One of the most ubiquitous lies of the current era is the claim that the private sector is always more efficient than the government. It is a lie that has been repeated so frequently, and with so much conviction, that most people now believe it to be a universal truth. The success of this lie is an unfortunate tribute to the propaganda skills of those who promote it.

     Like many successful lies, there is a small element of truth buried in it. There are some objectives and some activities that can be carried out more efficiently by the private sector than by the government. With respect to those objectives and activities, it makes sense to allow the private sector to compete to be as efficient as possible.

     But there are many other objectives and activities where the government can be more efficient than the private sector. While reactionary ideologues like to deny that this can ever possibly be the case, it is relatively easy to point to specific examples where it is true.

     In general, the private sector is most efficient in areas where there are many highly competitive businesses, and where the consumers have the information necessary to make informed and rational choices between the competing products. Under those conditions, inefficient enterprises fail to attract customers and go out of business. Among the survivors, the operations tend to be efficient and the cost of delivery tends to remain low.

     The government, on the other hand, tends to be most efficient in areas where competition is restricted and where the consumers are not able to evaluate the different choices available to them. Under those circumstances, the private sector is able to gouge the consumers with exorbitant prices while government still tends to only charge the cost of delivering the goods and services.

     There are many examples of government programs that are more efficient than their private sector counterparts. Let me mention just a couple of them.

     Consider the administrative costs for Social Security compared with the expected administrative costs for the private pensions that were being pushed by the Bush Administration. The per person administrative costs for social security are about 11 dollars per person per year. The typical insurer spends about ten percent of its outlays on administrative costs such as exorbitant executive pay and efforts to weed out its neediest customers.

     According to the Bush Administration’s own Social Security Commission, the annual costs if private accounts were placed the hands of the supposedly more efficient private banks and brokerage houses, would have been as much as thirty times higher than the existing administrative costs for Social Security.

     Here is another example. Public utilities across the nation are consistently able to offer their services at a lower price than the comparable private utilities. Whether it is electricity, water, telephone or some other service, the private companies charge higher prices to the consumers. The public utilities are more efficient.

     The motive behind this lie is greed. Many rich people know that there is a lot of money to be made when public resources are sold into private hands. It is a very old story.

     The consequences of this pernicious lie are both intentional and far-reaching. Domestically, it is used to justify giveaways of public resources to private companies, and the privatization of public programs. We saw this in Anchorage with the repeated and ultimately successful efforts to sell off the Anchorage Telephone Utility.

     The same arguments are being used internationally to justify the use of the IMF and the World Bank to force debtor nations to end social service programs. Thousands of the most desperately poor people in other nations have died as a result of those policies.

     There is a need for private enterprises, but there is also a desperate need for well run and efficient public programs. We will all be better off when each is allowed to operate in those areas where they are most efficient, and each is kept out of the areas where they make things worse.

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