Why Own When You Can Rent?

Many conservatives believe that, under the current progressive administration and majority in the senate, this country is headed for some kind of socialism or even a kind of Marxism. Although these political brands have been tarnished, if not entirely disproven, by the fall of the Soviet Union, the failures of East Germany and North Korea, and the sotto voce turn toward capitalism in the People’s Republic of China, conservatives still believe that dismal, dystopian place is where the progressives want to take us all.

In the conservative mind, the model would be the sudden turn toward socialism that Great Britain made right after winning World War II. Then the government subsumed all hospitals and most physicians under the umbrella of the National Health Service and operated them directly out of ministerial departments. It nationalized major industries, turning private enterprises into British Airways, British Petroleum, British Telecom, British Steel, and other national industries run by the government after the fashion of the British Broadcasting Corporation. Capitalists out! Government ministers in!

Of course, Britain has since de-nationalized many of these industries. In fact, the only people still advocating and practicing this kind of state-owned socialism are third-world banana republics like Venezuela and Bolivia. And while I have no great love for progressives and their philosophy, I won’t make the mistake of calling them stupid.

We may be headed for—and in some cases have arrived at—an entrenched politics of personal dependence on government programs, high taxes on those who actually make a product or offer a service, wealth redistribution from the haves to the have-nots, and government control of all aspects of the economy. But we are not going to see a U.S. Airways,¹ U.S. Petroleum, U.S. Telecom, and so on.² What the progressives have learned from the British and the other nationalizers is, why own when you can rent?

Owning and running a company is hard work. You have to actually provide a product or service. You have to deal with suppliers and distributors. You have to keep customers happy—or at least not in revolt. You have to keep books and, if not show a profit, at least not create a scandalous loss. You have to take responsibility.

Of course, taking control of the corporate cash drawer is attractive. If you’re the lucky government minister appointed to run the national company, you have opportunities to engage in a bit of the “champagne and bad management” that you know those filthy capitalists formerly got to practice. But if you don’t have the cash drawer firmly in your paws—if you have to watch a government colleague operate the business from your seat somewhere beyond the fence line—then you have concerns. How do you know the man in charge will faithfully execute the public trust? Who’s around to watch him any more closely than the former government regulators—who have proven to be pretty fallible of late.³

And then, we have a long history of fighting monopolies in this country, going back to the robber barons of the late 19th century with their cartels, trusts, and interlocking directorates. For a hundred years, the government has been telling the American people that Big Business is bad, unfair, and anticompetitive. And within living memory the Justice Department has gone after AT&T, Microsoft, and others to prove the point. It would be a little hard to sell the public now on the virtues of putting all the economic resources of an industry under one management’s control.

But they don’t have to! The U.S. government has its own “interlocking directorate” of regulatory agencies to manage all the players in an industry. The Securities & Exchange Commission and the Internal Revenue Commission overlook their finances. The Commerce Department regulates their inter-business relationships. The Environmental Protection Agency makes sure they live lightly on the land. Federal and state consumer protection agencies look out for their customers. The Department of Labor, Equal Employment Opportunity Commission, and Department of Health and Human Services look out for their employees. And if the business is in a specialized industry like energy production, transportation, or pharmaceuticals, a host of particular agencies and regulatory boards have a hand in its affairs.

Even the Affordable Care Act, which will eventually take control of the health care industry, has no present mechanism for acquiring ownership of hospitals, laboratories, and pharmaceutical companies, picking up the contracts of doctors, medical technicians, and administrators, and managing the actual provision of health care services. Instead, it will manage the business of others by mandating the services they must provide and the price that the government as the ultimate, eventual single payer will offer. Figuring out how to survive and thrive between the two—between mandated product and regulated price—will be the job of the independently capitalized companies.

Why own the company and take on all the trouble of making it work, when you can simply write rules and regulations that mandate how the business will operate, what it will offer, whom it can employ, what resources it can acquire, and how it will use them? In the progressive dream, the money that the federal and state governments pay out to deserving citizens in the form of entitlements comes, not from some elected official’s or non-elected bureaucrat’s own pocket, but from the wealth of other citizens which has been taken in taxes. In the same way, the government can offer society the benefits of its own view of safe products and services, fair employment, and appropriate use of resources by regulating all aspects of industry and the economy. That it does so by playing with other people’s money—the investments of stockholders and the financing provided by banks and bondholders—is of no concern to the bureaucrats.⁴

Like the renter from hell, who clogs the plumbing, burns the carpet, and punches holes in the walls, then sues for the return of his damage deposit, it’s not his concern, not his property, not his responsibility. Who would want to take responsibility for actually running the economy and making it work when you can simply manage it?

1. At least not as the kind of mega-company that owns all the planes, employs all the pilots and flight attendants, and runs all the scheduled flights into, across, and out of the country. But a smaller U.S. Airways will still exist, and the Justice Department will still block its proposed merger with American Airlines on anticompetitive, antitrust grounds.

2. Even when the federal government bailed out General Motors and Chrysler at the start of the Great Recession and acquired part ownership in them, the intent was never to subsequently snap up Ford and then create some kind of national automobile company. The government remained a relatively silent partner in the two firms and easily permitted them to “buy their freedom”—with the government’s GM stock sold at public offering and its share in Chrysler going to Fiat.

3. Think of how diligently the Securities & Exchange Commission followed Bernie Madoff’s career, or how effective the government was in tracking the financial ball of yarn in the mortgage funding market that came unwound in 2008.

4. Some regulators such as the Environmental Protection Agency are, in theory, required to perform cost-benefit analyses of their proposed regulations. Of course, any such analysis will depend upon the values one places on the intended benefits and the estimates one makes of the expected costs. This is how the delta smelt—essentially a bait fish, although a rare one—came to outweigh the agricultural output of California’s Central Valley, where one percent of the nation’s arable land raises—used to raise—eight percent of its produce with a value in the tens of billions of dollars.