In the communist world, state ownership of almost every business was the norm. Even in the socialist economies of Western Europe, many companies - sometimes all companies - in major industries were state owned: the seemingly never ending list includes steel, railroads, oil companies, airlines, electricity generation, mining, telephone service and even automobile companies.
The common elements - whether in a socialist or a communist country - were inefficiency, incompetence and vast taxpayer subsidies. The only significant difference between two models was that, in socialist countries, the beneficiaries were the workers who received far higher than justified compensation in exchange for little work.
In communist countries, by contrast, there were no beneficiaries: "they pretend to pay us and we pretend to work", was a frequent comment. Quality, features, reliability and availability were grossly lacking even if the price was acceptable.
In America, we have our own nationalized industries. Amtrak -formally known as the National Passenger Rail Corporation - is arguably the most egregious, but costs only (only?) a few billion dollars a year to provide, except perhaps in the Washington - Boston corridor, wholly inadequate service.
Far more significant is the US Postal Service whose operations, inefficient as they are, are made worse by political meddling. It's business model - a single price to anywhere for each class of mail - makes no sense since its prices are largely unrelated to cost or to the competition's charges. Any suggestions that business improvements might be made - such as reducing mail delivery to five days - are greeted with cries of "but what about our jobs". Worse, the Congress has legislated that the price of a first class stamp may not rise by more than the rate of inflation.
That is the credo of a nationalized industry: price controlled for political reasons and worker-centric. It's major operational objective is to provide well paying jobs, regardless of cost, rather than offering top class products or services that the market will devour at a price that will generate both profits and above average pay and benefits.
When communism collapsed, the group now known as the Oligarchs set about stealing the formerly state owned assets. There was some benefit but not nearly as much as in largely socialist nations of Western Europe which had already set about privatizing their nationalized industries.
In several of those countries, the Postal Service makes an interesting case study. Germany privatized Deutsche Post. The British, on the other hand, kept government ownership, while steadily reducing the scope of the Post Office's legal monopoly, but contracted out small postal facilities to local convenience stores and converted the larger facilities into the government's High Street facility where services to citizens are delivered.
Both of these postal service models seem to work - certainly better than the one that we have. Just don't try to hold your breath until any significant improvements are made here. One of our great national myths, that we are a totally capitalist economy, will surely prevail.
Of course the Postal Service is something of an extreme case. On the other hand, when and how, are the most recently nationalized (wholly or partly) wards of the state to be returned to the private sector?
The Hall of Shame includes:
- Banks (CitiGroup, Bank of America and too many more to list)
- Investment Banks (Morgan Stanley, Goldman Sachs)
- Automobile manufacturers (Chrysler, General Motors)
- Insurance companies (AIG)
- Guarantors of private debt (Fannie Mae, Freddie Mac, Sallie Mae)
Privately owned businesses, although capable of abuses that require regulation, have generally served us well. No nationalized industry can make such a claim.
We are ill served by state ownership of the 'means of production and distribution'. The sooner the government is no longer a business owner, able to dictate policies and prices, the better our economy and our society will be.
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