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When the Blue Chips Are Down, in Gov We Trust
Published on Tuesday, April 30, 2002 in the Washington Post
When the Blue Chips Are Down, in Gov We Trust
by Paul Farhi
Let us now praise slothful, inefficient, bloated government. Let us now rejoice in the glory of your trillions of tax dollars at work. Drop what you're doing and hug a GS-14.

We've heard so much, for so long, about government waste, fraud and corruption (WFC) that it has seemed at times like a Cabinet-level agency. But America's corporations -- those smug lions of capitalism, those sleek models of can-do efficiency -- seem to be getting awfully good at WFC, too.

Item: AOL Time Warner, the world's largest media company, reports a $54 billion quarterly loss, the largest in corporate history. The red ink was primarily a result of adjustments AOL Time Warner had to take to reflect an unfortunate fact: AOL overpaid by at least $54 billion, and perhaps much more, when it agreed to buy Time Warner for $183 billion in stock in January 2000.

Even in Washington, overpaying by 54 bil is bound to attract some unpleasant attention. The difference between the federal government and AOL, of course, is that taxpayers could at least get a few extra Apache helicopters and Spruance-class destroyers for their $54 billion. AOL Time Warner's shareholders got nothing but grief for theirs.

Item: Telecommunications firms go on a six-year building spree, wiring the country with thousands of miles of high-capacity fiber-optic lines. A new infrastructure is created to handle an expected boom in data transmission.

Except that the boom never arrives, and the building spree turns out to be one of the most wasteful and inefficient investments ever. Analysts estimate that private concerns laid 10 times more fiber than is currently needed. The result: dozens of firms march into bankruptcy. "Dark fiber" isn't the name of a new cereal; it's the industry's term for all those unused connections.

Amid the speculative frenzy, commuters watched in disgust as streets were torn up over and over. Now that those roadways look like a post-op heart transplant patient's chest, the telecoms are finally transmitting something. It's a message. They're saying it's the government's job, not theirs, to repair the damage.

Item: Merrill Lynch, the world's biggest stockbroker, apologizes after its analysts publicly recommended stocks that these analysts were privately disparaging as "dogs," "junk" and "crap." The analysts apparently were under pressure to give high ratings to companies that paid Merrill big investment banking fees. The New York state attorney general and the Securities and Exchange Commission are investigating other Wall Street firms. Several of them were recommending a certain stock until the day it became nearly worthless -- a Houston outfit called Enron Corp., which has had its own little problems of late.

Many people are reflexively suspicious of their government, believing it invented mendacity and ineptitude. It's our birthright to criticize government, of course. We started the country on a fundamental suspicion of those in power, and armies of journalists, commentators, inspectors general and late-night comedians are employed to keep them honest.

But let's get some perspective.

Many people like big government, no matter how much they complain about it or posture about it for political effect. Big government builds roads, fights disease, directs air traffic, fights wars, inspects food, takes the census, doles out food stamps, Medicare and Social Security checks, sends the space shuttle up and performs about 12,000 other necessary and vital functions.

Yet calling someone "a Washington bureaucrat" remains an insult. Odd.

Even those who believe in the gospel of smaller government and the miracles of the private sector know there's no decent substitute for collective effort -- that is, for the very things that "Washington bureaucrats" and those in the hinterland provide.

Yes, the government does its job with a couple of key advantages. It taxes its citizenry (and the private sector) to the tune of hundreds of billions of dollars annually. It has a mandate and a monopoly over certain services and activities (though usually the services and activities the private sector wouldn't take on without a guaranteed monopoly).

But as the previously mentioned items attest, you've got to wonder about unquestioned faith in the marketplace. The market may deliver an abundance of goods and services at "fair" prices, but it does so imperfectly. The process is often chaotic, inefficient, riddled with giant misjudgments (as AOL's executives can attest) and sometimes subject to fraud and corruption.

Indeed, the market is often no better at delivering its goods and services than a stodgy bureaucracy. Could the private sector deliver mountains of first-class letters as quickly as the U.S. Postal Service, and at the same price? Could any company process millions of tax returns with as few mistakes as the Internal Revenue Service? Considering that years of "downsizing" have transformed the phrase "service industry" into an oxymoron, the answer is probably not. A visit to the post office might be frustrating, but so is a visit to the bank or the department store these days. I hear America grumbling, as it waits on line.

This isn't to suggest that the government is perfect, or that the private sector is incompetent. But it is to suggest something else: The gap between the two is smaller than you might imagine. And it might even be narrowing.

© 2002 The Washington Post Company


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