When "Public Options" Serve the Public—and When They Don't





Dr. Wittner is Professor of History at the State University of New York/Albany. His latest book is Confronting the Bomb: A Short History of the World Nuclear Disarmament Movement (Stanford University Press).

Currently, there is nothing more controversial in President Barack Obama's health care reform proposal than the "public option."  Much of the controversy, of course, has been generated by private insurance companies, determined to safeguard their hefty profits, and by Republican politicians, eager to destroy anything that might redound to the benefit of the Democrats.  Even so, a little clear thinking on the subject of public programs might illuminate their advantages and disadvantages.

In fact, there are numerous "public options" in American life, with many of them rooted deep in the nation's history.  In the area of education, there are public schools; in recreation, public parks; in travel, public roads; in fire-fighting, public fire departments; in law enforcement, public police forces; in culture, public libraries; in transportation, public bus and train lines; in mail delivery, the post office; in sanitation, public water supply, plumbing, and sewers; in energy, public power; in old-age security, Social Security; in nutrition, public school lunch programs.  Where did the notion ever come from that public programs were somehow "un-American"?

Even in the disputed area of health care, there exist public hospitals, Medicare, Medicaid, the Veterans Administration, and the National Institutes of Health.

These and other public programs, while not perfect—and often challenged by private competitors—seem to work well enough most of the time.  If they did not, Americans would be clamoring to abolish them.  But, with the exception of the wealthy and their supporters, who dislike paying for their share of these social benefits through progressive taxation, most Americans seem reasonably contented with them.  And when they are not, they use their democratic rights to reform and refine public services until they get them into more acceptable shape.

But public services don't serve the public well when they are administered by dictatorships.  The reason is that, under authoritarian governments, the rulers are unaccountable to the ruled.  Therefore, public programs—however good they might look on paper—become subject to abuse by power-hungry and corrupt officials.  This is the sad story of the Soviet Union, a nation forged in a revolution dedicated to the liberation of humanity, but one that—thanks to its dictatorial nature—gradually adopted some of the most brutal and exploitative practices in the world.  Naturally, in these circumstances, public options became disaster zones.

Public options also serve the public poorly when they are subverted, often quite consciously, by their enemies.  Unable to win the battle to abolish public services, their critics and competitors have often tried to cripple them by imposing budget cuts, accompanied at times by stiff user fees.  Thus, many public colleges and universities, virtually free of cost only a few decades ago, now charge substantial tuition in order to survive.  This limits public access and, at the same time, has the happy result, from the standpoint of private educational institutions, of making public colleges and universities less financially competitive with their private counterparts.  The same pattern of deliberately starving the public sector can be found in areas like mass transit, health care, parks and recreational facilities, social welfare, legal services, and many others. 

A key justification for budget cutbacks is that government "can't afford" to maintain the public sector.  But why can't government afford such programs?  The reason, aside from the bloated U.S. military budget, is that conservative ideologues have pushed through dramatic tax cuts for the wealthy.  This practice has not only helped turn their millionaire patrons into billionaires, but has produced unbalanced budgets that are then used to justify cutting back public services.  And this, in turn, helps guarantee that the public sector fails to produce substantial benefits for the public.  What such ideologues avoid dealing with is their own culpability in this matter.  Nor do they say what would happen if there were no public sector at all, and Americans had to rely entirely on the generosity of private corporations to cope with their health, education, and welfare.

Overall, then, public options serve the public well to the degree that the public exercises effective control of the government.  Under dictatorial rule, the public almost inevitably gets the short end of the stick.  And even in democracies, public programs can sometimes be weakened when private interests use the influence provided by their vast wealth to exercise disproportionate power.  But where an active citizenry avails itself of its democratic rights to provide for the general welfare, public options work just fine.  Let's use and cherish them.       



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Arnold Shcherban - 9/4/2009

Though your premise of ultimate superiority of private services over
public ones is controvercial, at the best, I would like to focus attention
on the other issue, which is the most relevant to the central point of the public-versus-private debate.

"best services" you say, Mr. Hughes...
But who are the receivers of those best services offered by "privates"?
The same 10-20% of the populus who offers the services, and in cases when those privates are open to anyone they are offered for a fee (quite hefty one, sometimes) are they not?
I would think that in a DEMOCRATIC society, i.e. the society with a power of majority, the best of services must be offered to that majority along with "the cream" of the society who can afford them based on their financial and social standings.
And that's where the front line of this debate, as old as the US corporate state capitalism, lies.
In its most refined and clear (for comprehension and objective analysis) form it has always been and remains to be class issue: haves against have nots.


Andrew D. Todd - 9/3/2009

Well, over most of the country, MaxMail only delivers to postal sorting centers. There are only about two hundred of those. Delivering on that basis is not an autonomous operation-- it's more comparable to magazine fulfillment, or similar printer services. I suppose MaxMail has some kind of courier service in New York, but that is a special case. At least one of the companies you cite seems to be one of the old Lower Manhattan bicycle courier shops. To deliver mail or parcels on a national basis, you have to have hundreds of thousands of carriers. Launching a new national carrier is an uphill proposition because you have to overcome the economies of scale of existing players. DHL, which was a subsidiary of the German post office (D stands for Deutsche), tried for a while, but lost money, and eventually folded. If a carrier has to drive an hour between every delivery point, the rates are going to be impossibly high. To have reasonable costs, the driver has to make a delivery every couple of minutes, which, in an urban area would mean every block or so. That means there have to be a lot of drivers, and you practically have to have at least a ten percent market share to be in the business at all. Apparently, DHL did not manage to get a big enough market share, or perhaps there simply wasn't room for four national carriers in the market.

http://www.cmsnetwork.com/
http://maxxmailusa.com/

If you make deliveries to a given address with any regularity, you can often arrange with the occupant to put up a box which is not, technically, a mailbox. It has your company name written on the side instead of "U.S. Mail." A lot of newspapers used to have their own plastic boxes, as a practical alternative to throwing the paper in the bushes. A plastic box made in China is really cheap. You would probably spend more to have your representative talk to the householder, and get his permission to install the box, than the box itself would cost. Of course, to get still more to the heart of the matter, in many cases, a mailbox is apt to have keys, or it may be located in a lobby or stairwell with keyed access. Thus, in demanding "equality" for private carriers, you are effectively demanding that they be given, of right, latchkeys to private premises.

What makes Business-to-Business delivery work is the assumption that the recipient employs a receptionist, doorkeeper, concierge, etc., whose job is to greet the public, and who can pay instant attention to the parcel deliveryman when he comes in the door. I have noticed that Federal Express deliverymen become noticeably irritable when one does not answer the door as fast as someone who is paid to respond instantly. I think I only ever got one parcel through DHL before they folded. The doorbell rang, and by the time I got to the door, the deliveryman was gone, and there was a parcel on the doorstep, valued at about two hundred dollars. Whether that was acceptable to the shipper is more than I can say. UPS operates to rather higher standards, of course.

The truth is that, for anyone except junk mailers, forty-some cents for a first class stamp is perfectly acceptable. I find that I usually send a letter, instead of an e-mail, when I am sending a check, and postage is much cheaper than bank fees. For various kinds of junk mail, the Post Office offers rates as low as seven cents, if you bar-code in all the right places, and presort to the last detail, and put bulky material on the internet-- in general, never make a human do what a computer can do. If you aren't willing to spend seven cents for my attention, I don't think I want to listen to your sales pitch. That is the whole lesson of SPAM e-mails.

I think you don't quite grasp the seriousness of the Comcast crime cases. The case in Oregon the month before last involved a Comcast employee carrying out a robbery in the course of which he hit a clerk over the head with an iron bar. It was a particularly brutal sort of robbery. It is only the Comcast employee's dumb luck that he is not facing a Capital Murder charge.

http://www.oregonlive.com/news/index.ssf/2009/07/comcast_robbery_suspect_tied_t.html
http://www.kgw.com/news-local/stories/kgw_070809_news_se_portland_rovbbery_assault.1ed99801.html

A case a couple of years ago involves a serial sex-killer:

www.chicagoflame.com/media/storage/paper519/news/2007/03/12/NewsBriefs/Lawsuit.Says.Comcast.Let.Suspicious.Repairman.To.Make.House.Calls-2772545.shtml">http://media.www.chicagoflame.com/media/storage/paper519/news/2007/03/12/NewsBriefs/Lawsuit.Says.Comcast.Let.Suspicious.Repairman.To.Make.House.Calls-2772545.shtml


Local monopolies:

The key word is "horse." A horse can go only a limited distance. Like a man, and unlike an automobile, a horse gets tired, and must sleep before he can do more work. In the nineteenth century, the American railroads were located, taking account of the limited strength of the horse, so that a farmer's horse-drawn wagon could reach one, and only one, railroad station, operated by a single railroad company. And, yes, the commercial monopoly implied thereby entered into the railroad locater's economic calculations. The railroad would not build if it was not assured of a commercial monopoly. The result was a town of five hundred people, more or less like Sherwood Anderson's fictional _Winesburg, Ohio_, with one of each kind of store. See also, Frank Norris, _The Octopus_.

The railroads and their associated express companies did not deliver in rural areas. The farmer had to go to town, say an hour of travel each way, and collect his goods at the railroad depot. Until 1896, he had to collect his mail on this basis, and it wasn't practical to do so more than once a week. The express company charged an hour's wages or more, just to pick up a small parcel from a shelf and set it on a counter, just because it could. In a small town, the express agent was probably also the railroad stationmaster. A local train might stop once or twice a day in each direction. The station agent or express agent wheeled a cart up to the baggage car and spent a few minutes rapidly unloading stuff before wheeling the cart back into the station building, and putting everything on the appropriate shelves. And then he could sit around with his cronies, telling tall stories, like a character in a Ring Lardner story. On Saturday morning, of course, when the farmers came into town to do their business, there would be more of a rush. Naturally, the local power structure had a good deal to say about who got the near-sinecure station agent and express agent jobs-- they were just the thing for the mayor's neer-do-well son.

The profits of monopolistic rural service went into subsidizing high-speed expresses along competitive routes, such as New York-Chicago, where the New York Central faced off against the Pennsylvania Railroad.

When a farmer got a Model T Ford, circa 1915-1920, he was suddenly free to drive thirty or forty miles to a small city, with a population in the tens of thousands, where there were many competing stores, and better prices.

Parenthetically, experience shows that if you collect your mail from a store, the shopkeeper is likely to make difficulties unless you buy stuff from the store. He doesn't want you buying stuff mail-order when you could buy it from him.


William J. Stepp - 9/3/2009

As for the Post Office, the Post Office would not be much use if it could only deliver things to the next block. It has to be a national organization, in some form or other. Your choice is between a federal government department and a mega-corporation.

The reason the Post Office exists in its current form is because of the legal monopoly it has on delivery to residential mail boxes. If FedEx, UPS, Eastern Connection, MaxxMail, CMS, Global Green, etc. could delivery to Mrs. Smith's mailbox, the price of mail delivery would fall quite a lot. Just look at how MaxxMail, CMS, and Global Green have cut the price of b-to-b mail delivery in New York City. The reason they don't deliver to my house is because they don't have legal access to my mailbox. Give them that and the USPS is toast, er I mean burnt toast instead of just the toast it already is.

A friend of mine suggested the other day that in a truly free market, house-to-house mail delivery would only be done in hardship cases or for people willing to pay a premium reflecting the higher marginal cost of such delivery. There could be neighborhood kiosks where mail would be delivered, maybe in stores. Or maybe in other places, and advertising banners might be attached to the kiosks.
Even in some rural areas, the USPS drops mail in a box quite some distance from a ranch. The rancher drives down his lane and collects his mail.

Of course, you could compare the Post Office with UPS and Fed Ex, but I think a fairer comparison would be with a related business, telecommunications, which is dominated by corporations, and where corporations are not under pressure to compete with a "public option." Cable television companies represent the "business ethic" in its purest form. Therefore, you need to explain why you think Comcast is better than the Post Office. You have to deal with the fact that Comcast sometimes does block traffic which it thinks might compete with its own businesses.

I don't think comparing the USPS with Comcast (even though both, especially the former, have monopoly privileges)
is a good one, because the USPS moves paper and goods, whereas the former moves bits and bytes.
As for the thuggery stuff (somehow I missed the Verizon story), the USPS has engaged in similar stuff. I've yet to hear of a Verizon staffer mimicking the Bronx Post Office worker of a few years ago, who took it upon himself to steal mail and store it in his apartment.

Also, when you talk about commercial railroads engaging in "price gouging," how do you know they weren't engaging in rational pricing reflecting the real costs of delivering mail to rural areas? They were, after all, profit making institutions, unlike the Post Office.

"Local commercial monopolies" makes no sense to me.


Andrew D. Todd - 9/2/2009

Mr. Heuisler:

Please look at a rainfall and water runoff map of the United States. You will find that the major sources of your water in Arizona are up in Colorado near Teluride and up in Wyoming near Yellowstone Park. Under true local control, Colorado, Wyoming, and Utah would divert the water for their own use, the same way that Turkey is doing in Anatolia; the Colorado River would cease to flow; and Arizona would dry up and blow away. In 1930, before the water projects got going in a serious way, Arizona's population was about four hundred thousand, despite the fact that Arizona had been settled for nearly two hundred years. That reflected a good deal of mining employment which has since been automated out of existence. In 1870, the population figure had been about nine thousand, a tenth of the contemporary population of New Mexico (*). That latter figure, nine thousand people, would probably be something like Arizona's "ecological carrying capacity." In terms of water, you are a beggar in the street.

(*) The Rio Grande is not an appreciably bigger river than the Colorado, but it is not effectively buried at the bottom of a mile-deep canyon-- it is where people could use it before high dams came along. Look at Colin Fletcher's _The Man Who Walked Through Time_. During his trip up the Grand Canyon, he was always worrying about where he could climb up or down to fill his canteens.

Grain is closely related to water, because it requires so much water to grow. In Arizona, you import government-subsidized grain from Iowa and North Dakota. Absent the government subsidies, Iowa and North Dakota farmers would go to "low-input farming," and produce beef (or maybe bison), rather than shipping trainloads of grain down to feedlots in Arizona. Look at the April 2009 issue of Trains Magazine, a special issue dealing with grain. Among other things, it has a nice map of grain movements. Roughly speaking, the dividing line between grain producers and consumers runs as follows. Fort Worth, Texas; Amarillo, Texas; Denver, Colorado; Boise, Idaho; Spokane, Washington. Farmers east of this line sell grain-- farmers west of the line buy grain and feed it to livestock. East of the Mississippi, the dividing line is roughly the Appalachian Mountains. Farmers in Ohio sell grain-- farmers in Georgia buy it and feed it to livestock, typically chickens and hogs.

As for the Post Office, the Post Office would not be much use if it could only deliver things to the next block. It has to be a national organization, in some form or other. Your choice is between a federal government department and a mega-corporation. Of course, you could compare the Post Office with UPS and Fed Ex, but I think a fairer comparison would be with a related business, telecommunications, which is dominated by corporations, and where corporations are not under pressure to compete with a "public option." Cable television companies represent the "business ethic" in its purest form. Therefore, you need to explain why you think Comcast is better than the Post Office. You have to deal with the fact that Comcast sometimes does block traffic which it thinks might compete with its own businesses. Likewise, you have to deal with the fact that Comcast employees sometimes carry out armed robberies, taking advantage of their uniforms to secure the trust of the public. There was a weird case involving Verizon recently. A Verizon employee in New York came to a man's door, and when the man asked for identification, the Verizon employee forced his way in and beat the householder up, before being subdued by an off-duty policeman. Afterwards, Verizon took the line that since the Verizon employee had managed to beat the rap, via a stay-out-of-trouble bargain with the DA's office, he must be altogether innocent. As firms compete, and try to maximize profits, they are under pressure to find cheaper and cheaper labor-- and you get what you pay for. The uniforms may _look_ spiffy enough, but there often isn't very much in the way of background checks behind them. I could go on, but if you are interested, read Techdirt.com.

Also, take a look at James H. Bruns, _Motorized Mail_ (1997). It offers an interesting perspective of how the public mails reached their present level, with improvements like Rural Free Delivery and Parcel Post. The Post Office started doing Parcel Post to fill a public need, because the commercial railway-express companies had formed a combination, and were going in for price-gouging. I have a couple of facsimile Sears catalogs (1900 and 1908). Sears was recommending customers to organize "buying clubs" to put together group orders weighing a hundred pounds or more, to circumvent the express companies pricing schemes. The official railroad express shipping rate from Chicago to Arizona was about twelve gold-backed dollars per hundred pounds, say six dollars per pound in modern money, or twelve dollars per pound for a small shipment. Something like a pair of boots, shipped alone, was an "uneconomic shipment," on account of the high shipping rates. Needless to say, when Parcel Post went through during the Wilson Administration, in 1913, some of the major backers were department store magnates who were in the mail-order business.

To get some idea of the kinds of local monopolies which Sears broke down, take note of the fact that they were profitably selling canned vegetables, eg. corn, lima beans, etc. A 2-1/2 lb. can might cost ten gold-backed cents (fifteen gold-backed cents, inclusive of shipping to Arizona, or about three modern dollars for a standard modern can of 15 oz.). That must have been about five or six times the rate in the modern supermarket. Just think of the sheer scale of local commercial monopolies in terms of which it made economic sense to get canned beans by mail-order from across the country. I really don't think Parcel Post was such a monstrous incursion upon liberty.


Bill Heuisler - 9/1/2009

Well put, Mr. Brooks. Another "elephant in the room" not mentioned by Dr. Wittner is the obvious truism that so-called public options closest to local control work the best. For instance, city police and fire are more responsive to the individual citizen and financially effectual than the Corps of Engineers or the Post Office. In fact, it could be argued that either of the above might better serve the public good as state or county or private entities.
Bill Heuisler


Lawrence Brooks Hughes - 8/31/2009

Check each pair below and ask which offers the best services:

Public schools - Private schools

Public parks - Private parks

Public police forces - Private police

Public libraries - Private libraries

Public mail delivery - Private mail

Public power - Private power

Public hospitals - Private hospitals

Public defenders - Private lawyers

It's a mystery why anyone would prefer more of public anything, not just public health services.

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