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Friday, July 16, 2010

When Government Ownership Is Right and Privatization Is Not

Two primary sectors of society are government and private enterprise.  They have two different roles (one regulative and the other creative) and they run the risk of forfeiting their own proper roles if they try to usurp the role of the other.  Yet it is common practice for government to run programs that are creative.  Common examples of these include park and recreational programs on a local or national scale, sports and civic venues, various projects to help the homeless or those in poverty, education, health services, water-sewage-garbage services, streets and roads, police & fire protection, military services, space and aeronautics programs, mail services, etc.  Government is also an accessory to the creative sector in many ways.  It strives to create a positive environment for maintenance, development, and growth of the creative sector.

The primary rationale for this entrepreneurial government activity is that the creative sector does not find sufficient incentives to accomplish these wanted and necessary tasks.  Left entirely to the market and the creative sector, these tasks would not get done or would have marginal success.  Often the return on these investments is either nil, intangible, hard to monetize, or very long term.  Yet the need and desirability for the services persist.

Therefore the governmental role, in addition to regulation, is to foster and promote the public weal in ways that are creative when market limitations prevail.  This means there are times when privatization of government creative activity can be largely artificial and even to a certain extent phony--when underlying realities have not changed and true ownership and responsibility remains with government.  Then, privatization can be purely dogmatic or an attempt to insulate government from responsibility and accountability.  Under these circumstances it is preferable for government to engage in activities directly and not attempt to devise an arms-length relationship through privatizations when that is essentially a sham.

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