Libertarians advocate reliance on the private sector and the down play or even abolition of the public sector. However, what they don’t seem to realise is that this system is enormously wasteful. Privatising public industries would result in duplication, under capacity and under use of resources. Libertarians fail to recognise the power of economies of scale that the state wields to keep costs low. There are simply are some times when we are better together than alone.
Look at transport. One bus can transport 50 people cheaply and easily from one place to the next. There are slight problems such as having to wait for a bus and not getting dropped off exactly where you want, but otherwise the system works well. If this was privatised and all 50 people had their own cars, this would involve an enormous waste of resources. It would cost far more without any benefits. In fact there would be additional disadvantages of traffic and pollution. Even if the bus is half full, it is a far better use of resources than everyone buying their own car. The fuel and insurance costs of running a car, plus the difficulty in finding parking outweigh the benefits of “more freedom”. Like most libertarian notions, the idea of more freedom is really an expensive illusion.
I had a debate with a friend who argued we should abolish public education and instead rely on competition and the free market to provide a cheaper and more efficient system. However he didn’t seem to realise the enormous waste of resources involved. For example I attended my local secondary school (or high school to any American readers) which was the only one in my town. It had a population of roughly 700 students and 50 teachers. Nearly everyone attended it because it was the local school and that’s where all our friends were going (never underestimate social norms; they have the power to dwarf economic considerations). For competition to work there would have to be multiple schools in this small town, each with enough classrooms and teachers to achieve critical mass (no one wants to go to a school that no one else goes to and for competition to work it must be between identical options).
Imagine if there were even 5 schools in my town. Each one would require enormous investment in building the school and require the hiring of a large number of teachers. If there was a roughly even distribution of students among them, then the schools would be near empty and operating at only 20% (one-fifth) capacity. In other words massive waste of resources. If there wasn’t an even distribution then some schools would go bankrupt and we would be back at square one with only one or two schools. At which libertarians would undoubtedly claim there was no competition therefore the free market had never been tried and could not be called a failure.
This would work better in urban areas where larger population could support a larger population. Even still people are quite parochial and there would have to be a massive increase in the number of schools (and therefore waste of resources). There is little room for increased efficiency in the education system. As a labour intensive industry, teachers can only be more productive if classes are larger or school days are shorter, neither of which is beneficial to a child’s education. So a completely private system would be far more expensive than the current one and I haven’t even mentioned the inevitable elitism and snobbery that private schools produce or the inferior opportunities children of poor parents would suffer.
My friend also proposed that the police force should likewise be privatised (admittedly more of an Anarchist than Libertarian proposal). This too would be enormously inefficient. Imagine if every single shop, no matter how small, had its own security guard? This would be a huge source of employment, but would draw people away from other industries. It would be a chronic waste as security guards are not productive and even those that stop crime spend about 99% of their time doing nothing. A privatised security force would be an enormous cost for all businesses that would particularly cripple smaller ones. Before you argue that a group of businesses could band together and hire one guard to protect them all, this is what the state does. The state is a combination of citizens for mutual protection and provision of services.
While it could be claimed that the state relies on coercion, this is necessary due to the free rider problem. If all my neighbours are protected then there is little incentive for me to hire a guard. As a result a sub-optimal number of guards are hired. I may also not trust or wish to share with my neighbours. A private system would protect large wealthy businesses while leaving poorer ones at the mercy of criminals. Whereas the state can protect all citizens cheaply and efficiently. It can purse and imprison criminals, as well as prevent all crimes not just property crimes (rape and murder etc).
Imagine if instead of one regional hospital in each city as it currently is in Ireland, we have several. How would this be anything other than a waste of resources? The inevitable result would be duplication and under capacity. Specialisation is no solution as the whole point of competition is that there is more than one supplier of identical resource. Complete privatisation would not lead to lower costs but would actually be more expensive, both on an individual and societal level.
Libertarians fail to see the advantage of the state and instead focus solely on the disadvantages. True, the state is subject to political influence and bureaucracy (problems that affect corporations as well) but it has the advantage of economies of scale. Public services greatly simplify our decisions and make things cheaper and easier. Most industries have room for innovation and competition, but libertarians make the mistake of applying a one size fits all logic. They fail to realise that this is not the case for all industries and fail to realise that exceptions exist.
Libertarians love the idea of competition. To them it is a miracle worker always reducing costs and increasing quality. However, it is not a solution to every problem. If the core sectors of the economy were privatised, the result would be an enormous increase in costs and a giant waste of resources. That is why the state runs them in the first place. Libertarianism is not the ideology of freedom but that of waste.