Can we have fair capitalism?

If we had certain services provided by the government while others provided by private businesses, what would be the best way to make certain that both were being operated properly and in accordance with standards of fairness?


I had a very interesting conversation with a friend the other day.  We all know that the United States is becoming or has become an oligarchy.  That means “a small group of people having control of a country, organization, or institution.”  Russia has been an oligarchy for quite some time, as have many other countries. Why? Robert Michels in his 1911 book “asserts that rule by an elite, or oligarchy, is inevitable as an “iron law” within any democratic organization as part of the “tactical and technical necessities” of organization.”  He states that the official goal of representative democracy of eliminating elite rule was impossible, that representative democracy is a façade legitimizing the rule of a particular elite, and that elite rule, which he refers to as oligarchy, is inevitable.

We can certainly see that happening in America, where the unequal distribution of wealth and income is creating a smaller and smaller group that controls the country.  In other words, the economics of the country destroys the democracy of its political organization.

Those of us who believe in democracy state that the system of free elections will save democracy.  But is that really true? As we race towards the elections in 2020, we believe that participation by a much greater part of the voting population will change the politics and overcome the economic power of the oligarchy.  This is our hope. But if we manage to bring back democracy, we may want to think about an improved system to prevent the return of the “iron law of oligarchy.”

Those who oppose socialism in America cry out that it will become an oligarchy, like China or Russia.  What I shall try to describe here is a fair form of capitalism with protections to avoid oligarchy.

First, let us try to identify services in our society which should be constructed to eliminate a two-tier system.  This means that the service (such as healthcare, or education) shall be provided free across the board, and people of wealth shall not be permitted to pay money to get a higher standard of treatment.  If you have a two-tier system, then the wealthy will cause the services paid to the general population to diminish, because they can always buy the higher services for themselves. But if they cannot buy special services, then they will protect the services for everyone, because they have to rely on them.

A perfect example is the highway system.  If everyone has to use the same roads and cannot pay for an “expressway,” they will join in the effort to make the roads as good as they can.  If they can buy a different mode of transportation, then they will let the highway system corrode. I suspect that this is what has happened to the American highway system.  The wealthy have learned to use paid highways, airplanes, trains or a combination of these to avoid the normal highway system and therefore let the highway system fall apart.

Similarly, we should use the Finnish education system – a single system, with well-paid teachers, and no way of going to private schools that do not follow the public school system.  The Finns allow private schools, but the wealthy cannot pay money to improve those schools beyond the public schools. As a result, the overall school system is excellent.  

What are the services which should be publically operated and where a two-tier system should be avoided?  Roads, highways and bridges; education; healthcare; utilities (electricity, gas, water, garbage, recycling); the military; police; fire department; public transportation (busses and city transportation); air and water transportation; government regulation; the court system.

It goes without saying that the fire department should be paid publically and the wealthy should not be able to pay for better services.  Yet it should be pointed out that in certain rural communities, the fire department is paid by the homeowners, and if you fail to pay, the fire department will let your house burn down.  You can see immediately what a poor idea this is.  There are a raft of services which we expect the government to provide, and we all pay for it through general taxes.  This is quite socialistic, and no one tries to have a private service.  

There are private police services separate from the public services.  For example, banks have special services to deliver their money. They do need capable people for this, but the cost is much higher if those services are separate from public services.  The guards need training, and it would make sense if they were trained alongside guards needed for public services (like jails, or police).

One area exists which must be cut off from private funding and that is politics.  The wealthy are able to buy the services of politicians, and the only way that ordinary people can compete is on the very highest levels, where small-donor contributions can be raised.  It’s very difficult to do that on the municipal level or for state legislative races. The only effective answer is for the government to provide campaign funding and for individuals and corporations to be denied any right to pay for advertising and other services.  Of course, Citizens United sits squarely against effective government funding and limiting corporate funding.  But something must be done about that issue or oligarchy will be the fate of the United States.

There are some services which have been traditionally provided by private services in America but which might better be provided by a centralized system.  For example, airlines. Many European countries had government-run airlines (British Airways, Air France, etc.) They have become private, but having a centralized system run for the benefit of the whole society might be more efficient and cost savings.

The U.S. government is currently considering a government-run 5G Internet system. There is a lot that can be said for this, although one should also be cautious; the government might well use its control of the system to access private information of the users.  Traditionally in Europe, the telephone company was a government entity, but over time these entities have been privatized, In reality, this change did not improve things. The same could be said of television services, radio service, and the like.  It would make sense to have one entity handling the technical side of the business but to permit numerous smaller entities to provide the news, entertainment, and the like.

Look at something like the Tennessee Valley Authority (TVA).  It operates efficiently and effectively, even though it is a government service.  It certainly is doing better than PG&E, which filed for bankruptcy. In fact, the retiring head of TVA has become head of PG&E in its bankruptcy.   There are 251 municipal utilities throughout the U.S., and they do a respectable job.  The CEO of Duke Energy gets $21.5 million a year. The head of Seattle’s municipal utility gets under $400,000.   The retiring CEO of TVA was the highest-paid federal employee at $8.1 million.

But there are some businesses which do not run particularly well on large scale.  Farming, for instance. The best way to run farms would be family farms, as were done traditionally.  But the marketing of produce, and sharing of specialized equipment, should be done by cooperatives run by the farmers or their helpers.  Similarly, producers of art, music, writing, and the like should be done by individuals or small companies. The sale and publication of these works should likewise be done by cooperatives.  These sorts of businesses can be run effectively, for the owners, the customers, and the employees, as private operations.

There are certain industries which were traditionally run on a small scale.  Clothing, furniture, restaurants, professions (veterinarians, attorneys and accountants), art supplies, electricians, taxis, delivery services.  The list goes on.

Let’s start with utilities.  They should be operated like municipal utilities.  The salaries if the upper management should be below $400,000.  The rates should be low for those who consume low and should rise quickly for those who waste fuel.  That would help fight climate change. People who have to consume because of medical conditions should be given relief.  Rates should permit the utilities to pay a living wage to their lower-paid workers. Gas companies and petroleum companies should follow the same models.

Air and water transport companies should follow a similar model.  They should no longer be permitted to make all the seats too tight.  Rather, they should make at least a quarter of the seats larger so that tall and fat people have a chance of riding in comfort (without having to pay more).  They can sell first and business class seats, but if they don’t sell them at the higher price, they should give them over to the economy class. They should no longer charge extra for baggage but they can charge a reasonable amount for seats to cover costs and make a reasonable profit.  A “reasonable profit” does not permit them to pay excessive salaries to upper management. They are encouraged to pay good salaries to their lower-ranked employees.

Utilities, air and water transportation companies can be operated by the government, or they can be operated privately.  Either way, though, they should be regulated to that the upper management does not take advantage of their power to overpay themselves or underpay the lower-ranked employees.  Nor should they overcharge the consumer and thereby make it difficult if not impossible for poorer citizens to use their services. Unlike education, their services cannot be given free to the citizenry, or else people would be inclined to waste them.  You have to put a price on the services or otherwise limit use in a rational sort of way. You don’t have to limit the use of education, fire departments or highways in that way, because their services are not normally overused. Medical services can be abused, because there are people who misbelieve that they are sick and would visit their doctor weekly for that reason.  (I suppose there must be some people who would call the fire department weekly, too, likewise because they suffer from mental issues).

So far as the businesses that are traditionally run on a small scale, they should continue to be allowed to do so.  Take restaurants. A business with one or two locations can operate well and can offer unique menus, and that’s good.  A business with hundreds of locations may be able to improve their profits because they can purchase food, advertising, and the like more cheaply.  The smaller businesses could benefit from buying food, advertising and the like on a cooperative basis, thus competing with the larger operations but still having the ability to invent.

From a social standpoint, either model (or both) can work.  But the society needs to make sure that the lower employees have a decent income, and it needs to be sure that the owners or upper employees do not earn too much.  So long as the business obey health and other public rules, they can operate independently. I would certainly want restaurants to operate independently rather than be controlled by the government or a giant monopoly.

So if we had certain services provided by the government while others provided by private businesses, what would be the best way to make certain that both were being operated properly and in accordance with standards of fairness?  I would recommend an Ombudsman Group (“OG”).  This would be a government office that would investigate complaints against any government agency but also against any business or corporation.

Basically, any citizen, business or corporation could file a complaint with the OG regarding failure to follow any law or regulation in a manner that adversely affected the complainant or (if the government failed to complain) or the government itself.  The complaint would be provided to an investigator of the OG. If the investigator found no failure to follow the law, a second investigator would be appointed. If that investigator found no failure, the complainant could file an appeal with the Ombudsman Board of Review (“OBR”).  If the OBR found no failure, that would end the complaint.

The complainant would not have to pay anything.  He would be limited to one complaint a year, unless the complaint were successful.

If either OG investigator or the OBR found a failure to follow the law, then an investigator would meet with the entity being investigated and try to work out a settlement between the complainant and the entity.  If no settlement could be worked out that satisfied the entity, then the matter would go to trial before the OBR, without appeal. The OBR could order what the entity needed to do, including a fine of up to [$ Amount].  If no settlement was reached that satisfied the complainant, there would likewise be an OBR Trial with the same possible outcome. At any OBR trial, the OG would represent the complainant and the entity without charge, although they would be free to hire attorneys.

If the OBR made an order “excessively burdensome” to the entity or in an amount above [$ Amount], or both, the entity could appeal to the appellate court, which would make a decision.

The OG/OBR procedure would not be complex.  The purpose of the OG would be to settle proceedings, not to go to trial unless necessary.  The OG would work hard to uncovered entities that broke the law and, if they so found and determined that there might be criminal law issues, would turn their findings over to the police.  If for any reason, the police did nothing, the OG’s duty would be to report this to higher-ups and make sure the law was followed.

The OG/OBR organizations would have internal rules to prevent them from becoming oligarchies or corrupt.  The OBR would oversee issues involving the OG. If there were complaints involved the OBR, it would be subject to review through the court system.

Preventing corruption and the development of an oligarchy anywhere in the political or economic system would be the central purpose of OG/OBR.  The entire political and economic system would be organized so that no individual, family, corporation, trust or governmental institution would get excessive amounts of money or power.  OG/OBR would investigate all complaints involving such matters and would be free to use the media and any branch of the government to settle such complaints. It would be considered a great honor to become a member of OG/OBR, although the salaries would not be excessive.  The OG/OBR offices would be geographically separate so that if there were a complaint against members of one OG office, investigators from another OG office would be totally independent to investigate and deal with issues.

Police forces throughout the country would handle standard criminal activity.  But individual citizens could help launch investigations by OG of activities which injured the society on the civil and criminal side.

So, let’s try to see how OG/OBR would operate if (say) a member of the legislature were accused of violating the law.  A member of the public could complain, and an OG investigator could move forward. If he found nothing wrong, a second OG investigator would move forward independently.  And possibly the OBR would become involved. The investigation would be handled appropriately, so that the job of the member of the legislature would not be undermined unless the complaint was supported by facts.  If the OBR recommended that the member of the legislature be fined or removed from his post, the matter would then go before the legislature. But if the legislature were corrupt, the OBR could take the matter before the courts, the media, or any other social or legal system that would lead to resolution.

Because OG/OBR would operate independently and not be subject to blocking unless it were clear that it was not acting in the best interests of the country, the combination could prevent negative acts by other organizations in the country, no matter how powerful.  This could avoid oligarchy and corruption, whether in a socialist or capitalist country.


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