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Public Monopolies Are a Good Thing

Private monopolies are rightly criticized for being inefficient and unaccountable. But public monopolies are a different story — we should loudly and proudly say that democratically controlled public monopolies are a positive good.

(Flickr)

Elizabeth Warren’s newly released education plan takes aim at the main source of federal funding for charter schools. It proposes abolishing for-profit charters.

Bernie Sanders got there first, of course, but that’s no great surprise. You’d expect a socialist like Sanders to support pouring money into public schools instead of diverting funds to privately run charters. The “education reform” crowd presumably takes it for granted that Bernie is their enemy. But they experienced Warren’s embrace of his position as a betrayal.

Warren was once on their side. In their coauthored 2003 book, The Two-Income Trap, Elizabeth Warren and her daughter, Amelia Warren Tyagi, write:

A well-designed voucher program . . . that paid nearly the entire cost of educating a child (not just a partial subsidy) would open a range of possibilities to all children. With fully-funded vouchers, parents of all income levels could send their children — and the accompanying financial support — to the schools of their choice. . . . An all-voucher system would be a shock to the educational system, but the shakeout might be just what the system needs.

As David Brooks noted in a New York Times column pining for the days when Warren was less predictable, “This is exactly the argument that Education Secretary Betsy DeVos uses to support school choice.”

Defining Monopolies

Are public schools “monopolies”? Or would they be if not for charters?

This could be questioned on at least two grounds. First, “monopolies” are usually understood as enterprises that sell commodities without competition. Public schools offer education as a decommodified service. Second, regular private schools would exist even if charter schools did not.

On the first point, let’s concede, at least for the sake of argument, that what matters for classifying something as a “monopoly” is the absence of competition. Whether the service being provided is funded by sales or taxation is a separate issue.

The second point is a little trickier. The usual argument from charter advocates is that poor families don’t have a meaningful right to that which they can’t afford. One might wonder why the underlying principle about rights doesn’t lead these self-styled reformers to become leftists, but socialists aren’t going to quarrel with this particular premise.

Given all of this, would charter-free public education be monopolistic, non-monopolistic, monopolistic-only-from-the-perspective-of-poor-families, or what? Here’s a better question: if a charter-free public education system would in some sense be a monopoly, would that be a bad thing?

The Limits of Anti-Monopoly Politics

Trust-busting liberalism starts from the premise that competitive markets generally serve the public good better than any alternative. If you’re the sort of person who calls yourself a capitalist to your bones and you see an area where markets are manifestly not serving the public good, your first instinct is not to endorse public ownership but to find a way to make that part of the market more competitive.

This instinct is so powerful that it’s applied in all sorts of areas where it makes no sense. For example, we’re seeing more and more calls (from trust-busting liberals and even from social democrats who should know better) to break up Twitter and Facebook, even though the nature of the services severely limits how much they can be broken up without losing their functionality.

Simply separating Facebook from Messenger and Instagram, for instance, still leaves Mark Zuckerberg with extraordinary control over the flow of information. Really breaking up Facebook would mean having to keep track of which of your friends were on which mini-Facebook. Nationalizing the social media giants would solve the same problems more efficiently and also have the advantage of extending the First Amendment to social media.

To those trained to shudder at the very thought of a “monopoly,” though, this might sound like a terrible idea. The public sector is already a large part of the economy. Adding monopolistic businesses to its portfolio would make things even worse . . . right?

The Advantages of Public Monopolies

Private monopolies like California’s Pacific Gas and Electric (PG&E) are bad because (a) as private companies, they have the usual incentive to soak the public for profit, but (b) as private companies, the public has no democratic control over them, and (c) members of public lack even the limited influence they can exercise over other private companies by threatening to take their business elsewhere.

Democratically controlled public monopolies are an entirely different matter. Socialists should loudly and proudly say that public monopolies are (at least in many cases) a positive good.

Take the debate between proponents of single payer — i.e. of the idea that the government should have a monopoly on at least basic insurance — and various “public option” schemes. Single-payer advocates correctly point out that the cost-control benefits of a public monopoly are canceled out when private companies are free to compete by offering to compensate providers at a higher rate — a dynamic that currently causes many providers to refuse to take Medicaid.

As I’ve argued elsewhere, “If Bernie’s plan to abolish private plans (at least for basic insurance) were implemented, on the other hand, doctors and hospitals would have to either close their doors or make do with the rate that Medicare was willing to pay. The last several decades of Canadian history strongly suggest that most of them would learn to make do.”

Another advantage of single-payer systems — whether in health insurance, energy, or K-12 education — is that no one can buy their way to the head of the line. With different payers come different tiers of service for the rich and the poor. Eliminating both local funding on the one hand and private and charter schools on the other in favor of a single national education system (roughly along the lines of the Finnish model) would be far superior. Now that’s an “education reform” worth getting excited about.