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21 February 2007

Washington's $8 Billion Shadow

An excellent example of the free (sic) market (sic) in operation. An interesting quote:

It is a simple fact of life these days that, owing to a deliberate decision to downsize government, Washington can operate only by paying private companies to perform a wide range of functions. To get some idea of the scale: contractors absorb the taxes paid by everyone in America with incomes under $100,000. In other words, more than 90 percent of all taxpayers might as well remit everything they owe directly to SAIC or some other contractor rather than to the IRS. In Washington these companies go by the generic name "body shops"—they supply flesh-and-blood human beings to do the specialized work that government agencies no longer can. Often they do this work outside the public eye, and with little official oversight—even if it involves the most sensitive matters of national security. The Founding Fathers may have argued eloquently for a government of laws, not of men, but what we've got instead is a government of body shops.
Think of this when you pay your taxes this year.

A footnote, considering how horrifying this article is, but...

Oh, yes, government is the problem. This kind certainly is. What do you think Adam Smith would say about this?

Wait, don't guess. Let's let Smith speak for himself. No, it doesn't map perfectly, but it is quite relevant. Note both his defense of temporary monopolies and his still-accurate prognosis for permanent monopolies, which companies such as SAIC, Bechtel, KBR, etc., pretty much have.

Smith is more worshipped as an idol than read (I introduce some paragraph breaks and bracketed glosses of my own):
With the right of possessing forts and garrisons in distant and barbarous countries is necessarily connected the right of making peace and war in those countries. The joint stock companies which have had the one right have constantly exercised the other, and have frequently had it expressly conferred upon them. How unjustly, how capriciously, how cruelly they have commonly exercised it, is too well known from recent experience.

When a company of merchants undertake, at their own risk and expence, to establish a new trade with some remote and barbarous nation [or, in SAIC's case, a capital-intensive business essentially in the service of the state], it may not be unreasonable to incorporate them into a joint stock company, and to grant them, in case of their success, a monopoly of the trade for a certain number of years. It is the easiest and most natural way in which the state can recompense them for hazarding a dangerous and expensive experiment, of which the public is afterwards to reap the benefit. A temporary monopoly of this kind may be vindicated upon the same principles upon which a like monopoly of a new machine is granted to its inventor, and that of a new book to its author.

But upon the expiration of the term, the monopoly ought certainly to determine; the forts and garrisons, if it was found necessary to establish any, to be taken into the hands of government, their value to be paid to the company, and the trade to be laid open to all the subjects of the state. By a perpetual monopoly, all the other subjects of the state are taxed very absurdly in two different ways: first, by the high price of goods, which, in the case of a free trade, they could buy much cheaper [a quick perusal of defense budgets over the past 50 years should bear this out, to say nothing of the fleecing of the American taxpayer in Iraq]; and, secondly, by their total exclusion from a branch of business which it might be both convenient and profitable for many of them to carry on [but actual competition may finance other party's candidates...].

It is for the most worthless of all purposes, too, that they are taxed in this manner. It is merely to enable the company to support the negligence, profusion, and malversation of their own servants, whose disorderly conduct seldom allows the dividend of the company to exceed the ordinary rate of profit in trades which are altogether free [this is pre-cost-plus and no-bid contracts, of course], and very frequently makes it fall even a good deal short of that rate. Without a monopoly, however, a joint stock company, it would appear from experience, cannot long carry on any branch of foreign trade [or, in our case, trade in the kind of capital-intensive business SAIC, et al, have been contracted to do by the government]. To buy in one market, in order to sell, with profit, in another, when there are many competitors in both, to watch over, not only the occasional variations in the demand, but the much greater and more frequent variations in the competition, or in the supply which that demand is likely to get from other people, and to suit with dexterity and judgment both the quantity and quality of each assortment of goods to all these circumstances, is a species of warfare of which the operations are continually changing, and which can scarce ever be conducted successfully without such an unremitting exertion of vigilance and attention as cannot long be expected from the directors of a joint stock company. [Nor do they bother, when influence can be paid for much more cheaply, the influence to create "socialism for the rich."]

The East India Company, upon the redemption of their funds, and the expiration of their exclusive privilege, have right, by act of parliament, to continue a corporation with a joint stock, and to trade in their corporate capacity to the East Indies in common with the rest of their fellow-subjects. But in this situation, the superior vigilance and attention of private adventurers would, in all probability, soon make them weary of the trade. [The cost of bribing government officials with campaign funds or revolving-door, highly lucrative jobs is much less than that needed to actually create a product that could survive in a free market -- a real one, not the propagandistic one we currently live in. For the same reason, money spent on PR, "branding," and advertising rises while product-development budgets are squeezed; a general phenomenon in corporatist "capitalsm," as anyone who's ever worked for a corporation ought to know.]

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