In Defense of Big Government... and Capitalism

09/01/2015 12:22 pm ET Updated Dec 06, 2017


"Big government" is a toxic term. It has become shorthand for waste, debt, big brother, and corruption rolled into a neat, yet nefarious, package. It has been redefined and equated with a command-style communist system. Sure, government can be slow and bureaucratic. We have all been to the DMV. But when it comes to the function of government, bigger can be better. And bigger can strengthen capitalism. Here's how:

1. Lack of equal access: Capitalism breeds innovation and wealth, but also income inequality. This is not widely disputed. If rates of upward social mobility were favorable, we might argue that inequality is acceptable on the basis that individuals could improve their lot. Unfortunately, social mobility in the U.S. is in a state of rapid, and rabid, decline. Americans' ability to move up the socioeconomic ladder is becoming increasingly difficult - sometimes impossible. According to a recent Brookings Institute study, greater income inequality is highly correlated with lower social mobility. With income inequality worse today than before the financial crisis, the prospect of economic progress is dismal. At best, we are economically stuck. At worst, we are poised to regress. Contrary to the popular American narrative, it is the social democracies with large public sectors, such as Norway, Finland, and Sweden, that have the highest levels of social mobility. These are the socialist countries we mock.

Why is this the case? For capitalism to work its magic, everyone needs equal access to the building blocks that make growth possible.

Take education. Disparities in the American education system are staggering. Poor communities -white, black, and brown - have abysmal schools: fewer advanced STEM classes, a lack of veteran teachers, outdated textbooks. When education is unequal, outcomes are unequal. In a democratic society, economic status should not determine how good of an education your children can receive. Equalizing the education system so that all Americans have equal access to good education would mean that everyone could gain access to the same foundational knowledge necessary to succeed. As the system currently stands, we should not be surprised that the poor are not moving up the economic ladder.

The same goes for health care. It is true that everyone has "access" to medical care in the narrow sense that nobody is denied coverage. However, health care is unaffordable. Nearly 2 million Americans per year file for bankruptcy as a result of medical bills. The underprivileged are faced with the choice of forgoing medical treatment and living sick, or seeking treatment and contending with exorbitant medical bills and potential bankruptcy. Why, as Steven Brill carefully documented, are Americans paying $1000 for a five-minute ambulance ride to the hospital, $20 for a couple of aspirins, and $7 for the tiny paper cup used to administer them? Why are drug companies allowed to buy out generic drug manufacturers for the express purpose of killing the competition and driving up prices?

Health care is not a free market because getting sick is not a choice.

The solution is not Obamacare. In fact, the very problem with Obamacare is that the government is not involved enough. This bears repeating. Obamacare does not involve government enough. The notion that it is a government-run health care system is simply untrue. The Affordable Care Act forces Americans to purchase coverage from for-profit companies, but does nothing to help control medical costs that keep rising as a result of the "free" market. Everyone has to buy into a rigged system. Premiums are high because individuals have to purchase insurance in a manner that turns a profit. What we need is either greater direct or indirect government involvement: direct involvement through a public option or a single-payer system, or indirect involvement through tighter regulation of medical costs and licensing. Only then could Americans achieve more equal access to care.

2. Regulation: It is also a bad word in political discourse, but the express purpose of regulation is consumer and citizen protection. The agencies that Americans love to hate - the FDA, the EPA, the FTC, and many others - are the very ones protecting us from the excesses of the profit-seeking motive. The FDA sets strict standards for what can go in our food and the types of drugs that are approved for medical treatment. Without the FDA, Americans could be prescribed unsafe drugs and companies would not be legally bound to disclose dangerous side effects. The EPA sets legal limits for water contaminants that companies must follow to maintain a safe drinking supply. Before regulations were shored up, companies were freely dumping carcinogens, such as arsenic, into the water supply. The FTC helps to regulate consumer identity protection in an age where identity theft is becoming increasingly commonplace.

Without strong regulations, we are poised to look like China where melamine-contaminated infant formula resulted in mass hospitalizations and, more recently, a chemical factory exploded because of lax regulation. We would still have lead in our paint. Workers injured on the job would have no legal recourse. We would contract diseases from the water supply.

Self-regulation may work in some cases, but it is far too slow and can be counterproductive. Civil society groups do much good work in the area of raising awareness of dangerous or unfair practices, but only laws can formally bar companies from engaging in practices that hurt consumers and society. Moreover, companies that choose to self-regulate will likely face higher costs, which translate to higher prices. Inter-industry disparities could put those companies who self-regulate at a disadvantage against those that do not. In this sense, regulation equalizes the business playing field as well.

Ultimately, the big government debate has been hijacked to obscure the importance of government in protecting Americans. Without a government that ensures equal opportunities and creates regulatory standards, capitalism only works for those who already have wealth. Capitalism needs rules. The government is the only entity strong enough to set the boundaries that can ensure that capitalism flourishes and works for all Americans. Without it, the American dream is only a dream.