How much should the government do?
In a previous post, we discussed the role of a government – and we came to the conclusion that by sacrificing a little bit of their rights and some of their money, societies empower governments to provide (public) services and enforce laws. This is all well and okay in a tribal context. But yet, as people became smarter and got better at co-operating with each other, this concept has come into question as well. Why do we need a government to do this? Perhaps the government can do the minimum of enforcing law and order, but can’t we provide these services ourselves?
When a society gets big enough, past the tribal/village stage, something called the economy happens. That’s when people invent the idea of currency, using little paper bits to represent value, and begin to provide things for each other.
For example, Bob may decide to start a car company. The people working for him handle everything from buying iron from another country to building the actual car in a factory they set up. His company, Bob Inc, provides cars to people in America – they provide a service, or a product. And people, who want these cars, give Bob Inc. little paper bits called money in exchange for these cars. And the workers of Bob Inc. use this money to buy food and housing.
Bob Inc. provides a service, just like the public services of healthcare, a police force – but not on the same level, since people don’t need cars to survive.
But this raises a question – why can’t the public services be part of the economy as well? Why does it have to be run by the government? Why can’t Bob privately own a healthcare company as well, one which sets up hospitals and hires doctors? People can pay him money in exchange for Bob Healthcare’s services.
Because it’s owned privately by individuals, these companies such as Bob Inc. has traditionally been called part of the private sector in the economy – a slice of the pie that belongs to business owners like Bob. The other big slice of pie is the public sector, including the public services, because it belongs to the government – and by extension, everyone.
Now the problem is this – Bob Healthcare and Bob Inc., like most companies, are motivated by money. Bob has to spend money too on car factories and hospitals. And in order to pay his workers, he has to charge the car drivers and sick patients a little more than what he spent, so that the extra money he gets – called profit – can be given to his workers.
This means that hospital fees under Bob Healthcare is probably going to be pretty expensive. And that’s bad for poor people – what if a man, the breadwinner of a really poor family, gets into a car accident? And he can’t pay the hospital fees of Bob Healthcare, which runs the entire country’s healthcare service? Or he does, and his family starves. That’s unfair, surely. Surely it’s better for the government to take money from everyone in society (tax), and use that money to run hospitals which provide free or low-cost healthcare, or run schools that offer free primary school education.
“I work hard,” says Bob. “Why should I pay taxes for the government to spend my money on other people?” (In most countries, richer people are taxed more because of their higher income.)
“But these people are poor,” you say. “Isn’t it right for richer people like you to help them out?”
“They’re poor because they don’t work hard like me,” Bob insists. “Anyway, private businesses can do basically everything. There’ll be some companies which will provide cheap healthcare for the poor, albeit at a lower quality. Businesses are more efficient and productive than the bulky state-run systems – privatising healthcare will be good.”
“The poor are poor maybe because they were unlucky and didn’t have the same opportunities as richer people,” you protest.
There is now an awkward silence.
Welcome to the world of left-right politics.
So what is left-right politics? You definitely have heard the terms left-wing and right-wing, perhaps on the radio or in a newspaper. What do they refer to in politics and economics?
Essentially, the left-right political spectrum represents the different answers people have come up with in answer to the question: how much involvement should the government have in the economy? Or, how much should the government do – in order to fulfill its role?
On the right-wing side, you have people like Bob. “The government shouldn’t touch the economy,” Bob grumbles. Even the traditional public services such as healthcare and education should be privatised – let businesses run them, it’s better that way. Then governments can lower taxes, since they no longer have the burden of running the public services. That’s good for everyone.
The right supports the idea of Capitalism – people should get what they deserve . For example, if an individual works hard and contributes significantly to society, others will pay him for his services; if he works more, he earns more; if he works less, he earns less. And that’s fair. The public sector should shrink as much as possible and stop interfering.
On the left-wing side you have people who believe that things don’t always work out so nicely in reality. The ones holding true power in capitalism are rich business owners like Bob, they argue – because he owns the factories and the hospitals (the means of production). People underneath him like the poor workers will never be able to move up to his rank. They’ll forever be workers, and over time, become exploited once people like Bob realise how much power they have. Businesses are not all bad, they say, but they shouldn’t be trusted – governments should take over important services. In fact, governments should raise taxes – especially for the rich – and redistribute that money to the poor through providing things like free healthcare, free education and good social welfare policies. The public sector should be considerably big.
Most people are somewhat left, somewhat right or somewhat in between, moderate as they call it. But many in the past were seized with creating a political system that goes to the extreme left or right. On the far-left, for example, you find the idea of Communism. Conventionally, government tax takes away a portion of your income (or it could be based on property or whatever). In leftist countries like Sweden that could be up to 40%. Communists say it should be a 100%. Everything that you own should belong to the entire country – there isn’t even a government as an intermediary. And everything that the entire country owns will be redistributed according to the principle – people should get what they need.
Both the systems of Communism and Capitalism in their extreme forms are noble in principle, and are commendable attempts to create a perfect society. Yet, they are idealistic, and the truth is, these systems only fall apart in the hands of cruel and corrupt humans – and this has happened time and again the past century. As said earlier, most people are somewhat in the middle between the left and the right, and most countries run on a model of regulated capitalism or socialism, a toned down version of capitalism at its extreme, allowing the government to partially tax people, and use the funds to help society along. This, though maybe differing slightly from country to country depending on their individual cultures, is probably the most suitable system of government given the nature of human beings. But we will of course work and strive towards better and better systems of government