Note: this is a cross-post fromThe Realignment Project.

“A term like capitalism is incredibly slippery, because there’s such a range of different kinds of market economies. Essentially, what we’ve been debating over—certainly since the Great Depression—is what percentage of a society should be left in the hands of a deregulated market system. And absolutely there are people that are at the far other end of the spectrum that want to communalize all property and abolish private property, but in general the debate is not between capitalism and not capitalism, it’s between what parts of the economy are not suitable to being decided by the profit motive. And I guess that comes from being Canadian, in a way, because we have more parts of our society that we’ve made a social contract to say, ‘That’s not a good place to have the profit motive govern.’ Whereas in the United States, that idea is kind of absent from the discussion. So even something like firefighting—it seems hard for people make an argument that maybe the profit motive isn’t something we want in the firefighting sector, because you don’t want a market for fire. “
— Naomi Klein

Introduction:

As I discussed in part 1 of this series, “Public Virtues” will examine those areas in which the public sector has an economic advantage, and compare and contrast those where the private sector is supposed to have an advantage. And where better to start than the profit motive, the first principle of capitalism that’s been held up, not just as an explanation of why corporations get better and better at making widgets if people give them money, but why the public sector is inherently and unalterably inefficient, technologically stagnant, and uncompetitive. The profit motive, as everyone knows who’s lived in the capitalist world, basically holds that because people want to make a profit, they are pushed towards the maximization of their resources, and thus seeking to make profits, they make the system as a whole more efficient and productive.

However, most honest thinkers, i.e those not professionally involved in proving that capitalism is infallible, admit that the profit motive only spurs innovation and efficiency where it actually exists. Where it doesn’t, you wind up with market failures.  And where the market fails, that’s the natural place for the public sector. The debate, however is how often and where this happens.

 NOTE: this is a cross-post from The Realignment Project.

Introduction: In this post, I'm returning to a theme I initially explored in June, back when California was grappling with its budget crisis. Now, after nearly two months of additional struggle, we finally passed a bill that cut $26 billion and raised no new revenue, and now we learn that the governor has possibly illegally cut a further $500 million, taking the axe to children's welfare ($80 million), health care ($400 million), Cal Grants (cut in half), HIV/AIDS Prevention and Treatment ($52 million), and domestic violence shelters (cut by 80%) . In addition to the moral insanity of attacking the most vulnerable of our citizens at a time when they are most in need of support one must add the economic insanity of believing that you can reduce government spending by $31 billion in the course of a single year (including both the February and July cuts) and not effect the state's economic recovery.

Lest this be seen as merely a California problem, a recent report by the National Governors Association notes that the collective budget shortfalls of the fifty states comes to a collective $200 billion shortfall. Given that the total Federal economic stimulus for this year only comes to about $400 billion, we are forced to recognize that our system of state government budgeting and finance is creating a massive economic undertow, weakening the impact of Keynesian stimulus by cutting spending and raising taxes (although they've been doing a lot more of the former than the latter).