2013 SECOND PLACE ESSAY
by Chelsea Martinez, Age 16
Submitting Teacher: Mark McDaniel
"Yes we can!" The battle cry of our nation's leaders. They promise us effectiveness, low prices, and progress. And who will bring these ideals about? According to the government, they will. And that's the problem. They can't.
First of all, most government agencies are inefficient and actually raise prices. For example, in 2010, The Boston Consulting Group released a report that projected mail volumes of the U.S. Postal Service through 2020. According to this report, a profound decline in USPS mail volume, a mix shift from First-Class Mail to Standard Mail, and an increasing cost base will "cause profits to experience steep, unrelenting declines." The government is failing to provide first-rate services for the people. This legal monopoly should be abolished.
We can take tips from New Zealand. New Zealand has successfully privatized its postal system. Initially, the government-owned New Zealand Post provided all postal services. Now, according to the Postal Services Act of 1998, anyone can process and deliver mail. In other words, the postal market was opened to full private competition. Since the act was passed, postage rates in New Zealand have decreased. In this market, the competition provides the private enterprises with incentive to continually improve their products and services and to lower their costs as much as possible. Consequentially, the most successful companies are the ones that deliver the best results.
Secondly, when government subsidies are ever-present to be depended on, federal agencies can and will spend unnecessary amounts of our tax money. Take into account our country's Federal Aviation Administration. The U.S. Government Accountability Office (GAO) has long been keeping a watchful eye on the FAA's wastefulness. A GAO report on the FAA's Automation program stated that the program was estimated to cost 2.5 billion and be completed in 1996. However, after a "restructure" of the program in 1994, the estimated cost came out to 7.6 billion and completion was delayed until 2003. Unfortunately, subsidies do not guarantee improvement. Instead, agencies, like the FAA, will waste these funds. These agencies have no incentive to manage money well because of the continuous flow of money from the government.
On the other hand, in competitive markets, private enterprises must manage their resources well. This is necessary to ensure a company's profitability, which in turn is dependent on the quality of its products and services. This is true of the air traffic control system in Canada. In 1996, Canadian government transferred responsibility for air navigation services from Trans Canada, a federal department, to Nav Canada, a privately run enterprise. Since the transition, Nav Canada has been awarded the International Air Transport Association's Eagle Award for "exceptional commitment to control infrastructure cost and related charges" three times. Since they receive no government subsidies, they rely solely on profit they themselves earned. The result? Nav Canada is driven by necessity to superior excellence in managing their money.
Finally, government regulations do nothing to improve market situation. In response to the subprime mortgage crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Two of the bill's major components were the "consolidating of regulatory agencies" and the "comprehensive regulation of financial markets." As a result, extensive contracts were added to the already complex rules that businesses are required to follow. Yet, this complex system of government regulation could not stop the Bernie Madoff scandal. Even after six investigations, the SEC still could not identify the scheme.
In his video "No They Can't" John Stossel says, "fewer rules create prosperity." Stossel uses the Cayman Islands as an example. In the Caymans, there are much simpler rules for starting a business. This system definitely pays off. Don Seymour, President of the Cayman DMS Offshore Investment Services, says that the Caymans have an excellent economical track record. "We've been through the crisis of 2000, 2004, and the most severe crisis being 2008," states Seymour. "And no Cayman financial institution needed any type of government intervention or needed any type of bailout." The average income being KYD$47,000, the Caymans have the highest standard of living in the Caribbean.
In summary, federal agencies raise prices extensively high, yet provide second-rate services. They also waste government subsidies unnecessarily. Furthermore, government regulation hinders economic progress. The solution to these problems is to downsize government and privatize state-owned enterprises. Private enterprise and free market competition keep prices low, provide superior products and services, manage money economically, and constantly encourage the creation of new inventions and innovations. What this country needs is less government. Stossel wraps it up with a simple statement. "Individuals succeed, while government fails."