I was looking at a credit card receipt the other day at a restaurant. On the receipt, there was a “transaction id.” It was a number with 15 spaces. That’s a lot of space, enough for 999 trillion transactions.
Worldwide there are half a billion credit cards, a number that is increasing rapidly. Even with 15 spaces, we may be needing to add more spaces in the next 50 years.
Each one of those 999 trillion transactions represents a consumer using his or her money to buy something. People don’t easily part with their money. Those transactions represent crucial information about what really matters to people in the marketplace. If you add cash transactions, the number of transactions gets even greater. It is a huge amount of information about what people really want and need.
This is called the free market. Free people making free choices about what to buy. It is the most powerful economic force in the world. To think government bureaucrats sitting in offices could make better decisions about what to produce than the free market is the height of lunacy. That’s why communism failed utterly.
If we want good government, we need to make every effort to use the powerful information of the free market. The more we allow the free market to work, the more responsive and efficient our society and economy will be.
You may think I am stating the obvious, but look at polls that show the number one issue voters want the government to address is jobs. But government cannot create jobs, only the free market can. Yet the Republicans in power in Mississippi have consistently tried to use government subsidies to create jobs. It is as absurd as the communists and doomed for failure.
Thanks to the embarrassing spotlight of the media on botched government job creation subsidies, there hasn’t been a big state subsidy deal since the Continental Tire plant two years ago. Yet in those two years, unemployment has dropped dramatically. As Gov. Phil Bryant said in his most recent state of the union address, we now have 40,000 jobs looking for workers.
Government didn’t do that. The free market did that. All government has to do is get out of the way and let the free market work.
The City of Jackson is getting a lesson in the power of the free market. Five or six years ago they doubled the price of water rather than modernizing and downsizing the water department. It’s so much easier just to raise prices rather than operate efficiently, especially when you have a government monopoly, or so our city officials thought.
But the free market is far more powerful than the Jackson city council and its water monopoly. The free market responded with force. When prices doubled, people found alternatives.
Of course, the first alternative is to cut back on the use of water, which happened. But thousand of Jackson residents didn’t stop there. They started straight piping.
Straight piping is simply installing a bypass to the meter. A plumber can do it. Heck, I can do it, thanks to dozens of You Tube videos. Modern technology has eroded the government’s water monopoly.
After rates went up, many big users such as UMMC simply drilled their own wells. Another classic free market response.
It’s even worse. The Jackson water department is so incompetent it has failed to send out bills to about 20 percent of its customers. Many of the bills have been inaccurate, giving customers an excuse not to pay. Collections have plummeted. The city, in the words of public works director Robert Miller, faces “an existential crisis.”
So why didn’t the bills get sent? Why haven’t straight pipers been prosecuted? Again, the lack of a free market. Our water system is run by the city council. They want votes. Giving free water is politically popular. Since the council members don’t get the profits from the water department, there is no incentive to make it profitable.
If the Jackson water system was owned by a private company with shareholders and paid executives on bonus plans, this billing problem would have been nipped in the bud. The executives would have lost their performance bonuses because the shareholders wouldn’t have tolerated a loss of dividends. If management didn’t turn it around, the company would be sold to an organization that could. One way or another, the problem would be solved by the free market.
So what happens now? For Jackson, bankruptcy looms. This happened in Birmingham last decade, Jefferson County, to be exact. The county issued millions of bonds to finance EPA-ordered work. Contractors were bribing officials to get the work. Twenty-one people were convicted.
Water rates skyrocketed. Revenue plummeted. Bonds were in default. The legislature and governor got involved. In the end, federal bankruptcy was the only option. The bond holders got a billion dollar haircut, over a third of the outstanding debt. What a mess.
But despite it all, the government is still running the show through a bankruptcy judge and the free market is working minimally.
Ironically, early water systems were privately owned. The World Bank estimates that, as of 2007, about 270 million people received water from private companies in more than 40 countries, including about 160 million in developed countries and 110 million in developing countries.
The city could seek a private contractor to run the water department, but it would still be a monopoly. Privatization of our prisons hasn’t worked so well. Bidding corruption is a problem.
Facing water bills of $1,200 a month, it might make sense for a Jackson resident to drill their own water well. That might cost $5,000 or so.
It will be interesting to see how Jackson muddles through. Certainly, the overall declining tax base is exposing a variety of problems in the city. A rising tide lifts all ships.
Cities do muddle through and no doubt Jackson will one way or another. Water is basic infrastructure and lends itself to a natural monopoly. Too bad government administration doesn’t work as well as the free market system.
