The Public Goods Deficit

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Deteriorating roads are just one sign of our public goods deficit. Credit: Creative Commons/Virginia Department of Transportation

In The Affluent Society, one of the most influential books of the twentieth century now in its fifty-fifth anniversary year, the eminent economist John Kenneth Galbraith highlighted the bizarre and potentially catastrophic coexistence of “private opulence and public squalor.” Galbraith warned that American society was in grave peril because of a deficit that we lack even the language to discuss today: the deficit of public goods. Correcting that crisis should be at the top of our collective New Year’s Resolution list.
Galbraith wrote that “It is scarcely sensible that we should satisfy our wants in private goods with reckless abundance, while in the case of public goods we practice extreme self-denial.” As early as the 1960s, he was struck in an affluent America by the decline of public goods, including quality public education, highways and public transit, air quality, consumer protections, and basic public services.
Galbraith was arguing, prophetically, that America was entering into a dangerous era of what we call a “public goods deficit.” It can only be remedied by satisfaction of essential public needs that cannot be met by private market arrangements. Failure to focus on the public goods deficit rather than fiscal deficits can crash the economy and social life itself.
Since Galbraith’s day, private goods have mushroomed while we systematically disinvest in public goods. But we see clearly only what we have language to discuss. And the term “public goods” is rarely seen in headlines, economic reporting, or even textbooks, part of a broader deterioration of public discourse about wealth and government.

Public education is another public good that is on the decline. Credit: Creative Commons/Woodleywonderworks

The term “public goods” had a place in nineteenth-century public finance and in twentieth-century Keynesian economics, but Galbraith, a Keynesian himself, noted that the term was being marginalized in highly specialized economic discourse focusing on limited forms of market failure. He became a trenchant critic of his own profession, arguing that “a mystique [is] attributed to the satisfaction of privately supported wants.” And he noted that “Any growth in public services is a manifestation of an intrinsically evil trend. If the vigor of the race is not in danger, liberty is.”
In our view, public goods are, first, goods or services that are not produced by the market because the benefits are spread so broadly that it is not possible to charge users individually, so they must be paid for collectively. Public goods are, second, goods and services that because of their general societal value a society determines should be available to everyone regardless of ability to pay, and so must be paid for by all.

Environmental protection is yet another crucial public good. Credit: Creative Commons/DonkeyHotey

Public goods are intertwined with government, since it is only through democratic political processes that people collectively decide what are essential public needs that must be satisfied through joint payment. It is not surprising, then, that the public goods deficit has mushroomed since the Reagan Revolution, when anti-government ideology became a governing philosophy. Neoclassical economists, such as Milton Friedman, along with new big business think tanks and corporate networks in the 1970s, helped entrench the idea that government is inherently coercive and that only private goods are efficient and useful. This essentially eliminated the case for the very idea of “public goods,” except where government acts to protect public safety or the market itself.
Reagan sought to weaken countervailing power to corporations, such as unions and government itself, while molding the anti-government political discourse and policy of today, which ensures massive public goods deficits. In policies such as the Sequester, still largely in place after the recent bipartisan Murray-Ryan budget agreement, previously unimaginable cuts in public goods – in education and job training, environmental infrastructure health and other scientific research, anti-poverty programs, and public pensions – will be extended into 2021 and beyond, all in the name of reducing government deficits in a way that catastrophically explodes the public goods deficit.
The solution is to end the public goods deficit as rapidly as possible. This will require, first, the rebuilding of countervailing power to corporations as part of a movement for democratizing society, since public goods can be determined only by an empowered public.
Second, we need a new “ideas infrastructure,” promoting new visions and language especially for the teaching of civics and economics itself. This means, first, getting the ideas of “public goods” into the national conversation and second, changing the economics curricula in the classroom to revive Galbraith’s analysis of private opulence and public squalor.
Our national budgetary and political conversations might then turn to the truth that our public goods deficit is far more consequential today than our fiscal deficit, and that ending the public goods deficit will not only improve social well-being but ultimately reduce fiscal deficits and build a robust and sustainable economy.
Charles Derber, professor of sociology at Boston College, has written seventeen books, most recently Capitalism: An Invitation to Political Economy. June Sekera, former Vice-President of the Commonwealth Corporation, is heading the Public Goods Initiative.