If you were trying to right a capsized business -- let's say a book company -- you wouldn't ask, in an ideal world, how much of the gross national product should be spent on books. Or how profitable the book business should be. Or whether, in the abstract, you should print only books on public safety, or only books that people read in 1789.
Instead, you would ask: Is there a market for such books? Even if people bought them in 1789, are they still relevant to anyone today? Have new technologies, like e-books, fundamentally changed the nature of what I can and should provide? Do competing offerings like movies or the Internet affect my business strategy and how much I should invest in it? Do these changes mean that I should give up on the book business entirely? Or do they open up new opportunities if I simply think differently about what it means to be in the "book business"?
We tend not to think about government in this way. After all, we all know what "government" is, has always been, and should be. But, in fact, what government does and has done has varied widely over time and space. We think of the government providing public safety, or at least meting out punishment for criminal offenses -- but it hasn't always done so. The modern welfare state only emerged in the late 19th century, and, in fact, the state itself is a relatively recent invention. And it simply isn't true that governments only increase the size and extent of their activities over time: Many governments used to develop and impose religious beliefs, determine the disposition of the labor force, or decree what clothes people could wear.
What governments can do today is, in fact, different from what they could do in the past -- not just the distant past, but the recent past, as well -- thanks to the development of new demand for or ways to deliver their services, or the emergence of new competitors. In my last post, I discussed the fact that, like just about everything else today, governments face challenges from a new range of competitors -- in everything from providing social services to torturing enemies. Who does which isn't obvious. Private-sector companies increasingly "do government," providing war-fighting and military intel and issuing their own currencies. But the alternatives are hardly limited to private companies. Non-governmental organizations and multi-state authorities, not to mention a wide variety of extra-legal entities such as drug cartels, rebel armies, and terrorists, all compete with governments now in various ways. The terrorist group Hezbollah, for instance, fights wars and maintains its own social-service organizations and construction company to deliver housing and social services. Countless current governmental services are migrating to the private or non-governmental sectors.
But increased competition isn't just going one way: As I'll explain later, government is out-competing private companies in product lines from handling retirement investments to health coverage to student loans to gift-wrapping (yes, gift-wrapping). And not only can government often offer the best buy as the producer of a range of competitive services, it also now goes head-to-head with businesses in its expanding role as consumer-in-chief, using market clout rather than mandates. This offers possibilities for government that go against the grain of both current liberalism and conservatism.