10A109 Subcontractors by Jim Davies, 12/22/2010    

While writing Transition to Liberty I dug for some data on how many people work for government, so as to visualize the rate at which those employees would resign and so bring government to its knees; but found it's not an easy count. Those employed directly are clear enough at a little under 20 million, but then there are another 30 million working for commercial firms with contracts to do government work. Finally I figured 40 million was a fair estimate of the total who are wholly or largely in government employ. But it's clear that those contractors make up a large part of that Parasite Sector (which contrasts with the Productive Sector, working to provide goods and services people actually want to buy.)

Subcontractors appear all over. Halliburton is one of the largest, and as John Stossel notes in his delightful Myths, Lies and Downright Stupidity they are the bÍte noir of the Left - but that they do deliver some high value for moderate cost. He found that if government did the same work directly in Iraq, "it would take three soldiers to do the work of one private-sector employee." Result: gross as it is, the cost of government would be much greater yet, if subcontractors were not used.

Many prisons and prison services are turned over to firms like the Wackenhut Corp - they may make life no more bearable for the government's prisoners, but at least they minimize the cost to its other victims, those who foot the bill. Emergency services like firefighting are sometimes contracted out, for example to Rural Metro. Then there are many firms which build things government buys, like fighters for the Air Force, tanks and artillery for the Army, handguns for police forces, and so on. The reason why for-profit companies can work for less is that even though they serve only one customer - the monopsonist, government - they are motivated by some concern about competition; if they perform badly, they will lose out at contract-renewal time. More: they are motivated by the need for profit (revenues minus costs) and therefore, given a revenue determined by their contract, they work hard to minimize costs. So they exhibit some of the traits of free enterprise, even while performing the generally deadly work of government administration.

Recently the SpaceX company launched a rocket, propelled an object into Earth orbit, and recovered it - all with commendable accuracy. The press correctly hailed it as the first time a private firm had done that. Scaled Composites made its first sub-orbital space flight in 2004 as we noted on 11/21 here, but haven't yet gone orbital. Where did SpaceX get the money, to move ahead in the race?

Alas, they got it from taxpayers; SpaceX is a subcontractor. Having spent a fortune even by government standards over half a century, NASA is being wound down and someone came up with the idea of having a modest space program run, if not by the USA, at least by a US company. The purse strings were loosened and so SpaceX took off. Hopefully the heist needed to keep them flying will be a lot smaller than NASA's grab, and being motivated as above I expect them to achieve great things cost-effectively; but they are still not a true, free-market space exploration company, with a business plan to make money without stealing it. That Elon Musk, one of the founders of Paypal - an enterprise that shook the banking industry to its complacent roots - is also the founder of SpaceX, does not reflect well on Elon Musk. The money he is helping steal could have been used, in a zero government society, for something really creative.

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