Would government-monopoly long-term care really be better?

‘Profit has no place,” the NDP declared earlier this year, “in the care of our loved ones” — a statement that raises some obvious questions. For instance: have all NDP members of parliament, in planning for themselves and their families, deliberately committed their personal savings and retirement funds only to unprofitable investments? If not, why should profits have a place in the care of their loved ones but nobody else’s?

These are important questions, but set them aside for a moment and consider long-term care, which is the issue that prompted the NDP’S anti-profit declaration. Since last year, both the federal and Ontario NDPS have been demanding an end to for-profit long-term care facilities. Given the growing need for long-term care, this presumably means replacing them with government-run institutions, with maybe some increase in private non-profits, as well.

That government could run things better than for-profit businesses does seem unlikely, but in the spirit of open-mindedness, we might consider all the other examples where the government runs things better than competitive for-profit businesses. In fact, financial economist John Cochrane once attempted this exercise of considering all the historical examples of industries being led by government regulation to better use of resources, improvements in quality, reductions in costs, and rapid and widespread innovation to the benefit of consumers. The exercise amounted, he said, to a moment of silence.

In the package delivery business, for example, does anybody think Canada Post outperforms Amazon? Is Canada Post well known for efficiency and innovation? When the coronavirus and lockdowns drove shopping online, consumers overwhelmingly turned to Amazon. Meanwhile, Canada Post lost $570 million last year, because while it too saw growth in its package delivery business, this was more than offset by less letter-carrying and higher costs.

Municipal services are similarly not widely regarded as beacons of operational efficiency. The most infamous illustration of this may be the story from 2017 of the Toronto staircase leading from a public parking lot into a park in the city’s west end. The city, estimating the cost of the staircase to be between $65,000 and $150,000, neglected to build one. As a staircase was needed, however, a local septuagenarian resident hired a homeless man and constructed a wooden staircase in one day, at a total cost of $550. It was, of course, promptly torn down by municipal workers and replaced with a $10,000 concrete staircase.

The inefficiency of municipal operations more generally is evident in the significant savings to taxpayers when municipalities contract services out by allowing private companies and in-house staff to submit competitive bids. For example, researchers with the C.D. Howe Institute report that in Ontario, from 2009 to 2016, municipalities that completely contracted out waste services paid 31 per cent lower costs.

Looking to other areas, public schools continue to underperform, as costs keep going up while test scores trend in the opposite direction. Or take health care. Though staffed with diligent medical professionals hospitals are not well known for operational efficiency. By contrast, other areas of health care that are less tightly controlled by government — optometry and dental offices, for example — seem to be much better run, with shorter queues.

One major reason for the discrepancy between for-profit businesses and government is that inefficient business operations generate losses, which can provoke shareholders to replace management, while inefficient government operations are generally rewarded with increased funding. It is therefore no surprise, as Cochrane concluded, that wherever we look, government-imposed efficiency is “a hope without historical precedent.” Some might bristle at the word “efficiency,” but all it means is delivering better quality at the same cost, or the same quality at a lower cost, or some combination of better quality and lower costs.

Of course, it could be that long-term care facilities are completely unlike everything else we see in the economy. Maybe in the case of long-term care facilities, replacing private competition with government control would be beneficial, and the NDP is actually right about this. But maybe not.