An IT Analogy for Capitalism

April 23, 2011 at 4:24 pm

Recently I was asked a question on Chris Weigant’s blog that helped me clarify how I feel about government and the relationship between government-run programs and private sector programs.

I realized, and I think many progressives feel the same way, that I view government programs and private sector programs as a couple tools in the toolbox.

This runs counter to how progressives are portrayed in the media – as “big government” liberals.

So its important to get this story out. Rather than shy away from talking about government and socialism, I believe we should address this head-on.

For helping me think through my beliefs, I give credit to Michale for asking the following question:

Can you name one successful operation run by the US Government that is not run better by private industry?

<My response.> 

Great question. I’m going to take it a step further by talking about the kinds of things which I believe would be better run by government. Then, I’ll give you some examples.

Since you’re an IT guy, I’m going to assume that you’re familiar with the history of IT – mainframes, to PCs, to our present state where we’re moving to Cloud Computing.

An IT Analogy for Comparing Socialism and Capitalism

Socialism is like a mainframe, right? Centralized, government controlled. Your computer was typically what was called a “dumb terminal” – it was simply a conduit to the mainframe. All the applications resided on the mainframe so the admin determined what you could and could not run.

From a user perspective, incredibly frustrating because the apps you may have wanted to run did not always exist on the mainframe. And convincing the admin to put them on the mainframe could take years.

There was an upside to mainframe computing though. Because it was centrally managed and controlled, it was very easy to administer. You didn’t need a large IT staff and you only had to learn one system.

Fast forward to the 80s …. (cue Van Halen’s “Panama”)The PC was developed and along with it, the client server model. This model allowed individual departments to run their own software and to deploy it quickly. We’ll use this as our model for capitalism.

The benefit were great. No longer was there a central admin lording over his own IT fiefdom. It freed up departments and even individuals to run the programs that they wanted to run and quickly displaced the mainframe.

But there was a cost. The cost was that each application typically required its own server and back-end database. And all of these different types of applications required lots of different infrastructure. And suddenly it’s a real bitch to support. Why? Because resources were not shared and used in the most efficient manner.

Socialism and capitalism are very similar to these two models. In a centralized model, you’re going to use resources most efficiently, but the trade off is centralized control. In a capitalist model, you’re able to do more of what you want immediately, but the trade off is inefficient use of resources.

So the trick is to look for situations where each would work best.

Example 1: The police force.

Consider a capitalist model for the police force where there are several different police forces competing with each other. Each requires their own guns, their own record systems, their own entire infrastructure for supporting the police including cars, jails, etc.

In a socialist model, all of these would be shared by a centralized police force enabling the most efficient use of resources.

Example 2: Health care

Similarly, consider a capitalist model for health care. You’re going to have many different insurance providers each with their own pool of insured. Each provider must have their own computer systems and support staff. The companies must make a profit on top of the administration required to return benefits to customers. Each time you pay out a benefit, your potential profit drops so there is a natural conflict of interest.

Now, let’s look at a socialist system. You have one pool of insured. One infrastructure and your support staff supports everyone. The larger your pool of insured, the higher your negotiating power with health care providers – you’re able to drive down costs. You’re not required to make a profit so all of your income (after overhead) can go towards benefits.

This is the reason why our current capitalist system is so inefficient – meaning we pay much and don’t get a lot in return.

Other examples: the military, utilities, education, fire and rescue, anything requiring a large national infrastructure – railroads, communications, etc.

My belief

What I’d recommend is that we should consider the system which is going to be best, rather than simply saying capitalism is always better. “Capitalism is always better” is not sound policy. We should look at the situation, consider which method would give us a better value, and make our decisions based off of what will work best.

END NOTE: I know, I know. I’m not really talking about socialism. Or even capitalism to be honest. What I’m comparing is more what these two terms have come to mean to the average person here in the U.S. – socialism, as a term for any government program and capitalism, as a term for private sector solutions. Still, I think the analogy is a good one that helps explain where and when each type of solution has the potential to be most effective. This is the type of conversation I wish we had more of in the national media.