Government ownership and control of a means of production is the standard definition of socialism even if some linguistic revisionists want to redefine the term as merely the control of a business or industry. In short, a government must own the economic enterprises to meet the definition of Socialism rather than merely government regulation of private businesses. Socialism, I contend, involves a structural conflict of interest that a government that both owns an controls an enterprise, industry or even an entire economy may be tempted to exploit for its own ends rather than the public good. The key here is the regulating of that which is owned. Specifically, where a government as owner enjoys the benefit of profit or surplus, that government has a financial interest that can be against the restriction of the produced product. Such a monopolistic restriction could admittedly be warranted by public health or safety, but the gain could also be private in the sense that it is limited to the government and even the personal financial interests of government officials. In other words, the public good can be distinct from a government’s own financial (and related political) interest even as that government is charged with acting in the public interest in part by owning and regulating state enterprises. It is the pivot between the public and private interest that sets up the conflict of interest because the human urge is to go with a narrower, private interest at the expense of the public good. In other words, the very possibility, even likelihood given human nature, that a government would exploit the wider distribution of benefits for the narrower one (i.e., to the government itself) is the basis of a conflict of interest. I argue elsewhere that even the mere possibility renders even an as-yet unexploited conflict of interest inherently unethical. Here, I examine the matter of public health in China as a case of a socialist (in part) government that has had a conflict of interest.
Three hundred million Chinese were smokers in 2010. This number is roughly equivalent to the entire U.S. population in 2000. In 2010, the addiction killed an estimated 3,000 people a day in China; this translates into 1.2 million tobacco-related deaths for the year. One out of three cigarettes smoked worldwide was smoked in China. It was estimated that smoking would kill about a third of Chinese men under 30. On May 1, 2011, the Chinese government banned smoking in indoor public places. However, the law contained no penalties. According to Time magazine, the law was not likely to have any effect.[1]
The reason for the lenient regulation may have had something to do with the powerful China National Tobacco corporation, a state-owned and controlled enterprise. In 2010, taxes and profits from the monopoly were roughly 7% of the government’s revenue.[2] That gave government officials an incentive to protect the enterprise's revenue and a disincentive to issue regulations that could be expected to reduce the consumption of cigarettes in China even if a reduction were in the public interest. This combination of incentive and disincentive is an earmark of a conflict of interest, the basis of which is the human instinctual urges behind the combination.
This may be why more incentive typically exists to protect and increase revenue coming in than to minimizing costs even if they exceed the revenue. Even if the government’s expense in covering health-care costs for the 3,000 Chinese a day who died of smoking in 2010 exceeded 7% of the government’s total revenue, even a partial loss of revenue would likely be resisted by government officials. Attention to revenue can dwarf that to costs especially where no market competition exists because extracting more revenue is relatively easy whereas cost-containment is still difficult.
Ethically, the government officials otherwise tasked with regulating so as to protect the public health in China and thus preventing deaths from smoking suffered from the personal (if kickbacks were involved) and institutional conflict of interest wherein the government’s financial interest and public-health goals were in conflict. That is to say, the officials not only had their own ethical dilemmas to resolve; there was also a larger institutional problem akin to a house being designed to be at odds with itself. The part of the government oriented to protecting and even increasing the revenue may have had disproportionate influence beyond that of the public-health department because the narrower the benefits are, the greater the incentive. Seven percent of the state's revenue doubtless got more attention from the state itself than its broader public-health measures, including those that made it more difficult for people to smoke in public.
Ethically, the government officials otherwise tasked with regulating so as to protect the public health in China and thus preventing deaths from smoking suffered from the personal (if kickbacks were involved) and institutional conflict of interest wherein the government’s financial interest and public-health goals were in conflict. That is to say, the officials not only had their own ethical dilemmas to resolve; there was also a larger institutional problem akin to a house being designed to be at odds with itself. The part of the government oriented to protecting and even increasing the revenue may have had disproportionate influence beyond that of the public-health department because the narrower the benefits are, the greater the incentive. Seven percent of the state's revenue doubtless got more attention from the state itself than its broader public-health measures, including those that made it more difficult for people to smoke in public.
See related essay: Socialism Where You Might Least Expect It.
See related book: Institutional Conflicts of Interest:Business & Public Policy.
1. “A Smoking Ban without Teeth,” Time, May 20, 2011.
2. Ibid.
2. Ibid.
