Internet Socialism

By Dennis Rice
web posted February 21, 2000

Quite recently, Canada's federal Human Resources Department was rocked by allegations that up to $1 billion of grant handouts have been poorly accounted for and seem to have vanished with few traces. The sloppy accounting is undoubtedly inexcusable, but critics who focus almost exclusively on that aspect of the issue miss an important point: why were such large sums of taxpayers' money doled out in the first place? If the books had been completely in order, would Jane Stewart, the minister responsible for the department, be allowed to continue her free- spending ways in blissful peace? What basis is there for the assumption that as long as the books balance, government handouts can do no harm?

Experience in my own corner of the country demonstrates just how naive such assumptions really are. Driven, one supposes, by theories about "market failure", Industry Canada launched a program about three years ago to develop affordable internet access for rural Canadians. A small community neighboring mine received a $30,000 grant to set up a volunteer-run internet service provider (ISP), giving toll-free access to the internet for a nominal charge. The rationale for the grant was that private sector ISP's were not providing toll-free service outside of major cities. The federal government felt it their duty to do more than stand idly by while rural residents gazed longingly at their urban cousins cruising the information highway.

For a five dollar monthly fee, I was one of the first to sign up for this taxpayer-funded service. Initially, accessibility was fairly easy at almost any time of the day. However, as more and more citizens took advantage of the opportunity to get on the internet so cheaply, the frequency of busy signals increased dramatically. Attempting to access the system during peak evening hours can often mean clicking on my mouse for ten to fifteen minutes at a time.

Other problems have cropped up as well. The system often slows to a crawl with heavy usage, and has been crashing frequently. The latest outage lasted 2 1/2 days. A recent letter from the system's overseers notes that a proposed upgrade that could increase the system's speed has been rejected as being too expensive. Even so, fees are now up to seven dollars a month. Despite the initial largesse courtesy of the taxpayer, the community ISP now appears to be severely undercapitalized.

After starting out with such high hopes, my local tax-funded ISP is functioning about as well as Canada's medicare system. By offering service at below-market prices, such public providers practically guarantee that their systems will be overwhelmed by excessive demand and eventually break down from capital starvation, a necessary by-product of economic models that regard profits as unnecessary.

But unlike medicare, thankfully, private sector alternatives to public ISP's are not banned by government edict. The primary reason for the "need" for taxpayer-financed rural internet access, that being the lack of private sector competitors, was rectified within a year of the handout. I recently signed up with one of these greedy, profit-seeking exploiters for the princely sum of $9.95 per month for 30 hours of access, less than three dollars more than the community service. For that money, I get far quicker access, fewer interruptions and more features. Because the system is profit-driven, capital can be marshaled more easily for upgrades to meet future increases in demand. Because the staff are paid a wage for their work, customer service is seen as a positive value instead of a burden on a volunteer's spare time. It's not that there is no role for community- run services in society; it's just that governments should leave such decisions to the communities themselves, who should learn to live with whatever resources they can gather on their own.

This whole experience provides a valuable lesson concerning the ability of governments to anticipate and react to trends in economic development, especially in the rapidly moving high-tech fields. Their track record is, to put it mildly, appalling. Even though we know quite well where government handouts go most of the time, we oughIt to be focusing on what actual good, or harm, they do. The money spent usually winds up ineffectively duplicating what a more efficient private sector would do anyway, thus constituting a tragic waste of capital. We need to send a much clearer message to politicians like Jane Stewart: rather than "fix" or "reform" your inept departments, why not just wind them down and give the money back to those who earned it in the beginning?

Dennis Rice farms near Starbuck, Manitoba. He is the leader of the Libertarian Party of Manitoba.

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