Social Guarantee Corporations

With the financial collapse, we see that under-regulated corporations driven purely by market forces do not result in steady and sustained growth and prosperity. This is likely due to the fact that greed is very short-sighted so that although much of the immediate needs are met, this way of thinking can result in working the economy into the corner that results in a major collapse.

With the collapse of communism we also see that centrally planned communal economies also do not work. This is likely due to the fact that without a high degree of rewards to the most productive members of society, there is no motivation to perform. Although artificial encouragement can be created in the form of social awards and a high level or propaganda supporting "heroes," this can only last for so long and have an effect on a portion of the population.

So this has me thinking, what if we combined the two system? I've been toying with the idea of, for the lack of a better name, "Social Guarantee Corporations" or "SGCs" operated by the government for a few years now, and I still think it is a good idea. An SGC in all respects operate just like a normal government owned corporation. The collection of SGCs should be large enough to span all sectors of the economy that relate to the vital needs of citizens such as utilities, fuels, food, housing and clothing. These SGCs would be centrally planned for the long-term and the benefit of the citizens in mind rather than for making a quick buck. Although these should be kept profitable, they should focus on stability as their main goal.

During times when the economy is hot and companies are working to squeeze out as much profit as they can, the SGCs will offer it's services at more reasonable prices, making life more affordable and relieving inflationary pressure. At the same time, because of their lower prices, this will force the other corporations to keep their prices reasonable as well and to increase their efficiency and develop better processes. Since the SGCs are very profitable during this time, it will store its profits and lend their profits to the government to fund it's social programs or pay off its loans if it has any. If the SGCs cannot keep up with the other corporations, its operations are allowed to shrink to prevent losses and to release more workers into the job market to prevent an unstable runaway growth scenario.

During tough economic times, the SGC will use the stored profits to keep up it's employment numbers and push centrally-planned production higher to offset the loss of production from the private sectors if needed. For example, if utility companies run into trouble, the SGCs can purchase them and keep the basic services running to maintain a certain standard of living, even if they are forced to run at a loss. At this point, production becomes more important than profit, so price breaks and interest-free financing options for these basic services become available for the people who are worst affected by the economic downturn.

To understand this system, we have to go into a lot more detail, but that was the basic idea. With a good implementation, we have the motivation and the competitiveness of the free market combined with the long-term planning, security and citizen-centric attitude of a centrally planned economy. It will become another tool the government can use to smooth out the boom and bust cycles of the economy, and may even help to reduce taxes by allowing the government to make a large profit when it sees fit. Of course, if implemented incorrectly, we would have the worst of both worlds, but if the SGCs are maintained in a very transparent manner, many problems can be avoided.