Last summer, I was in Maine with a good friend of mine, and we happened to walk by a little rural post office. My friend gestured with his thumb and said, "You know what's killing the Post Office? Having to support thousands of tiny offices like that."
A little while later, I mentioned that it is now much cheaper to send an overnight letter via the Post Office than by Federal Express, and he said, "Well, they've got all the infrastructure." An essential part of that "infrastructure" is all those tiny rural post offices. In other words, the public sector is terribly inefficient, except where it isn't.
You see this all over. A few months ago, I was watching my local school board discuss letting the school kitchen offer limited catering services to the public as a way to offset the cost of producing school lunches. One of the members nearly blew his top at the suggestion and vigorously denounced the idea as unfair to competing businesses. Fair enough perhaps, but this came only moments after he suggested it would save money to privatize the same kitchen. Just like the debate over the public option health insurer, you can't argue both that the kitchen is so efficient it will put private caterers out of business and that it's an inefficient waste of taxpayer money. It's got to be one or the other, according to the rule of the excluded middle, one of the logical rules handed down to us from Aristotle.
My current favorite example of successful and competitive public service comes from those radicals in North Dakota. North Dakota is a pretty conservative state these days. They voted for McCain, and have a Republican Governor and two of the most conservative Democratic Senators in Congress. But a century ago, North Dakota was near the center of the Populist movement that nearly elected William Jennings Bryan president in 1896. Agrarian populists promoted all kinds of economic and fiscal reforms meant to pull power away from the financial and industrial elite of that "Gilded Age" and give it to farmers and workers. Part of their platform was to reform the banking industry to serve producers instead of bankers, and in 1919 they managed to squeak a measure through the North Dakota legislature to establish a public bank.
The Bank of North Dakota is the nation's only state-owned bank. Its deposits are the revenues of the state, counties and towns. With those deposits, they make loans to the same governments, do some limited economic development lending, and offer student loans. They provide a competitive rate of interest on the deposits, and a cheap rate of interest on their loans, with very low overhead. They even provide service to the private banks in North Dakota, offering check-clearing services and emergency credit to other banks.
This is not a non-profit endeavor, nor is it subsidized by tax dollars. But they run efficiently, and they don't pay a zillion-dollar salary to their CEO, so they manage to provide a modest rate of return to the state's coffers. They also serve the state as a de facto rainy day fund, since their reserves are available to be used in an emergency. They did so this year, and partly because of their bank, North Dakota is one of the very few states in the union whose budget is not in fiscal trouble this year.
But the part that I like best about the North Dakota bank is that it was founded by radicals but now run (and defended) by conservatives. This puts it in the company of many other common-sense public policy institutions, like disability insurance, unemployment compensation and Medicare.
The Populists who saw the bank through their legislature saw the original proposal subject to a hundred modifications, and barely overcame a last-minute push to derail the whole thing. But today, almost a century later, the bank is run by practical and conservative business types who understand that it provides an important public service to their state, at a low cost. It isolates them from the way the bond-rating agencies overrate the risk of state and municipal bonds (resulting in a higher interest rate) and it prevents them from being robbed by crooked investment bankers. Best of all, they rely on themselves to provide the financial services they need, so they don't use tax dollars to subsidize the absurd salaries and bonuses so common on Wall Street.
The people who run the Bank of North Dakota are not "Conservatives" -- rigid ideologues to whom every public service is anathema -- but conservative people, sensible folks interested in making their world a better place by whatever measures seem most effective. We could use more of them.