The Business of Government

Polls show that a plurality, if not a majority, say “yes” when they are asked if they want the government run like a business (depending on how the poll question is phrased).

I think that is because the phrase “run like a business” evokes a certain mental image of streamlined efficiency, effectiveness, and responsiveness that businesses tend to have versus the common experience of government as a trip to the DMV.

Government is like business in that it has many employees, a defined organizational structure, budgets, and objectives but, as Ludwig von Mises emphasized in his classic 1944 book “Bureaucracy”, those similarities are superficial:

“Private companies exist for one primary purpose: to earn profit. Participation, as an employee, supplier, investor, or customer, is strictly voluntary. The firm’s capital is privately owned. Profits are earned, and losses avoided, by producing goods and services that consumers want and are willing to pay for. Under competition, we can measure a firm’s success or failure in monetary terms, by looking at accounting income and the market value of the firm’s assets or equity. A good executive earns profits for the firm’s owners, a poor one incurs losses. The details in each case are varied and fascinating — that’s what we business professors study! — but the general model is straightforward and consistent.

Government, of course, is different. Assets aren’t privately owned — in theory, the land and capital and equipment of a government agency are owned by the taxpayers, or the citizens, but are de facto controlled by bureaucrats and politicians. The (ostensible) purpose of a government agency is, well, whatever is specified in the relevant statutes, executive orders, etc. The job of the Defense Department is . . . to provide defense. The Commerce Department, according to its website, “promotes job creation and economic growth by ensuring fair and secure trade, providing the data necessary to support commerce, and fostering innovation by setting standards and conducting foundational research and development.”

There is one aspect of government that is run like a business – a sort of “pre-government” operation, actually – and that is the way electoral politics is managed by the two national political parties. Much to our detriment (in my humble opinion), they do apply the theories of marketing, market research, product packaging, product placement, advertising, and Big Data very well.

Several years ago, the term “retail politics” was coined. Its definition was “a style of political campaigning in which the candidate attends local events in order to target voters on a small-scale or individual basis” and is supposed to evoke the feeling of a candidate getting close to their constituents in order to have a better connection with the “regular folks”, it’s thought of as the old hand pumping, baby kissing, barnstorming tour where the candidate is directly accessible to the electorate. Over the years, the “retail” part has become more of an effort to “sell” a candidate to get them elected as if the parties were selling consumer goods or services to customers through multiple channels of distribution to earn a profit.

And in this process, electoral selection is flipped backward.

Retail politics as it is practiced today is about using business tools to find out what people want and giving it to them – and in that process, the idea of government has been transmogrified from a benign, transparent, “behind the curtain” entity that protects the conditions for individual success into a malignant, opaque, participating entity that hands out goodies and determines winners and losers. This is how America gets to the level of aggressive “identity politics” where politics infiltrate every single aspect of our lives. Elections are not won or lost on principle, electoral success is based on giving the largest group (or coalition of groups) what they want through government – and when this happens, the general model of governance is neither straightforward and consistent, it is arbitrary and capricious. It is not about protecting and defending the Constitution and its provisions that protect the chance of success for all citizens, it is about “what are you going to do for me when you get in.”

Von Mises points out that the “purpose of a government agency is, well, whatever is specified in the relevant statutes, executive orders, etc.” and therein lies the rub. When those relevant statutes and executive orders are tailored to advantage on group over another, government then becomes a business where the market currency is the giving of favors and the rewards are influence, status and power.

And that is no way to run a lemonade stand…


One thought on “The Business of Government

  1. I have managed my General Contractor business for 39 years and I have never seen any other company stay in business after continuing to over spend their budget. Surely you could over spend one year and make up for it over a few following years, but you could never over spend every year like the government does, and still be in business.

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