Friday, April 05, 2019

Running Government Like a Business

A Google search for the term "running government like a business" returns over 400 million results. It's a popular phrase no doubt. We often hear politicians touting their business experience claiming they will run government like a business.

Promoting the idea that government services would be better if they were run like a business assumes that business is more efficient and responsive to customers than government agencies.

Is this true?

Have you ever had cable TV service? Have you ever contacted the corporation who provides that service to ask for their assistance in some problem you are having? How'd that go for you?

Given my personal experience I'd much rather deal with the V.A., Social Security Administration, Medicare, public schools, public libraries, the post office or the DMV than Comcast. Comcast isn't evil it's just an example of a large corporation fulfilling it's duty to maximize profit. Given their market position and absence of competition they can treat product quality, customers and their workers as secondary concerns.

No doubt there are businesses that are more efficient and customer focused than many government entities, however it's also true that some businesses - particularly large corporations, can be extremely inefficient and not satisfy their customers needs.

There's multiple reasons for this - customer knowledge, personal relationships, market forces, engaged and loyal workers, profits/losses directly impacting the owner, a need to be efficient in order to profit - to name a few.

How can an inefficient business that doesn't satisfy it's customers remain a viable enterprise? Don't we have the invisible hand of the free market that will smite these slackers down?

No - there's no such thing as the free market. For insights into why this is true see Thing 1 in the excellent book, 23 Things They Don't Tell You About Capitalism, by Ha-Joon Chang a professor of economics at Cambridge. It's a fascinating book and not at all as boring or overly complicated as you might think a book about economics would be.


In many cases these corporations have obtained some type of monopoly removing consumer choice. 

We also see government providing aid to corporations through corporate tax rates, top income tax rates benefiting grossly overpaid CEO's (compared to any other nation in the world), and in some cases massive tax breaks to try and entice a corporation to remain or locate in a community. In the case of defense spending the government uses our tax dollars to prop up corporations by purchasing overpriced, sometimes unnecessary, often times dysfunctional military hardware and systems.

Considering the amount of money in politics it shouldn't come as a surprise that government wastes our tax dollars on defense spending and favors big business over people. Well most people anyway. A small group of very wealthy people have major influence in many governments - currently and historically.

Government works for big business, not for small business. Consider small farmers displaced by industrial corporate farming or small shop owners displaced by big box stores to begin to understand how government policies have favored large business over small.


My premise is that many corporations are less efficient and customer focused than either government entities or some small businesses. These inefficient corporations survive due to government policies that immunize them from market forces.

Amazon is an interesting anomaly given it's size, efficiency and customer focus. This is part of what makes Amazon so disruptive.

U.S. government anti-trust policy was changed in the 1970's in a way that super-charged the scope of disruption possible. These changes led to devastating impacts on communities as big box stores and online shopping displaced small businesses.

It's interesting to note that 80% of the profits from a big box store leave the local community. In some places the community leaders, youth sport coaches, school board members, boy/girl scout/4H leaders, who also happened to own or work at small businesses, left the community as well.

What happened in the 70's? Robert Bork promoted a new theory of antitrust that held that as long as consumer prices remain low there's no need for government intervention. This is known as "the consumer welfare standard" and was a radical change from existing antitrust law.

In this American Prospect article David Dayan writes that under the Borkian standard -
"Mergers are judged...solely on whether they provide benefits to consumers. Other by-products of market concentration—negative impacts on worker wages, squeezing of suppliers, fragility in the supply chain, reduction in innovation, and constraints on personal liberty and democracy—sit in the background, behind the consumer-based frame. It essentially cuts people in half, presuming that only their rights as buyers of goods matters." 
It doesn't take much imagination to see how fragile supply chains are. Consider something as critical as the food supply. When small farms have disappeared from your community and food is trucked, shipped and flown in from hundreds or thousands of miles away it's obvious there are many places where this complicated system could breakdown.

Antitrust and other government policies could be used to protect local businesses, local food producers, and therefore local communities. Vibrant local communities would take the pressure off urban areas to provide jobs and housing for people displaced from dying small towns. If young people could stay in those small towns we'd see less fear, anger, and misplaced resentment that comes from the primarily white older citizens that remain. The electoral map would shift significantly in rural areas. I see this in how my home state of Montana has evolved politically over the years.

Mike Mansfield was a U.S. senator from Montana during the 50's, 60's and into the 70's. Mike Mansfield was what we'd call a liberal democrat nowadays (although I hate using those labels...finding them mostly meaningless). In the senate he helped pass LBJ's Great Society programs including Medicare, Medicaid, The Civil Rights Act of 1964 and Voting Rights Act of 1965. Mike Mansfield was born in Brooklyn, grew up in Great Falls and lived an amazing (by today's standards) life as a young man. He was well rounded, intelligent, moral and diplomatic; serving his final years as a public servant as U.S. Ambassador to Japan.

In the 2016 election cycle Montanans elected Greg Gianforte 

Capitalism is a disruptive force for families, communities, religious beliefs, cultures, the land and the environment (to name a few things). A free marketeer promoting laissez-faire or unfettered capitalism is willing to sacrifice these things that make human life meaningful and satisfying.

What do we get in return for these sacrifices?

Everyday low prices.


Please don't take my criticisms of capitalism to mean that I don't appreciate all the good things about our country. My point of view is that capitalism must be regulated to some extent for the good of citizens, families, communities and small businesses (and for the good of capitalism according to Professor Chang). 

Any pure ideology is bound to fail in the real world - socialism, communism, capitalism, name it. An ideal society would use the best ideas from great thinkers implemented by a representative government chosen by informed citizens. 

Absent that ideal, if you believe that American government has swung too far towards the interests of industry, corporations and the ultra-wealthy at least we could support politicians who will help swing things in the direction of providing for the interests of the majority of American people. In other words, a representative democracy - of, by, and for the people.