Like a Business…

It’s not uncommon to hear a candidate seeking elective office to make the argument that government should be run more like a business. The more I think about this, the more I think that this is not a good idea, and if someone pledges to do that, then he or she is not deserving of your vote. This is not a liberal or conservative / republican or democrat point. It’s a question of a fundamental misunderstanding of the true nature of either business or government (or both).

Usually the “run government like a business” argument is an attempt to argue for efficiency and/or a lack of wasteful spending.

And, to be perfectly fair, there is undoubtedly wasteful spending in the budget for any government agency. I do think it’s interesting that a lot of the people who bemoan wasteful spending in public statements often choose examples of spending that are not wasteful. Two very high profile examples of this are Louisiana Governor Bobby Jindal’s complaint about volcano studies, and Alaska’s then-Governor Sarah Palin complaining about studies on fruit flies.

Volcano studies are basically disaster preparedness. Considering that Jindal is governor of a state that routinely gets slammed by hurricanes, he really shouldn’t complain about any expenditures associated with natural disasters.

And studies on fruit flies have yielded immeasurable positive results in the worlds of scientific discovery and medicine.

Efficiency is an interesting point. I say interesting because its definition is vague and malleable to whatever you might want it to mean. There is a built-in inefficiency to the way the legislative branch of the United States government runs its business. For one thing, congress is, by design, a deliberative body. It is intended to talk about issues, almost ad nauseum, until they act on it. Every president who ever wanted a declaration of war from congress could speak to how slowly congress can act. I remember seeing a political cartoon from about the year 1915 with President Wilson pulling a snail, trying to get congress to declare war to allow us to enter the conflagration we all know now as World War I. Throw in the fact that the legislative branch of the United States government is a bicameral legislature, meaning that the same legislation has to pass both the house and the Senate before it can get sent to the president to become a law, and you can see the fact that it was designed to be anything but efficient. And this can’t change without a constitutional amendment. (Not that I’d know how to change it…)

But I would also argue that business isn’t exactly known for its efficiency. Yes, when there is competition among businesses, they have to be somewhat efficient to get the next best product out to market before the other guy does. But that doesn’t necessarily mean that everything behind the scenes is implicitly efficient. I work for a large financial company. In the year 2001, more than thirty years after we first launched one of our administrative systems, we made the decision to convert all of our accounts off of that system and onto a newer system. That decision was made primarily because the cost of keeping the old system had become too great, and because it took too long to get changes made in the system either to correct bugs within the system or because the laws governing our industry might change.

And that’s at the real heart of why government should not be run like a business. Speaking in very general terms, the primary purpose of a business is to make money. Whether it’s a business you admire, or whether you don’t like it, the business of business, is money. Profit margins, revenue, income. The business makes a product and sells it to its customers (which may be regular consumers, or it may be other businesses). If it makes the product well and consumers like it, they will buy it. If they sell it for more than it cost to make it, they will turn a profit. The more profit they make, the bigger the business will become. Then other companies will come in and make similar products for sale to consumers. If the consumers see the benefit of one product over another, either in terms of its features, its cost, or some combination of the two, then they will flock to the product that offers more benefits. If they do it in large enough quantities, then the other products might get discontinued or, maybe worse, the entire company could go out of business.

That is not the primary purpose of the government. Even ignoring the potential dangers of the government “going out of business” — a risk I don’t think anyone wants to take — the purpose of government is not to make money. The preamble to the United States constitution says it pretty well as to what the purpose of the government really is:

We the people, of the United States, in order to perform a more perfect union, establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare and secure the blessings of liberty to ourselves and our posterity do ordain and establish this Constitution for the United States of America.

Nothing about making a profit, or anything else. The purpose of the government is to, well, govern. In fact, it’s not uncommon for the government to take on jobs that they know will lose money. Cleanup of disasters, both man-made and natural comes to mind.

Compare that with the formula that any automobile manufacturer follows when deciding whether or not a defect warrants a recall. Simply put, if there’s a fatal defect in a car that they know about, they do analysis on the likelihood of that defect to actually occur. Let’s say it’s possible that one out of every hundred cars could be hit with this defect. And there’s 100,000 cars on the road. That means that of those 100,000 cars, one thousand of them are going to be hit with this defect. So the question becomes: which is cheaper: recalling 100,000 cars to fix the defect, or settling out of court with the victims of the defect on 1,000 cars? And they’ll do whichever is cheaper.

Businesses are notorious for not spending money until they have to. My employer was a great example of that in its delay in converting from one system to another. And now the system we converted on to is arguably nearing the end of its life cycle. Who knows when we’ll have another conversion, though?

For a more visible comparison, take a look at Microsoft. When it launches a new operating system, many consumers flock to the nearest store to upgrade to it. Businesses will be more reluctant in the process by which they decide to upgrade. They’ll want to make sure the new OS doesn’t conflict with any of the pre-existing software that they use every day. At work, I’m still working off of Windows XP.

If we truly want to use the metaphor for government as business, the only place where it can be accepted as true is that government really ought not to spend more than it brings in (or, to put it another way, the expenses shouldn’t exceed the revenue). So it would then become imperative that we find places to cut expenses and/or bring in revenue. Bringing in more revenue is the easy one: taxes. There is a point where too many taxes will stifle growth, but it seems as though taxes, especially on the highest wage-earners, are too low today. New taxes might also work, such as if we were to legalize some industries that have heretofore been illegal. Marijuana and prostitution come to mind. Legalize it, regulate it, tax it. Let the people who currently make an inordinate amount of money off of the fact that it’s illegal, make their money off of keeping it legal. And it’ll help empty our prisons, too.

Cutting spending … well, that’s another story. Finding the right things to cut can and will be tricky. But I’m sure that some people can figure it out without having a knee-jerk reaction to any given line item of the budget.

At least, we hope they can. It’d be good for business, anyway.

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