Can Government Be Run Like A Business?

Over the last few months we’ve all heard and read a lot of political rhetoric advocating that government should be run like a business, and that electing a president with extensive business experience would be good for the country. As a business owner, and someone who has dealt with many government agencies and elected representatives over the years, I have trouble subscribing to that theory.

Business and government are two very dissimilar professions – one being based on profits, the other on public service. They require different skillsets and different mindsets.

When most people say, “We should run government like a business,” I think what they really mean is: “We should run government more efficiently.” There’s little doubt that there is, and always will be, plenty of room for improved governmental efficiency. However, unless we’re willing to give up our democratic system and install a dictator, democratic government will continue to be inherently inefficient and, at times, downright messy. The Founding Fathers designed it that way.

Remember all that stuff about the three branches of government and “checks and balances” from civics class in high school? That model has worked for the U.S. government for over two hundred years, but no one in his or her right mind would use it as a business model.

The power to act, and the obligations, of a corporate CEO, is dramatically different from those of the President of the United States. A corporate CEO is empowered to unilaterally make all primary corporate decisions (subject to Board approval, of course). His or her obligation is to make the maximum profit for constituents (shareholders) by being as efficient and competitive as possible. That’s how he or she is judged. Achieving maximum efficiency and competitiveness, however, usually means paying little attention to externalities such as how many workers become unemployed, whether employees can support a family on what they are being paid or how much environmental damage is caused by company operations.

The president, on the other hand, is empowered to do very little unilaterally. In order to get something done, he or she must convince a majority (or in many cases, a supermajority) of 435 congress members and 100 senators to back a decision. Each of those 535 elected representatives has a different viewpoint, constituent base, degree of party loyalty and personal agenda. Building consensus requires diplomatic skill and compromise… not skills required of, or possessed by, most CEOs.

The president’s constituency is comprised of every U.S. citizen (not just the 53% who voted for him, as one current candidate seems to believe) and his or her obligation is to provide for the security and the physical, economic, environmental and social sustainability of the entire country. Among other things, that means being concerned with all of those externalities those CEOs can ignore. The president can’t fire or lay off inefficient, unproductive citizens who are infirm or too senior to work; is obligated to provide a safety net for those in poverty; and has to ensure that the infrastructure and environmental protections are in place that will support a sustainable society. Efficiency is still a goal, but within the framework of public service.

Very few of our presidents have come from the business world, and three of the more recent ones, Herbert Hoover, Jimmy Carter and George W. Bush, have not had what most people would consider successful presidencies.

The father of modern political economics, Adam Smith, once wrote, “The proposal of any new law or regulation of commerce which comes from people who make money by the employment of stock, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.” spt