Why Running a Business Is Different Than Running the Government
December 15, 2011
RSS Feed Print Lawmakers are very skilled and responsible at reducing and eliminating debt—as long as it's campaign debt. The federal budget? Not so much.
The Democratic and Republican congressional campaign committees have both done a very impressive job at reducing their debt, and both should be commended for it. The Democratic Congressional Campaign Committee has just erased more than $19 million in debt, which
Politico's John Bresnahan rightly points out is particularly impressive following a disastrous 2010 campaign season for the party. "It frees up resources to in races instead of a bank," DCCC chairman Steve Israel correctly told Bresnahan.
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See a collection of political cartoons on the budget and deficit.]
The National Republican Congressional Committee, meanwhile, is making good progress, whittling its debt down to just $500,000. Party officials expect even that vestigial debt to be eliminated soon.
Why, then, is it so hard for Congress to tackle the national debt and deficit?
This question exposes some deep misunderstandings—not about Congress, which deserves a collective whack on the head sometimes, but which is generally made up of hard-working, dedicated people (even if they are dedicated to different goals). It has to do with a naive attitude toward government budgeting.
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Read the U.S. News debate on the Balanced Budget Amendment.]
Some new members of Congress—those without government experience—like to say things like, "If I ran my business the way Congress runs the federal government, I'd be bankrupt." And that's true. Here's what's different:
When you're CEO of a company, you can make all or most of the decisions. When you're a House member, you are one of 435 members who make up one of two chambers of one of three branches of government. You have to take other people's differing views and constituencies and powers into consideration, and you can't always get your way.
When you run a business, you can grow or shrink to accommodate the market. This is not so easy with the federal government. True, "government"—be it regulation, reach, subsidies, whatever—can be shrunk, but you can't shrink the size of the country or the needs its citizens have. If the needs are not filled by government, they need to be filled by a private entity or individual. It's not impossible, and sometimes it's best. But the need doesn't just disappear because the federal government isn't attending to it anymore.
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See a slide show of 10 cities dealing with budget troubles.]
When you own a business, you can fire people who are either under-performing or too expensive. The federal government can't fire Social Security recipients, or disabled schoolchildren, or prison inmates or anyone else who—by sheer nature of what they cost versus what they contribute—are a financial drain.
The campaign committees, notably, are out of debt because they raised enough revenues to do the job. Granted, voluntary contributions are not the same as mandatory taxes, but the debts were not erased by reducing regulation or giving higher salaries or tax breaks to the upper-level staff.
It's laudable that the DCCC and the NRCC have drawn down their respective debts, and Congress should see it as an inspiration. But they should not be fooled into thinking that it's as easy.
See also:
The Government Shouldn't be run like a business
Why the Government cannot be run like a business
Yea I figure most of the right wingers on this board will find something to disagree with these articles but they all hit the nail on the head. Government cannot be run like a business it is a totally different beast than a business as most folks think of. The Republicans like to play this little "mantra" that Government should be run like a business but they do so because they know how uneducated most folks are about Government and how it is run.
What this guy in one of the articles said I thought was interesting:
In the spirit of transparency, I fell into the "government should not be run like a business camp". I have nothing against business or private sector, but I do think
the way we approach the client - customer relationship is inherently different than government - citizen. There are certainly lessons the private sector can learn from the public sector and public sector from private sector. Part of the challenge I think we face is that we need to mend the relationships between public and private sector. We need to remove the stigmas of each sector and work to collectively address the problems.
We also need to move away from a model that promotes self interest and start a dialogue that focus on shared values and interests.
The seven points below articulate New Public Service, Public Managers Should:
1.
Serve, rather than steer
2. The public interest is the aim, not the by-product.
3. Think strategically, act democratically.
4. Serve citizens, not customers.
5. Accountability isn't simple.
6. Value people, not just productivity.
7. Value citizenship and public service above entrepreneurship.
Here are some of the Quotes from others in that article on the "customer" vs "citizen" approach;
Juddith:
People who believe in the model of "customer service" hold this relationship as the highest relationship of a "free" society. That is why the discussion can become so vitriolic and bitter. It is based on the principles of Adam Smith and Ann Rand who promise that "self-interest" is the strongest bond of humanity. They would follow Gladstone over the brink of annihilation sincerely believing that without a "social contract" written on paper and agreed to by self interested parties, the human race would pillage and murder each other.
In their minds to denigrate the customer service model is to not understand it and thereby display absolute ignorance, since the cornerstone of human evolution is "survival of the fittest". The belief in the "customer service" model is not recognized as being based more on worldview assumptions rather than science. It is a worldview that makes no room for (as the theory of evolution labels it) "The problem of Altruism" in the human psyche. All choices and success are seen as strengthened by self interest and weakened by mutual or community or public interest. Some brands of religion are attracted to the model of human self interest because they hold to a negative assessment of the human species.
Do not underestimate the power of this worldview at work in our political debate and in the American culture. No political party or religion among us is free of these assumptions. It is an assumption that has the power to transform our watersheds into pipelines and our mountains into tailing piles either actively through "self interested" corporations or passively by redefining the role of government to change public service into customer service.
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I recommend the book, Good to Great and the Social Sectors: why business thinking is NOT the answer by Jim Collins. You can read portions of it on his web site,
http://www.jimcollins.com/books/g2g-ss.html
In my library of science graduate school we also debated running a library as a business and referring to "patrons" as "customers". It was a bitter debate that boils down to a difference in core philosophical world view. Those who would run a library like a business tended to extol the world of Ann Rand. Those of us who objected to running a library like a bookstore were labeled "luddites".
Customer service is not the same as Public service , I think Jeryln gave an excellent definition and explanation of the importance in definition and implication between the two. I will only add that a world in which every relationship involves a "commodity" is an emotionally impoverished and unsustainable world.
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I really enjoyed this post.
It is my opinion that while government can learn much from business in terms of efficiency, productivity etc. government cannot and should not be run like a business because the two have fundamentally different goals. Businesses provide rivalrous, excludable goods from which revenue can be derived. Government is essential because it provides public goods that the private sector has no incentive to provide. (i.e Clean Air, clean water, free parks). Where would we be if the government decided it would only engage in or provide products/services it could extract rent from? Additionally, many of the cost savings that have been achieved by the private sector have been due to technological advances. Unfortunately the government, which provides labor-intensive services does not have the option of substituting labor for technology. Who could imagine substituting teachers with computers? There are things both sectors can learn from each other and when we realize this and form a better relationship between the two, then we can create a culture of shared interest that helps everyone.
There is an idea in our land. It is an idea that has been gaining traction since the 1980s, since the Great Communicator convinced so many that the New Deal had been the wrong deal, that the Social Contract was a pact with the Devil, and that welfare queens, homeless vets, and liberals were undermining that which made America great. The idea, simply put, is that Government should be run like a business. It is a stupid idea, but there you have it.
Reagan, a smiley White man in a dark suit, cemented the idea of the president as CEO, legislators as Middle Management, and the citizens as stockholders. He convinced many that, with Government as Business, careful money management and profit would be the rule of the day. Government waste would be a thing of the past! Surely men who put money first would run our country efficiently -- and anyone who said otherwise was a stinky commie!
So it came to pass that where once Congress and legislative houses around the country had been filled mainly with Lawyers, whose training had prepared them to draft and interpret laws, "Government as Business" took hold, and these lawmaking bodies became filled with business leaders who had little or no law study or experience. These elected MBAs and jumped up Chamber of Commerce members worked to get "Government off our backs," deregulating everything they could, and managing the wealth of the county, or country, as they would any for-profit corporation.
But here's the thing: democratic governments are structured and function not as corporations, where profit is the bottom line, but as nonprofit organizations, where the providing of services is their sole function.
This is an important difference, and given our last few Administration's mania for privatization and for submitting the wealth of our nation to the whims of the Stock Market, it is important we understand profit and democratic Government are not only incompatible, they are antithetical.
Let's go!
A: Corporations are legally bound to provide the greatest financial dividend to their stockholders. That's it, that's all they have to do. Really. Look it up. (Oh, they're also not supposed to break the law -- however, let's stay with reality.)
But: Democratic Government is not structured to make a profit. It's job is to spend the pooled contributions of the citizens (taxes) to provide services to those citizens - health, education, defense, infrastructure. There is no profit, as we, the People, are supposed to run this country, and are not selling these services to ourselves. That would be silly. Representative Government is simply a mechanism created by citizens to provide themselves with the necessities of a life unaffordable to the individual. For example I can't afford to build a road, dispense Justice, or make sure my food supply isn't handled by filthy nitwits. But by pooling my money with that of other citizens big things become affordable, and by voting in the No Filthy Nitwits Handling Our Food Party, we won't have greasy fingerprints in our tapioca. That's all taxes and Government are. There is no financial profit. It's sole purpose is to provide services.
Next: The greater the Stockholder in a Corporation the greater his or her influence in that Corporation.
But: There are no stockholders in a democratic Government. Citizens do not buy stock, and reap financial dividends. Even the Richest citizen only gets one vote - and man, do they hate that!
We, the People, hire the government to use our wealth to distribute services, which we all benefit from. Again, it is structured much more like a nonprofit organization, with a Board of Directors - a voting body which elects a team of Administrators. In our case the Board is the voting citizenry, and the Administrator is the Mayor, Governor, President, and the Legislatures. And as a nonprofit Board, the citizens do not expect financial benefit, but expect their money to go to services provided to the community.
Numero Tres: A Corporation will cut costs to achieve profitability, degrading it's product if it must. Remember, a Corporation's job is to make money for it's investors -- the product is only and always a means to that end. If they can make more money selling crap, they will sell crap. SUVs weren't safe for years, but boy, did they make money! And if it is more profitable to junk a stable company, it will be junked.
But: For Government, the services provided are foremost. Like nonprofit organizations, it's primary function is service.
However we, as Americans, have become so hypnotized by the Svengalis of Wall Street -- and their mystical mumbo jumbo about the Market being the pinnacle of Democracy and Freedom -- that not only do we watch them dismantle a Government by, of, and for the People for their own profit right in front of us, we we gleefully chant their Free market Mantra as they do it. We convince ourselves that the profit motive is the purest, fairest arbiter of Truth, and that what is good for the rich must be in the best interest of us all -- because some rich guy said it was.
Crapaganda.
The Stock Market is simply where gamblers bet which business will make them more money. Not which product is best, but which company will prosper by selling it's image. That's how all those Dot Coms that didn't even make a damn thing had such high stock prices. All they delivered was millions of dollars to their early investors who sold inflated stock to the later suckers. Is that how we want our Government to be run?
Hell, crack is profitable, but I don't want my Government run by drug dealers just because they know how to turn a buck.
Unfortunately what we have now is a government made up of business people who are highly suspect of any expenditure that does not have a positive financial return. People in the halls of Congress who shout "Show me the Money!" when they should be asking "Where are the services?"
And this is the crux of the problem with the current governmental philosophy: profit-driven services. Once profit is introduced as a motivator, it becomes the only motivator. And there is a word for people who profit off the Government, especially in times of war. They are called Profiteers. We used to shoot them.
Here's an example: There was a time when the Armed Forces were a place where a young man or woman could learn a skill besides weapon specialist. Mechanics, radio operators, cooks, truck drivers, and so many more -- all jobs that had a life after service, accompanied by a wealth of benefits from a grateful nation. But to the Corporate philosophy this makes no sense. No one was getting rich providing soldiers with this priceless training. Socialism! And if all those vet benefits are free they must be inefficient, too! So we have Halliburton, KBR, CACI contracted to make these jobs part of the market, where profit, not service, is paramount. Benefits that cannot be made profitable are cut. We outsource Walter Reed Hospital. The result? The costs go up, the stockholders get richer, and hundreds of thousands of vets come home with less training, fewer benefits, and once again the rich get richer, and the poor get screwed.
And Blackwater... why did Americans so readily accept that the Marines are no longer good enough to guard our stuff? Why don't our elected officials trust the Few and the Proud to watch their backs anymore when visiting overseas? Sure, they call Leathernecks heroes, then diss them by looking elsewhere when it's time to pick the honor guards. I guess nobody was making money off the Marines.
The same goes for the outsourcing and "right-sizing" of governmental health and welfare organizations, the terrible failures at FEMA, the FDA... Did you know that most Americans who will receive tax refunds will have them processed and mailed to them by a private, subcontractor at a greater cost than if the Government did it -- which means any refund they will get will be slightly lessened -- to make someone rich richer. That's just messed up.
The philosophy of profit cannot be made to jibe with the Department of Education, so instead free, public education has been underfunded for years, then blasted as an inefficient, money losing proposition. And the idea of free schooling has been replaced with a push for private charter schools -- which always make someone richer, but fail to make our kids any smarter. Studies show the test score are about the same -- the only difference being someone made bank.
This is not sustainable.
Remember -- almost 60% of for profit businesses fail in the first four years. I'd like my Government to last longer than that. And as my friend John says, "If government should be run like a business, and our government is filled with businessmen, shouldn't everything be running better?"
It is not because it cannot. Putting a business person in the position of running government makes as little sense as putting the director of a nonprofit in charge of a for-profit corporation: the tools and skills they have were developed using a philosophy that is antithetical to the new position.
So, to sum up -- let business have all the dog eat dog, profit-worshipping, image over substance, greed sucking, suit wearing backstabbery it wants -- regulated, of course -- while we demand Government become what we, the People need: a vehicle to provide the greatest good to the greatest number, to comfort the needy, to protect the helpless, to encourage the brave, to insure domestic tranquility, provide for the common defense, promote the General welfare, and secure the blessings of Liberty to ourselves and our posterity.
And not for Profit.