Should Government be Run Like a Business?

March 29, 2017 at 2:08 pm

This video has been making the rounds on social media – namely Facebook.  A few Facebook friends have shared it and expressed positive opinions on it.  Today I’m going to offer you the counter-argument.  Below is the video.  Following that, I’ll make my case.


So let’s take this point-by-point. Points listed within quotation marks are direct quotations from the video, those listed without them are paraphrased.

Premise: “Having a CEO run the country like a business is one of those things that sounds good in theory, but when you actually stop and think about it for 5 seconds, you realize it’s a really terrible idea.”

A CEO is supposed to run a business, but the government is not a business.

This is correct. Government is not a business.  Government is its own monstrosity armed with a monopoly on violence that it wields against its citizens to acquire “revenue” via taxation (theft), tariffs, and other means.  It would be far better if it were a business, or even a charitable organization.  As a business, government would be bound to the will of the market (consumers) and would be forced to follow their demands, and discontinue “services” that were not wanted or needed.  It would also be limited by the amount of revenue it could bring in for the services it offered since it would have to compete with the market at large.  If it were a business, it would be unable to compel its “customers” (citizens) by force to cough up their earnings.  If it were run as a charity, it would be bound by the amount of income it could collect via voluntary donation.  This would also remove the profit motive that is unfairly demonized by the video and help ensure its motives were purely altruistic.

The goal of business is to maximize profit. While the goal of government is to implement the will of its citizens and provide services like healthcare, security and infrastructure.

Yes, the goal of business is to maximize profit.  That is exactly how it should be.  In a free market, maximum profit can only be reached by maximizing efficiency and customer satisfaction.  In other words, providing what customers want, when they want it, and at the quality and price that they demand.  The real goal of government is the concentration and enhancement of power, but for the sake of argument, let’s say the claim here is accurate, and that the goal is to provide services for citizens.  First of all, why does the government need to provide these services?  If they are services that the market (people) want, the market will provide them.  If the market does not provide them, they aren’t demanded enough to justify their being offered.  If we accept the premise that government should provide these services, we are still left with serious economic problems.  Government – since it produces nothing – cannot do anything unless it takes resources from the producers thereof.  Every cent it spends, belongs to someone else.  How can government make prudent spending decisions when it has no skin in the game?  It will not suffer for poor resource allocation or misuse.  It passes the negative consequences of its actions on to its citizens from which the funds were extracted to begin with.  Further, if it monopolizes the service it offers, there is no competition to drive costs down, and drive quality and innovation up.  There is no motivation to increase efficiencies, especially when paired with the governments prerogative of taxation, inflation, and endless borrowing.  At the current time, the US government is $20 trillion in debt.  What possible incentive could they have to be frugal when they control the cash tap?

The above listed goals are not only different, but diametrically opposed.

No, they aren’t.  Businesses provide goods and services.  Government (as presented) also provides goods and services.  The difference is that government tries to insulate itself from the power of economic law and market forces and does an exceedingly horrendous job of providing the services it does as a result.

“In democracy, the citizens are supposed to have the ultimate authority.  In a corporation, that authority lies with the owners and CEO.” “… corporations are entirely totalitarian institutions.”

In a free market, all corporations are beholden to their customers.  If a company ignores the demands of its customers, it will go out of business.  Sure, it can fail due to mismanagement from within, but without customers, it ceases to exist.  Consider: if Amazon didn’t offer the selection, prices and speed of delivery that it does (all things which we consumers demand) they wouldn’t be the success that they are.  The various businesses that are failing because of Amazon are unable to compete because they cannot provide the goods and services as well as Amazon can.  Some corporations like the video game giant Valve Inc. have a nearly flat management structure that allows employees to collaborate with each other on whatever projects they want, with little to no management guidance.  While Valve’s management style isn’t the norm, calling corporations entirely totalitarian is a gross generalization and misrepresentation of how most of them actually function.

CEOs don’t care about employees, they issue orders, and the employees follow them.

A wise CEO does care about their employees, because they will recognize that happy employees are better, more efficient employees.  The CEO does issue “orders”, just as a team captain, or military general does, but he or she is not the sole shot-caller.  The CEO has the vision, and it is their responsibility to steer the company toward that vision.  There is nothing wrong with that.

In democracy, citizens can vote, protest, and speak out against government.

Yes, and customers can speak out against businesses that don’t serve them well by taking their money elsewhere.  Ever heard of a boycott?

“A president has to build consensus, respond to public opinion, and manage complex diplomatic relations. While a CEO, at the end of the day, just has to squeeze out as much profit as he can.”

A CEO has to build consensus within management, respond to customer demands, and manage complex business relations with suppliers, vendors and manufacturers.  Profitability is just a metric for measuring how well a CEO does these things.  The President has no such quantitative metric for his performance.

The US Postal Service loses money, which is fine because it isn’t supposed to make money, it is supposed to provide services to all citizens, including those out in the middle of nowhere.

So now we are arguing that the government is inefficient by design?  First of all, there is no substantiation to the suggestion here that if USPS weren’t servicing these remote areas that those areas wouldn’t have mail service.  USPS has a government monopoly on the delivery of letters.  UPS and FedEx are not permitted to compete in that space, so we cannot know if they would offer service there or not, but I suspect they would, or that an intermediary of some sort would come into existence to bridge the gap.  This isn’t the reason for USPS being in the red though. USPS ran at a lost of $5.6 billion for the fiscal year 2016.  Which according to their own report was due to “mandated retiree health benefits expenses” (government mandated expenses sinking a government monopoly, go figure) – not the cost of servicing citizens in remote locations as suggested by this video.

If USPS didn’t exist, UPS and FedEx would jack up prices.

Again, USPS does not compete with UPS and FedEx in letter delivery.  They only compete in parcel/package delivery.  There is no evidence that UPS and FedEx would jack up rates if not for USPS. Lower USPS prices may only be possible because they are shielded from economic reality and permitted to run at a staggering loss.  The only way any entity can offer prices below the market rate is if they are being subsidized, in this case, by taxpayers.  If we take that into account, is USPS actually cheaper?

If healthcare were run as a business, it would prioritize profits, whereas government-run healthcare would prioritize care.

It must be pointed out that “healthcare” and “health insurance” are different things, and that the two terms are not interchangeable, despite how often they are incorrectly used in place of one another.  The government (aside from perhaps the Office of Veteran’s Affairs), does not provide healthcare.  It provides health insurance in the form of Medicare and Medicaid.  I’m going to focus on health insurance because I believe that is the subject here, despite the convolution of terms.  Health insurance is not about providing medical care or saving lives. It’s about paying out benefits on an insurance policy.  Insurance is all about risk vs. reward.  The insurance companies offer polices on the basis of their ability to make more than they have to spend on benefits, otherwise they will go out of business.  They are forced to find a balance between the benefits they offer and the premiums they charge their customers.  A customer who wants more coverage will necessarily pay more for it, because with the additional coverage comes additional liability for the insurer.  So when government steps in, the problems begin.  As previously discussed with USPS, government programs like Medicare/Medicaid are shielded from economic reality and given whatever funding they need to continue operation regardless of the value they provide or the efficiency at which they operate.  Further, in the case of the Affordable Care Act (Obamacare) where the government stepped in and mandated the benefits that private insurance companies had to offer (including coverage for preexisting conditions), suddenly the scales were dangerously skewed toward huge insurance provider liability.  In an attempt to counter, the government provided the “individual mandate” to force healthy individuals (who would pay premiums but file few claims) into the system to offset the influx of unhealthy individuals (who’s claims outweigh their premiums).  This wasn’t enough, and as we’ve seen it has lead to massive increases in health insurance premiums as insurers try to stay above water.  Unlike the government programs, private insurers are still bound by economic reality.  If they are not able to make a profit, they will go out of business, to the detriment of many.

Health insurance in the US costs more per person than in any other developed country.

This is true, but beyond the scope of this response. It is something worthy of additional research.

“Anyone concerned with governing, and not business, would be looking to provide more care for more people, not more profits.”

Without a business-like model, the excesses of government will become unsustainable.  It is not possible for the government to run on deficit spending indefinitely.  There is a limit to how much it can tax, how much it can borrow, and how much it can print.  Sooner or later the house of cards will come tumbling down.  The only way this can be avoided is by balancing the books.  Government cannot spend more than it takes in. As much as it tries to deny economic realities, it cannot overcome them and will eventually fall to their power, just as an unprofitable business does.  Taking on a business model of operation in which revenue and expenses are balanced is the only way government can continue to exist.  Who is going to benefit when the government finally collapses and no one can get the “services” it provides?  How many millions will be without insurance then? Government as a public service with no limit on what it spends is not sustainable.  What this video professes as the ideal is a path to ruin.

Running government like a business would only be good if we lived in a totalitarian dictatorship.

The United States government is already somewhat totalitarian (see also: fascist) exactly because it tries to command and control productive resources as it does with USPS and health insurance.  Moving to a business-like model of operation would lessen the totalitarianism, not enhance it.

One more thing I’d like to note is the attitude of the video.  Throughout, the actor uses inflections and facial/body expressions that can only be described as snarky and arrogant.  Through his language he’s expressing to the audience that what he’s saying is some how common sense, and that if you disagree you must be some kind of imbecile.  It makes for lovely window dressing for a misleading message loaded with incorrect information.  I wonder if they have produced a video lampooning so-called “alternative facts”.  Wouldn’t that be ironic?

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