Tuesday, September 28, 2010

Politics and Business

We have two significant political races in California this year where a former CEO is running for election - Meg Whitman for governor and Carly Fiorina for senate. I have strong feelings against both of them, but that is another post. The piece I want to raise is that business and government are not the same.

In both cases, their campaigns are arguing that because they were successful in business (perhaps questionable too), they would make great leaders in government. Now, because someone has been a successful business person is no reason to dismiss them as a politician. They may bring some wonderful skills to the job that translate well from one role to the other. The problem comes when folk involved don't realize that government is not business and should not and cannot be run like business. It is a completely different paradigm. The goals are different. The means are different. The metrics for measuring success are different. We simply cannot run government like a business.

So let's look at those three categories a bit. What are the goals of business? To make a profit. Obviously there are wonderful businesses out there that are concerned about providing a good product, caring for their communities, making the world a better place... but they only do any of things things to the degree they can do it profitably. A research firm may come up with a product that cures a specific cancer, but if they cannot produce it at a profit, they cannot make it. It doesn't matter that they want to do the right thing, the good thing... they are constrained by what they are to produce profits for their stockholders. And those stockholders, a very specific slice of the population, are the only people they are accountable to in the end. So people continue to die and research continues. Government has a much more nebulous goal - to promote the common good. And the population to whom it is accountable is everyone. Corporate bean counters are accountable to the bottom line. Government bureaucrats are accountable to the people. Huge difference.

How about means? Governments must build coalitions, appeal to common values, find compromises between competing ideas and ideals, and work through a sometimes difficult and complicated process of legislation. In business, many models allow a CEO to change everything with the stroke of a pen. There may be a board of directors who have some say but as likely as not, they rubber stamp most of what the CEO's propose and their role is almost never to be involved in daily decisions. Shareholders may vote, but it is very unlikely that they really have any say in any of the decisions made and likely don't care as long as stock and dividends are going up. Shareholders might be thrilled that a production facility is closed and 1000's of jobs moved overseas if it means higher profits. See how difficult it is to shut down a military production facility and we see the difference in a government setting.

And metrics? You know a business decision was a good one by looking at the bottom line. Did the company make money? Or is it poised to do so because of those decisions? Again, in government, things are not so simple. Let's look at a few actual programs briefly. First, social security. Depending upon whose numbers you believe, either it is solvent for the long term or it is pushing the entire government into a ditch. If it was a business decision, the way you read those numbers would answer the question. In government, the question becomes much more difficult when you look at the ways the program has changed our society. Poverty among the elderly has dropped significantly since the program began and even in our current economy is lower than it has ever been. One could even argue that some of the increase in life expectancy is due to social security and Medicare. So is it successful or not? And let's look at the War Against Terrorism. The Bush administration came into office with a huge budget surplus. They lowered taxes on the wealthiest Americans and went into two wars that cost billions of dollars, putting the government trillions in debt. Some would argue that their actions have made us safer. There is no question that had we not entered those wars, our national budget would be much healthier than it is today. Was it a successful thing to do?

Bottom line... politics is not business and cannot and should not be run like one. If we elect business people who do not understand that and/or expect them to run government like a business, we will all suffer. Are these two women just playing a game and saying what they think people want to hear in order to be elected and then will actually know how to govern vs. running a business? Or are they just caught up in the hubris of their own success and think they can impose a business paradigm where it does not fit? If they win, we will see...

No comments: