so who's better?

There is a common assumption that government is inefficient at providing anything. A comment on an earlier post included a link to a paper arguing that a completely privatized road system would be better than the system we currently have and would even lower the rate of automobile related deaths. It is rare that the argument goes that far, but there we are.

I would argue that for many areas of life, government is not only the logical but also the better provider of services. Let's look at a specific example, privatized fire protection. It might be cheaper (although we won't address the ways that is accomplished). A community has two companies providing fire departments. Taxes dropped significantly when the public department was abolished. Property owners purchase subscriptions for their service. Both companies do what they do well and the price is competitive between them and lower than the attendant taxes were. They truly are competitors in all of the best and worst senses of the term. A fire breaks out at a house with nobody home. The neighbors call a fire company and the dispatcher looks up the address, only to tell the caller that the homeowner does not have a subscription with them. Then the dispatcher tells the caller that the next door neighbor does have a subscription and they will be there to keep the fire from spreading. They arrive quickly, set up, and begin hosing down the neighbors home to keep the fire from spreading... while watching the first house burn. In the meantime, the caller has contacted the second company who send a truck. When they arrive, the first company is in their way and they cannot get close enough to efficiently address the fire. Plus, the additional call cost them abut 5-10 minutes, during which time the fire got a lot worse. And it is discovered that the neighbor on the other side, trying to save money, has neglected to purchase a subscription from either company. That house catches fire and the entire neighborhood is threatened. A third house, also without a subscription, begins to catch and the second company, which has a lot of subscriptions in the area, decides to address that house to keep things from spreading further. After the incident, they send a bill to the final home and the owner responds, "I didn't ask you to put out the fire." Those who have purchased subscriptions wonder whether they should drop theirs... look at the results - one house with a subscription is gone and one without was saved.

Would it not have been more efficient had there been one department, paid for by public funds, with the responsibility of keeping the entire community safe?

Here's the basic issue for me. A for profit company has as its primary responsibility, making a profit. Indeed, it has a legal and fiduciary responsibility to make money. If a given service cannot be done profitably, it will not be done. Decisions are made based on the bottom line, and usually with short term goals in mind. Many companies provide excellent services or products and rightly pride themselves on excellence but they must be able to make a profit or they do not provide that service or product. Government, on the other hand, has as its primary responsibility, the welfare of the citizenry. There are times when that welfare will not easily translate to a dollars and cents bottom line and other times when it clearly will not be profitable, especially in the short term.

Let's look at another example - medical care (which I believe should be provided by the government). When the Obama plan (which I'm not happy with) was being discussed two big scary terms thrown out by the opponents were "death panels" and "rationing" as if either was a new thing. There already are both. Panels decide what care will be provided. I have an insurance policy with scores of exclusions. Somebody sat down and said, "we will not cover this. no exceptions." About 5 years ago, we paid nearly $60K for a surgery that our daughter needed because our company never paid for that surgery. Without it, she would have gone deaf in one ear, had difficulty chewing, and likely would have had her jaw lock periodically, requiring visits to the emergency room to have it broken. "Sorry. Not covered. Ever." As for rationing, we were able to come up with the money. It really hit our finances hard but we did it. Had we not been able to, rationing would have come into play... no money = no surgery and she would likely be deaf now and facing the other issues. For those without insurance, every medical decision is a similar one. Questions are not always asked regarding the value of a procedure, the prognosis for the patient, or even if it is good science. Long term questions are not asked regarding the way that decision will impact the larger society. Instead, a bean counter asks who will pay and how much? I would much rather have a panel of scientists asking whether the procedure is likely to be successful than a panel of bean counters asking whether it will be profitable.

And finally, if a service is being provided for profit, every dollar that is shunted off into profits is a dollar not spent on meeting the need.

There is no question that government is not always efficient and that the services it provides could be improved. Often those with the loudest voices get their needs addressed while those with less power are ignored. Often government responds to misinformation and acts in ways that clearly go against the common good... that is what we have elections for. It is the responsibility of the whole of the citizenry to stand up and change those in power. Still, that basic difference of primary goal is critical. For profit businesses are there to make money. Meeting needs is only the way they make money. Government is there to meet needs.

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...