Every election there is always one, and there is no shortage of conservatives waiting to line up behind him. Last time it was Herman Caine this time it’s the Donald. I imagine part of it has to do with America’s pragmatism, it being the only philosophical school really founded on our shores. The token businessman candidate embodies the practical man. The man who can get a deal done. The man who spends his life in the private sector oozing with success only frustrated by the disfunction he observes in Washington from a distance. He takes it upon himself to roll up his sleeves and enter the hog pen. He will reach across the aisle, he has a goal, and by golly he is going to make Washington work! “Government should be run like a business!”
The notion sounds plausible, even tempting if you are a conservative who is remotely favorable to the free-market, and yet it is fatally flawed.
Why You Can’t and Shouldn’t Run Government Like a Business
The problem according to Mises (as Peter Klein lays out in his recent lecture at Mises University), and why government should not be run like a business, is that these are fundamentally different kinds of organizations. In Ludwig von Mises book Bureaucracy he talks about profit management and bureaucracy management. Mises defines a bureaucracy not simply as a large firm, slow in response, and multi-layered but an organization that produces goods and services which are themselves not sold or consumed on the market. They are not producing a good called “government.” They cannot say their sales went up when there is a tax hike. Their services are compelled on people (police, courts, military, regulatory) and therefore they do not have profit/loss books.
Government can do no cost-accounting. The government does not receive payment for services rendered but instead takes its “funding” by force. It cannot therefore calculate if it is making a profit or a loss. It only knows whether they spent as much as they took in or not. The Government has no need to cut costs; it can simply cut its service or simply raise “prices” (i.e. take more money). Government service is always a monopoly. There is no way to gauge the success of a product that customers are legally coerced to buy. As Mises said in the private sector “the proof of the usefulness of the services rendered is that a sufficient number of citizens is ready to pay the price asked for them.” Profit is indicative of having successfully provided a good or service, while those who take losses have not been able to give consumers what they actually want or at the price they want. With no market price the bureaucracy cannot determine whether the yield of profits will exceed cost.
What these well intended proponents of government business usually mean is that they want government to be efficient. The simple answer to this is how would you know?How do you know if resources, labor, and capital in a government bureaucracy is being used efficiently? In a business you would look at total revenue minus cost, but how do you measure efficiency of the police force, judges, or a department. Is it net income? Do we want the police department to decide that they to need issue more tickets to increase their revenue? Is an increase in arrested citizens or 911 calls analogous to increased sales of their service? Is a regulatory department or the Department of Education being business-like by trying to increase its revenue, i.e. boondoggling Congress for an increased budget? In a minarchist society bureaucracies and government services simply cannot be evaluated in monetary terms because they do not offer something voluntarily purchased in the market place. If government were even possible of “being run like a business” then why not have socialized medicine? Why not nationalize the automobile industry? Or all natural resources?
The objective of the CEO is to maximize profits, reduce costs, etc. To this end he may say to certain department heads or to another branch that he has no intentions of micro-managing them or telling them how to do their job, he only cares about the bottom line. If their subsidiary does well he gives more capital, expands their location, or constructs a new one. If income is low the manager is fired or the plant closes down. The government cannot be operated this way. You can’t say to the local police chief, or to a judge, that you don’t want to tell them how to do their job you simply want to see results. You want profit, more arrests, higher conviction rates, longer sentences, and more fines. The incentive problem is obvious, for the government operated bureaucracy income does not equal a job well done or satisfied customers. Imagine the absurdity of a presidential candidate running saying he is going to increase government income, increase shareholder earnings, and reduce how much the government spends. Yet this is exactly what someone would say for a job interview for a CEO or any type of management.
The way to manage or to run, according to Mises, a coercively monopolized service (right or wrong) like the police, courts, or the military is to lay out very strict strongly enforced formal rules and procedures for each circumstance and scenario with limited ability to make decisions on the fly. It is acceptable to do X in Y circumstance, but you may not a, b, or c. The police officer may set arrest rate records but if he completely ignores the 4th amendment it means nothing. Yet no one would say to a salesman or a producer why aren’t you doing things by the book? They simply look at the bottom line; were sales increased, were costs cut, was more produced? State provided services cannot be directed by profit and loss but only by an attempt to strictly limit intent, goal, and execution. The “public” sector is utterly unable to efficiently allocate resources because it is a state of economic calculational blindness, there is simply no room for entrepreneurial activity.The morality of this way to allocate resources and provide services is another question.
Getting Things Done and the “Right” People in Government
Kissing cousins of the token businessman candidate is the notion that he gets things done and that we need the “right” people in politics. He can be bipartisan and get past the Washington gridlock. Let’s be absolutely clear about this. A hopelessly bi-partisan gridlocked congress unable to “accomplish” anything is the greatest thing we could hope for. Getting things done for congress means increased budgets, new departments, higher taxes, new wars, and destruction of liberties. Since when could it ever be a conservative thing to want congress to “accomplish” more. Politicians are generally made of the stupid and evil, bipartisanship is when they accomplish that which is both stupid and evil. If the Token business man is as good as he says he is we don’t want him in government. As Rothbard said “Who wants good people in government? Good people should be in the private sector. Helping us out, helping themselves out in the private sector. We want schmoes in government. We want people who can’t find the doorknob. Why waste productive people, as well as looting the taxpayer?” We want an embarrassing collection of incompetent and immoral schmucks so obviously unreliable that no citizen can be duped into trusting them. Frankly politicians are too good at getting things done. They are those naturally drawn to a place of power, fame, and have discovered the law of comparative advantage has gifted them with an amazing ability to deceive, propagate, and appropriate the greater public with far greater efficiency than those around them, they are political entrepreneurs.
So please when you watch the debate do not fall for one of the more gimmicky political antics used to pull the wool over your eyes.