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Don't run government like a business

Ed Shiller

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(The following article was published in the November 11, 2003 editions of The Toronto Star)

Running government like a business may sound like a good idea at first blush. It certainly seems to have the ring of success. Just look at all those businesses out there: Microsoft, IBM, Magna . . . Corel, Enron, Anderson.

Ooops, on second thought, running anything like a business – let alone governments that have a deep and abiding effect on the well being of millions of people – may not be the panacea that the glib spinners of political rhetoric would have us believe.

Businesses are susceptible to the same inefficiency, greed, dishonesty, incompetence, deception, self-indulgence and array of other sins that, from time to time, afflict governments and all other human institutions. Running government like business, or business like government will not eradicate the shortcomings of either; it will merely allow them to flourish under a different banner. While our indignation and disgust over the behaviour of some of our municipal politicians and civil servants with respect to the MFP computer scandal may be fully justified, it should not obscure the other side of this coin: Namely, that it was business that instigated the wrongdoing by wining and dining and otherwise corrupting city officials.

The process of reducing or eliminating inefficiency and malfeasance, whether in government or business, most often starts with imposing accountability, transparency, firmly established and clearly understood rules of behaviour and effective enforcement of these rules. And history, whether of distant past or recent vintage, shows that business has no special claim to either ethics or efficiency. It was, after all, free-wheeling businesses and business people that led to the debilitating cycles of economic crises that culminated in the stock market crash of 1929 and the devastating depression that followed.

There has, of course, been tremendous improvement in the accountability and transparency of business since the free-for-all days of laissez-faire capitalism, but virtually all of the advances in the ethical conduct and underlying efficiency of business have found their impetus in the action or threat of action by government, spurred on by abused and angered citizens.

One could argue with equal validity that the abuses of government, of which there are many, have been and will continue to be curbed by the action or threat of action, not just of abused and angered citizens, but also by abused and angered businesses.

In effect, we must all work to keep each other honest and efficient. But it is difficult to imagine that this somewhat self-regulating system of checks and balances will continue to operate effectively, if the players – government and business – no longer maintain distinct identities both in the way they operate and in what they set out to achieve.

Indeed, if there is anything that truly distinguishes business from government it is exactly in the way they operate and in what they set out to achieve. And we will all benefit by ensuring that the distinction between what constitutes efficiency in business and what constitutes efficiency in government is maintained.

Business efficiency is measured by the bottom line. Improving profitability is efficient; diminishing profitability is inefficient. And from the shareholder and consumer perspectives that’s how it ought to be; it means higher returns for investors and lower prices for customers. The consequence of this, however, is that business will only provide those goods and services from which it derives reasonable, if not maximum profit. If business can’t make money from it, business will not make it available to the public.

But governments follow a different standard. They do not – or at least they shouldn’t – operate police and fire departments, public swimming pools, schools, roads and highways, healthcare, welfare, public housing, garbage collection, national defence, water, sewage treatment and an array of other services to make a profit. Efficiency here is not measured by how much money the government makes or saves, but by the degree to which the citizenry receives the goods and services it believes it should have, albeit, with the caveat that taxpayers’ money should not be spent in a wasteful or wonton manner.

Indeed, one could make a cogent argument that the private sector should provide those goods and services that people could afford, while the public sector should provide only those goods and services that people should have regardless of their ability to pay but cannot be provided under these terms by a profit-oriented business.

We live in a constantly changing world, and public debate will therefore continue endlessly over what constitutes a good or service that people should have only if they can afford it (i.e., private-sector business) and what constitutes a good or service that people should have by right but can only be provided at an economic loss (i.e., the business of government). But wherever that line may be drawn – and in recent years, it has shifted considerably – running a government like a business, will eventually obliterate it altogether and subvert the proper role of government.

To run government like a business, is to turn government into a profit-oriented enterprise that provides only those goods and services that its customers can afford – a development that will price many lower income people out of the market. Inevitably, the economically disadvantaged will sink deeper into despondency and the reins that government has placed on business since the Great Depression of the 1930s – resulting not only in fairer business practices but also in greater economic stability and overall prosperity – will continue to evaporate.


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