Wednesday, May 20, 2009

"Why Government Can't Run a Business"

John Steele Gordon, writing for the Wall Street Journal, today lays out seven reasons why the government, if it had to actually compete in the free market, would soon find itself bankrupt (oh, wait, isn't it already?). It has to be the best article I've read on exactly why Congress (in general) makes a lousy board of directors, and why presidents are lousy CEO's. I'll give you some highlights, but I encourage you to read the full article.

First of all, as the subtitle reads: "Politicians need headlines. Executives need profits." Mr. Gordon illustrates the main difference between businessmen and politicians: their goals. The businessman is motivated by the desire to make money. This will drive him to reduce costs, increase efficiency, and provide superior goods and/or services in order to remain competitive in the market. Businesses that fail to do so, fail.

Politicians, on the other hand, are driven by the desire to remain in office. This sort of motivation leads even the most reasonable men and women to sometimes abandon principle in favor of political expediency. As a character in the popular series The West Wing once noted to the president: "I think Lincoln did what he thought was right, even though it meant losing half the country. I think you don't do what you think is right if it means losing Michigan's electoral votes." And by the way, government programs almost never fold, no matter how costly, inefficient, and inferior they are.

Mr. Gordon gives several instances of this in the government's history, including its takeover of the steel and phone industries during the early decades of the last century. To this list, I would also like to add the U.S. Postal Service, which has yet to alter its practices in decades (only its prices), despite the superior private market alternatives FedEx and UPS. You would think, given President Obama's recent argument that a government-run health care industry would be competitive with private insurers, that he would also promise to overhaul the postal service to make it competitive, as well. After all, if the government is going to be in the business of business, then it should demonstrate its ability to innovate.

Like I said, it is a very insightful article. As a free market advocate, I couldn't be happier to discover such a well-reasoned argument against government expansion into the private sector; and, not incidentally, against government-run health care.

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