Government vs. Business

I've seen many posts lately about running government like a business. Some feel that it is important that government be more efficient -- like a well run business. Others feel that government serves a completely different purpose than business, and therefore it should be run differently. Before this debate can be fully understood, one must define the difference between government and business.

While there are many types of businesses, the ultimate goal for any business is to make a profit. If the business is publicly owned, there is a responsibility to the shareholders to provide a return on their investment. People don't intentionally invest in a company they know will fail. Privately owned businesses don't have shareholders to respond to -- if the private business fails, it is the owner and employees who will be out of work. While good businesses understand that it's in their best interest to keep their employees happy (provide benefits), there are few legal requirements on what they must provide for their employees -- basically a minimum wage and safe working conditions. If the business fails, everybody loses -- executives, workers, and shareholders. Therefore, to remain competitive, businesses must have clearly defined goals to which people are held accountable, they must be run efficiently, and they must rid themselves immediately of products or personnel that hinder the performance of the business.

Government, on the other hand, is different. Government is not meant to be profitable -- basically, at the end of the day, you should have spent what you took in, and no more (although its always good to put some money aside in a rainy day fund). Thus the Illinois law requiring that the budget be balanced each year. The question that arises as a result of this last statement is "how much should be spent?" This is a good question and it's why the legislature must approve, or amend, the budget proposed by the Governor each year. While Democrats and Republicans may disagree on the last question, we can usually find common ground in the understanding that, at its most fundamental level, government should provide essential services to the taxpayers who fund its operation. The bickering begins once people start debating what services are "essential."

Whatever consensus is reached on essential services, these services require employees to provide them. This, in my opinion, is where the true division between government and business is defined. While employees in business are often not provided much in the way of benefits, government employees are provided generous benefits. Pensions, vacations, comprehensive health coverage -- the list goes on. For many government employees, these benefits are guaranteed, either through union contracts or civil service codes. Don't get me wrong, there are many hard working professionals who work in government, and I have great respect for them. But the reality is that when you create such a system of guaranteed job security, you encourage laziness and discourage a strong work ethic. Employees in government view these benefits as entitlements, even when the government's pension obligation and health insurance costs account for over 1/2 of the annual budget (and growing fast!). Without the ability to adapt as any business would, government will be dragged down by its own weight and, while employees and retirees are enjoying their generous benefits, the very basic services that government should be providing suffer.

If you disagree, look at what is happening to the U.S. auto industry. Once dominant in the world of manufacturing automobiles, companies are losing their edge to newer, foreign car makers. Why you might ask? Because American car makers are forced to incorporate the cost of employee and retiree benefits into the cost of the product. The increased cost makes our product less competitive with our foreign competitors, this lowering sales and cutting profits for our car makers at home.

In my opinion, government should not be run like any business -- government should be run like a good business. There should be accountability from the CEO (President, Governor, Mayor) on down to the most entry level positions. If an employee isn't bringing value to the employer, the employee should be terminated. If the chief executive can't run the business efficiently, the CEO should not be reelected. Conversely, good employees should be rewarded and good CEOs should be reelected. Benefits should be evaluated on a regular basis, and changes should be allowed to ensure that, while employees and retires are treated fairly, the government has the funds necessary to provide adequate services to the taxpayers.

After all, government doesn't exist to provide safe, lifelong employment -- it exists to provide basic services to the taxpayers. The second we lose sight of this concept, we become France.

As posted at: Whack-a-Mole