Why government is not a business

Our society is so permeated by commerce that business metaphors are regularly applied to non-business situations. Thus we “profit by experience,” “calculate our losses,” and “take stock in the situation.” Another common phrase concerns “the business of government,” but in addition to being metaphorical, it’s a mistaken idea.

Government is not a business, and there are good reasons why not. To understand this, we must first explore the nature of business. Business is an economic activity premised upon the idea that an individual or group of individuals use capital or credit to engage in production or services for which others will make payment. The definition of business success is that the price charged to customers is higher than the cost of production or rendered services, and that in the aggregate, sums accumulated from such business activity represent the profit from which the funds needed to cover the cost of living, interest, taxes or dividends are paid.

Accordingly, the hallmark of traditional business is efficiency. Efficiency in this case means that costs are managed to their lowest possible level and productivity is managed to its highest, thereby maximizing profit. To the extent that efficiency is affected by demands of labor, cost of materials, land use cost or regulations, health and safety, or governmental regulation, profit is affected; accordingly, modern business practice now includes efficiencies directed at mitigating such factors, such as off-shoring labor, relocation to tax-friendly states or countries, avoiding unionization, and so forth. In all, most business practices take their cue from an industrial model first deployed in the 18th century, alongside management techniques borrowed from Napoleon’s organization of his military into line and staff chain of command with upwards reporting. In this model, people (labor) are relegated to the status of interchangeable parts, like pieces in a manufacturing assembly line. The organizational structure of business is inherently non-democratic.

Government, on the other hand, is not about profit, labor, production or for that matter, efficiency. Government is about the aspiration of people for a good society. Accordingly, in a democracy, government includes the election of leaders from a local to the national level. Setting aside the past and current history of distortions, abuses and corruptions of electoral politics, in theory those we choose to be our leaders are placed in power to effect changes which move us towards a good society. This is accomplished by establishing hypotheses, setting goals, making policies, determining implementation measures, and employing methods to evaluate the sum total of their effects. The entire mechanism of government, therefore, is better compared to a scientific experiment than a speculative business exercise.

When we try to make government run like a business, we pervert its nature. An aspiration towards goodness is not served simply by efficiency, and though government must be fiscally responsible that responsibility cannot sacrificed for the sake of profit. The comparison of government to business is therefore mistaken, and efforts to do so deprive the citizens of the very institution conceived to protect themselves from the depredations of greed. Efforts towards the privatization of government activities, for example, remove access from and accountability to the public and shift emphasis from the good of the many to the good of the few.

The inefficiency of government is a price we pay for sustaining our humanity, and it shares this lofty aspiration with democracy itself.

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