Tuesday, August 30, 2011

Government, Inc

"the government solution to a problem is usually as bad as the problem"  
An Economist's Protest (1975), Milton Friedman

Dissatisfied with the government? Disappointed with the opposition parties? Distraught that we don't have any viable solutions to our current political systems? Since we support deregulated governments on the rationale that the private sector is more efficient than the public sector, it's only sensible that the government takes the same form, right? Why not turn the government itself into a business?

The Firm
For one, we tender out the role of government to the highest bidder. An organiation with that kind of money must be good at making and spending it. The knowledge and skills associated with business have already worked well in New Zealand under Rogernomics, take for example the 1989 local restructuring, which saw much more streamlined and efficient services, with vastly improved accountability and fiscal responsibility. If we can get central government to this level, we'd be winning.

Secondly, why not float the government on the stock exchange? The value of the government would fluctuate as investors have more or less confidence in the performance of the organization, and the investment would pay for huge amounts of infrastructure and services. Shareholders would be able to appoint leaders they felt confident were working to a high enough standard, on the basis they had a plan and outlook for their investors. The vision involved with a business is something the government severely lacks, election promises are frequently broken without repercussion, whereas business stockholders change the leadership when expectations are not met. Politicians are not voted out for doing a bad job, new politicians are voted in because they have more exciting promises. The new government would be required to have a plan to give investors confidence in the viability of the organization. Returns must be made, promises must be kept.

Thirdly, look at who's already in government! Politics is a hobby for businesspeople, while this sounds like it's off to a good start, there is less accountability in government as opposed to business. The rich become powerful, and hold on to their positions until voters tire of them, rather than out of dissatisfaction of broken promises. Politics is something businesspeople love to get into; the current New Zealand Prime Minister was a businessman, the deputy leader of ACT is a businessman, the National party is largely supported by businessmen. The offer to turn government into a company is an offer rich people will buy into with big money.

The Reality
Obviously this is all a ridiculous idea, but it highlights the inefficiencies of government. I personally think the government would be wrong to become a business itself, as it clearly has its own place as a unique kind of organization. However, the large monolithic and inefficient government is not a sustainable way to run the country. Competition is something the government cannot sustain, so it must learn other ways of being efficient, thinking of the government as a type of monopoly, and taking advantage of the benefits of a monopoly while minimizing the negatives. The downsides to a monopoly are the same as government; high prices, low efficiency, low innovation and misallocation of resources. 

A government has no competition that forces it to innovate, to streamline and become more efficient, or to make its services more affordable. This is where resources aren't allocated to their efficient optimum and the great deal of power they yield is abused, not out of corruption, but out of being incapable to manage such a large array of sectors. The answer is not bigger government to match the size of its services, which leaves the same inefficiencies; but to reduce the number of services to match the capability of government.

Sticking to its day job is the most efficient way for government to go. What can be competed for, ideally should be, leaving government intervention and inefficiency can vastly improve the services. Education and healthcare can benefit from becoming more competitive. While I do not advocate total free market control of such services, a market style of competition can benefit them greatly, such as school vouchers and a mixed market healthcare system. Scaling back the size of government would mean leaving government to take care of its core services and fulfill its mission, such as law and order, defense, provision for the poor. Far-leftists advocate government control of many services in the name of ensuring the welfare of the poor, when really their systems give welfare to both rich and poor, which wastes valuable resources and becomes inefficient. Providing adequate healthcare for the poor leaves room for the free market to provide more comfortable healthcare for those willing to pay for it, educating an adequate national curriculum leaves room for the free market to provide alternative curriculums with different approaches. 

While government cannot itself be a business, it has a lot to learn from it. The currently unrivaled level of efficiency and accountability needs to be seen in government to ensure we have a more sustainable and effective system. A monolithic monopolistic government has a great deal of drawbacks which need to be minimized, the answer being a smaller government that proves true to its mission, rather than becoming bigger and intervening in sectors which are hampered by its presence.

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