Government cannot be run like business

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Government cannot be run like business

For many years people have argued that governments can be more effective and efficient if they are run like firms. For example in 1938, New York Mayor Fiorello La Guardia promised to run the city the same way he would operate his own business. In 1992 every time Ross Perot (then a presidential candidate) spoke, he promised that if he wins elections he would run government like a business.

In recent times Americans hoped that Donald Trump’s business experience would be useful in running the state. It hasn’t happened yet. In another twist, Trump’s son-in-law and senior advisor at one point declared that “the government should be run like a great American company.”

These are generally misguided notions by some individuals according to Brian Balfour. There is a wide difference between the state and business. We all know that the government collects its revenue using threats. On the other hand, businesses collect their revenues through engagement in voluntary transactions with clients.

When clients are not willing to pay for a higher price than the cost a firm incurs in producing a good or service, then the business fails. In the case of government citizens do not have to be satisfied with the services that they receive. This means that governments do not earn their revenues. Life is so unfair. The state has a monopoly of violence. That is what they exercise or threaten to use to get their income.

Ludwig von Mises wrote a book titled Bureaucracy in 1944 to show us that there is a difference in the way that a government bureaucracy operates. This great Austrian economist explored the great difference between government and business.

Mises indicated that the main goal of a business is to make profits. This is the main goal of every business manager. That means that the company’s bottom line matters.

Bureaucracy is very common in government because the civil servants have to obey the state. Centralizing authority is practiced in order to have a grip on a large population in a country.

This is why in public administration, there is relationship between revenue and its expenditure. Public services are provided by spending money only.

Most revenues for the government is collected from taxes. Force or threats are used to ensure that revenue is collected in time and the right amount. This is why it does not make sense to elect a business man or trader as a government head or head of parastatals. Immediately we elected businessmen into government they lose their reputation as entrepreneurs. They become bureaucrats and their main objective is to obey regulations and rules which have been put in place.

It is useless to think or elect people who claim that they will run government like a business. It is a chase after the wind.

Centralization of power is known to kill individual initiative and innovation. This is why businessmen can never make good bureaucrats. Decision making is also difficult since they wings are crippled. The lack of economic calculation in government leads to wastage.

 

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Editor-in-Chief

Geoffrey Kerosi is a prolific economics writer and an avid reader in economics, finance, business, politics and technology.

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