« Even Nancy Pelosi's district voted against a tax increase | Main | Marco Rubio video shows why NRSC's endorsement of Charlie Crist in the Florida Senate race was a stupid move »

May 20, 2009

Why Government can't run a business, and should't try to

Topics: Political News and commentaries

AS Veronique de Rugy notes at the corner, the Obama administration's may think otherwise, but the government can't and never has run a business effectively. She points to John Steele Gordon's informative overview at the WSJ on just how badly governments run enterprises and why that is inherently so:

1) Governments are run by politicians, not businessmen. Politicians can only make political decisions, not economic ones. . . . And politicians tend to favor parochial interests over sound economic sense. . . .

2) Politicians need headlines. And this means they have a deep need to do something ("Sen. Snoot Moves on Widget Crisis!"), even when doing nothing would be the better option. . . .

3) Governments use other people's money. Corporations play with their own money. They are wealth-creating machines in which various people (investors, managers and labor) come together under a defined set of rules in hopes of creating more wealth collectively than they can create separately.. . .

4) Government does not tolerate competition. .The Obama administration is talking about creating a "public option" that would compete in the health-insurance marketplace with profit-seeking companies. But has a government entity ever competed successfully on a level playing field with private companies? I don't know of one. . .

5) Government enterprises are almost always monopolies and thus do not face competition at all. But competition is exactly what makes capitalism so successful an economic system. The lack of it has always doomed socialist economies.

6) Successful corporations are run by benevolent despots. The CEO of a corporation has the power to manage effectively. He decides company policy, organizes the corporate structure, and allocates resources pretty much as he thinks best. The board of directors ordinarily does nothing more than ratify his moves (or, of course, fire him). This allows a company to act quickly when needed.

But American government was designed by the Founding Fathers to be inefficient, and inefficient it most certainly is. . . .

7) Government is regulated by government. When "postalization" of the nation's phone system appeared imminent in 1917, Theodore Vail, the president of AT&T, admitted that his company was, effectively, a monopoly. But he noted that "all monopolies should be regulated. Government ownership would be an unregulated monopoly."

And he concludes that the real drivers of business success are the profit motive and competition, elements not found in government-run businesses:

Capitalism isn't perfect. Indeed, to paraphrase Winston Churchill's famous description of democracy, it's the worst economic system except for all the others. But the inescapable fact is that only the profit motive and competition keep enterprises lean, efficient, innovative and customer-oriented.

Read the whole thing here.

Posted by Hyscience at May 20, 2009 11:30 AM

Articles Related to Political News and commentaries:

• Why Government can't run a business, and should't try to - May 20, 2009