The Enduring Myth That Government Should Be Run Like a Business
The election of Donald Trump should remind us — again — of the vast difference between managing a company and running a government.
There were many and varied reasons behind the election of Donald Trump as president, but certainly one argument, heard time and again, contributed to his appeal: that the federal government was such a mess that the solution was to run it "like a business" and that the way to accomplish that was to elect a successful corporate executive. Now that the presidential transition is upon us, many of the people being selected or mentioned as cabinet appointees have stronger ties to the private sector than the public sector.
Trump is not the first politician, by any means, to benefit from this this claim. Numerous successful state and local candidates have made similar cases during their runs for office. Illinois Gov. Bruce Rauner's argument in his successful gubernatorial campaign centered around his business success. Three decades before that, fast-food magnate John Y. Brown successfully argued that he should be elected governor of Kentucky so that he could run the state like he had run Kentucky Fried Chicken.
This is not a 21st-century -- or even a 20th-century -- phenomenon. In a classic 1887 article, Woodrow Wilson, then a professor at Princeton University, maintained that there was a "science of administration" -- arguing, in effect, that there were principles of management that transcended the context in which they were applied. "The field of administration is a field of business," wrote Wilson. "It is removed from the hurry and strife of politics."
Later observers and scholars of public administration thoroughly discredited this notion. The pithiest statement on the topic came from Wallace Sayre of Columbia University, who argued in 1958 that "public and private management [were] fundamentally alike in all unimportant respects." In 1979, Graham Allison, then dean of the Kennedy School of Government at Harvard, used Sayre's comment as a launching point from which to examine similarities and differences. He noted that both private firms and governments must set objectives, develop plans to achieve those objectives, hire people and direct them toward the achievement of objectives, and manage external environments. But he observed that the way in which these things occur is often fundamentally different from one sector to another.
Allison cited several examples of officials who went from high-level business careers to high-level government service and judged "public management different from private management -- and harder!" We could add to his list former Goldman Sachs executive and Clinton treasury secretary Robert Rubin, who observed that, compared to government, "the range of issues that you confront on Wall Street is really very narrow."
Some consensus has developed among scholars about the fundamental ways that running a government is different from running a business. Here are a few:
• Government is about this thing called the "public interest." There is no such animal in the private sector. Private firms care about their stakeholders and customers; they do not generally care about people who do not invest in their businesses or buy things from them. Thus, accountability is by necessity much broader in government; it is much more difficult to ignore particular groups or people.
• Private-sector performance is measured by profitability, while performance measurement in government needs to focus on the achievement of outcomes.
• Compromise is fundamental to success in the public sector. No one owns a controlling share of the government. When Gov. Rauner and the state legislature refused to negotiate, it resulted in Illinois operating without a budget for a full year. The notion of a separation of powers can be anathema to effective private management. It is central to the design of government, at least in the United States.
• Government must constantly confront competing values. The most efficient solution may disadvantage certain groups or trample on individual or constitutional rights. In the private sector, efficiency is value number one; in government, it is just one of many values.
• Government has a shorter time horizon. In government, the long term may describe the period between now and the next election. Thus there is a strong incentive to show relatively immediate impact.
• Government actions take place in public, with much scrutiny from the press and the public. There is no equivalent of C-SPAN showing how decisions are made in the corporate boardroom. Corporate leaders do not find it necessary to explain their every decision to reporters.
This partial list is intended simply to remind all of us that a government, particularly a large one such as a state or a big city or county, is an extremely complex enterprise to manage, much more so than any company. It remains to be seen, of course, how successful President-elect Trump and his appointees will be. To the extent that they are successful, however, it will not be because of their business experience but in spite of it.