Government Is Not A Business

I originally wrote this piece at RevoluTimes on November 29, 2011

Of all the platitudes offered as campaign rhetoric, the most commonly used reasoning for supporting a candidate I hear (especially among Republicans), is the notion that government should be run as a business. This seemingly insightful suggestion is often presented as a means to cure our economic ills.

As Americans struggle to make ends meet, electing a candidate who knows how to “balance a budget” sounds promising. It should be no surprise that presidential candidates such as Herman Cain and Mitt Romney are frequently touted as men with business experience who can bring a private sector approach to government. Though president Obama deserves much of the criticism he receives for prolonging the current recession, those who suggest it’s due to his lack of experience working a “real job” are mistaken.

The issue is not that Obama lacks the knowledge to manage government as a business; the issue is that no one can manage government as a business.

In a Forbes.com article published earlier this year, Frederick Allen provides criticisms from political scientist Seth Masket and blogger Matt Yglesias on this widely held belief:

Writes Masket,

“To say that governments should be run like businesses is to reveal ignorance about what either governments or businesses — or both — are. Businesses exist to turn a profit. They provide goods and services to others only insofar as it is profitable to do so, and they will set prices in a way that ends up prohibiting a significant sector of the population from obtaining those goods and services. And that, of course, is fine, because they’re businesses. Governments, conversely, provide public goods and services — things that we have determined are people’s right to possess. This is inherently an unprofitable enterprise. Apple would not last long if it had to provide every American with an iPad.”

Remarked Yglesias,

“a state is fundamentally an ethical enterprise aimed at promoting human welfare. A business isn’t like that.”

I’ll give them both credit for at least acknowledging there are distinct differences between the State and a privately owned business. As to what those differences are, both gentlemen completely missed the mark.

Both Masket and Yglesias seem to be under the impression that the State not only has the authority but the duty to determine what things individuals have a right to possess and to promote human welfare. As I’ve discussed previously, no one has a “right” to any thing in regards to a good or service.

Where so many miss the boat with this concept is a lack of understanding that governments produce nothing. Whereas private firms invest their own resources into each business venture, the State operates solely by extracting wealth owned and produced by private individuals. Every program and initiative of the State is an act of consumption as nothing is created by government; therefore even if it had the authority to do so, government “providing” anything would be an impossibility, since it relies entirely on the production and resources generated by the voluntary sector of society.

The voluntary nature between individuals and businesses during commerce is seldom understood or appreciated. This is a significant point because it helps to illustrate why the institution of monopolized force known as government is incapable of being ran like a business. The idea that wise businessmen could possibly create a more efficient government that could streamline us into prosperity is a misconception because the nature of government cannot be altered.

Were Wal-Mart or Apple to hold a monopoly on the use of force to fund themselves, they would find themselves bankrupt as well. Any business that had the ability to spend and borrow at will with other people’s money is inevitably going to take advantage of such a circumstance and abdicate any and all responsibility for any debts aqcuired. The irredeemable nature of man cannot be trusted with such power. As Lord Acton once said, “power corrupts, absolute power corrupts absolutely.”

Yet another reason why proposing to run government as a business is dangerous, is because of the stark difference between who takes the risk in government versus a private firm. Entrepreneurs and CEOs only have the ability to take risks with the resources that have been voluntarily invested in their company, (provided the State does not steal taxpayer money to bailout said company) whereas governments force every citizen to take gambles they would never choose for themselves. Human beings make mistakes on a daily basis, this is unavoidable. Not to say that the private sector is flawless, but aside from the fact it faces competition to incentivize responsibility and improvements, should businesses make fatal flaws in their ventures; millions of Americans are not forced to foot the bill.

The nature of human beings aside, there is a more fundamental economic argument that makes governments functioning as businesses impossible: they lack a price system. As Ludwig von Mises argued, governments, (particularly under socialism) have no price system. The market system of profit and loss accounting is either completely disregarded or in effect eradicated under State control. In the marketplace, individuals and business owners make decisions based on incentives. These incentives direct their actions to account for their profits and losses and mandates that resources are allocated and used in the most efficient manner possible. Governments have no such incentives because of their being an institution of force that faces no competition and also due to the fact that when government uses resources it’s for the “public good”, meaning private property does not exist, rendering a lack of market signals as funds are completely used arbitrarily or attempted to be disbursed to the collective. It should be no surprise programs such as Social Security and Medicare hold unfunded liabilities of over $80 trillion while the U.S. Post Office is $5 billion in the red; and let’s not forget our now $15 trillion debt.

If this is a business, at what point do we give our "employees" their pink slips?