Should We Really Run Government Like the Private Sector?

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There seems to be considerable talk in conservative circles from time to time about the concept of running government like the private sector. Currently that issue seems to have heated up locally. So, I thought I would initiate a discussion about the concept of running government like the private sector.

I have started by making a list of what I think are some important differences between the public and the private sector. Here goes, in no particular order:

• Government has the force of law behind it and is called upon to intrude in the lives of its citizens. This is an ominous power. The private sector does not have such power.
• There is an extremely low tolerance for risk from the government stockholders – the taxpayers – whereas risk in the private sector is a way of life in pursuit of economic reward.
• The public sector is more heavily regulated than the private sector and must spend more resources on compliance. The public sector must comply with most all regulations that apply to the private sector plus additional regulations and controls imposed upon government by legislation, a higher level of government, and/or the voters.
• Government cannot pack up and move to another state or country in order to take advantage of a better political climate, more favorable costs, a better labor market, better weather or other differences.
• Government cannot ship its funds and banking to offshore locations in order to reduce scrutiny; the private sector apparently does this fairly routinely.
• Government cannot outsource to cheap labor in foreign countries; the private sector can and does.
• Public sector jobs are viewed as belonging to the public and are generally filled by open and competitive selection process to assure fairness to applicants. This tends to be time consuming but leads to the cream rising to the top. Hiring and promotion processes in the private sector can be much more rapid, secretive and subjective.
• Decision making in government is slow due to laws requiring public deliberation and decision making (such as the Brown Act); in the private sector decision making can be done more quickly and with less oversight and review by others.
• The measure of success or failure in the private sector is profitability; the measures of success or failure in government are varied and more difficult to quantify and often subjective.
• The operations of government are generally open for public review and inspection through record request processes. (In some states, such as Florida, there are sunshine laws that allow the media on-going access to the offices and paperwork of government employees.) In the private sector such access to business operations is closely guarded and generally not allowed – it is secretive.
• In government this openness applies to wages being paid to employees making it public information resulting in employees knowing what their colleagues are being paid. This reality requires attention to equitable compensation. In the private sector individual compensation is usually confidential allowing disparities and favoritism to occur undetected.
• Executive and management compensation in the private sector is generally much higher than in the public sector (City of Bell fiasco aside).
• Through sales and marketing techniques the private sector has greater ability than the public sector to increase revenues to keep pace with costs. (A current example is the fuel cost surcharge being applied by airlines and trucking companies – it is impossible under current law for government to concoct and implement such a fee virtually overnight).
• Federal law requires state and local government to pay prevailing wage rates for public works projects that are partly or wholly funded with federal dollars. There is no such requirement for the private sector, thereby enabling it to contract to the lowest bidder regardless of wage and employment practices.

One could ask what private sector model is the successful model that should be replicated by government. Given the graveyard of once highly regarded private sector organizations – Enron, Mervyns, Washington Mutual, Lehman Brothers, Countrywide Financial, Kaizer Steel, General Motors, Bullock’s, Buffum’s, May Company, Studebaker, Builder’s Emporium, Gemco, Circuit City and Blockbuster Video are a few names that come to mind – there is evidence that private sector models regularly crash and burn and are not anointed with some protection assuring organizational success.

Looks to me like any perception that government can or should be run like the private sector is a misleading premise and no panacea for nirvana. Perhaps those who still think it can and should be done should begin by giving us a definition of what “run government like the private sector” means to them.