Why Running the Government like a Business is Dumb.

Posted on January 21, 2011


A Google search for “run this city like a business” yields 3 440 results. Replace  “city” with “country“, and you will get 8 560 results. This is a very popular, and somewhat understandable, political sentiment. With a multi-billion dollar deficit, it’s easy to think that there is some fundamental, structural problem with the status quo and a large shakeup is in order to fix things. If you are re-modelling the government, then why not remodel it after a business, which tends to be very good at fiscal success.

There is a large problem with this logic, however. In noticing that one organizational model is apparently a good solution for the problems faced by an organization which does not use that model, it neglects to notice that the two organizations have totally different mandates and metrics of success. This is made quite clear when you try to use similar rationale to solve persistent problems in other organizations. The phrase “run this school like the military” gets only one Google result, and it’s from a fan fiction story. The phrase “run this school like a prison” gets only 41 results. This despite the fact that, just as sure as governments have frequent fiscal problems, schools have frequent disciplinary problems. The reason that military or  fundamental goal of a school is not to control or pacify students, but rather to educate them. The techniques used in institutions which concern themselves primarily with discipline are not compatible with this goal. Running a government like a business makes about as much sense as running a school like a prison, or the military.

I don’t mean to dump on businesses. There are all kinds of nice things that we wouldn’t have if we didn’t have profit-motivated factories to produce them for us. But businesses are primarily concerned with fiscal solvency, and only provide products or services as a means to that end. If they need to reduce their level of service in order to continue to make money, then it is acceptable for them to do so. This is a totally backwards way to look at government, which should use fiscal solvency as a means to the end of providing services.

This distinction has significant real-world effects. If you look at government services with only finances in mind, then you will (among other things) wind up cutting public transit and other utilities to far-flung areas, focusing primary and secondary education funding in the wealthier areas where it will get a better return, and only funding those post-secondary programs which will directly contribute to economic productivity. You will also be much less likely to provide stimulus in the event of a recession.

To conclude, if government is run like a business, then it will result in a stratified society which doesn’t take care of people in rural areas, has no historians, poets or artists, and will collapse at the slightest hint of economic downturn. A government is no more like a business than a school is like a prison, and any politician or pundit who suggests otherwise should not be taken seriously.