The Differences Between Government and Industry

posted at 3:32 pm on February 1, 2010 by Doctor Zero

People who support socialist programs harbor some incorrect assumptions about the nature of government agencies. Politicians and bureaucrats don’t automatically become more intelligent or virtuous than private-sector business owners and employees. It’s also dangerous to assume government is the same as the private sector – a delusion politicians like to encourage when trust in the State has cratered, and they believe they can regain some credibility by posturing as the CEOs of America, Inc.

Recent events have illustrated three vital differences between government and private industry. The first is that government does not face consequences the same way businesses do. The President just rolled out a budget with a deficit of $1.3 trillion dollars. The federal government has been running gigantic budget deficits for decades. The national debt has passed $14 trillion. Even if Enron had hired Bernie Madoff to replace Paul Krugman, it could not have endured such incredible fiscal irresponsibility for so long. Businesses faced with budget shortfalls make hard decisions in order to remain competitive. If management fails to do so, it faces bankruptcy, the wrath of shareholders, and the loss of vitally needed credit.

Government doesn’t make tough decisions like that. It simply raises taxes or runs up the deficit. It does not view itself as “competitive” – it would use its power to crush private-sector competitors who threatened its interests, as the medical insurance industry will discover to our collective sorrow, if anything resembling ObamaCare is passed into law. For the State, competition ceases when legislation is signed. No matter how badly the Barack Obama People’s Health Insurance Company performs, it will never go out of business… at least, not until the entire economic system has collapsed around it.

Individual politicians are likewise insulated from consequence. It’s extremely rare to see a powerful politician’s career end because of a single mistake. No matter how poorly Obama performs as the CEO of Government Motors, it will not be the sole, or even primary, reason he loses his job – and his job is almost absolutely secure for another three years, regardless of how unpopular he becomes.

Politicians even enjoy significant protection from outright criminal wrongdoing, which they occasionally sell to favored businessmen. No level of corruption seems capable of rousing Eric Holder’s Justice Department from its long afternoon nap. Some states don’t mind voting for politicians they can barely see through the ethical clouds swirling around them, as long as they bring home enough pork for key constituencies. The political class is simply immune to the aggressive law enforcement that purges the worst fraud from the private sector, when the hungry roots of politics are kept from digging too deeply into the soil of industry.

A second difference between the private sector and Big Government is the nature of accountability. When you hear someone pontificate about bringing more “accountability” to government, always remember this is a relative scale, which ends far below the point where it begins for private businesses. The government is the primary source of information about itself, and it feels entitled to suppress what it can’t be bothered to distort, such as the SEC documents covering the AIG bailout. Much of the news we receive about the government comes from leaks and background talks, given to a media deeply sympathetic to its goals. The federal government is also entrusted with the task of policing itself, a job it feels very relaxed about performing. The government could not begin to pass the kind of accounting audit it requires from businesses.

Even if the government was meticulous about reporting on its performance, and the media dutifully passed along this information without filters, how could ordinary citizens hope to analyze the performance of an incomprehensibly huge super-State? If your auto mechanic consistently overcharged you for shoddy work, you’d find a new mechanic. What would you do if your auto mechanic was also your doctor, grocer, chief of police, and principal of your children’s school? The idea that citizens influence government with their votes presumes a level of awareness and informed response that simply cannot exist, when the State becomes as bloated as ours. We seem to be on the edge of a political earthquake in 2010, but look at what it took to get us here. Voters won’t display the passion and organization necessary to “fire” an immense national government until it has failed comprehensively… and very expensively.

The other obvious difference between government and the private sector is the government’s monopoly on the use of force. The closest a private industry can come to compulsion are monopolistic practices, which government polices against, but is also willing to perpetrate itself. Every action taken by the government involves compulsion: the collection of taxes and the enforcement of regulations. Those little targeted tax cut ideas salted through President Obama’s first State of the Union address are another form of compulsion – you have to do what the government wants, in order to enjoy those tax-cut crumbs, and everyone who refuses to comply with the designs of the State will subsidize you.

Few people would be eager to do business with a company that somehow acquired the government’s combination of insulation from consequence, unaccountability, and compulsive force. Allowing the government to pretend it’s a giant corporation is a terrible mistake. Those who make that mistake tend to underestimate the difficulty of running a business, and the intense competitive pressure which leads to the innovations behind our material abundance. Ask a small business owner or corporate executive about the tough choices and risks he or she must undertake on a regular basis, then ask if they would subject themselves to such pressure if they didn’t have to. They would laugh and tell you how much they’d like their mistakes to be subsidized, their credit to be effectively unlimited, or their competition to be held off at gunpoint.

If the State is immune to the restrictions and hardships that lead to innovation and efficiency, isn’t it completely foolish to expect it to match the performance of private industry? Any politician who asks you to believe the State can do better deserves to be laughed off the stage.

Cross-posted at www.doczero.org.

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