Bill Gates is Only Half Right When He Says Government Should Be Run Like a Business


Last Thursday, Pundit Aubrey Bloomfield ran the story "Bill Gates Says Government Should be Run More Like a Business: Why That's a Bad Idea." He correctly points out that "running it like a business" is a common trope, unlikely to net any results. 

But the reason running the government like a business won't do us any good isn't because of some fundamental difference between private and public organizations. It's because government is already run as a business, specifically one with a captive audience. If we want better government, this is what has to change; we need to break up the monopoly and make the market for governance a more competitive one. 

Government services are not fundamentally different from those provided by the private sector. 

In either case, organizations have been formed to provide a particular good or service. Whether it's widgets, unemployment insurance, or a court system; it's all the same. Anyone of these can and has been provided by both private and public organizations. 

The big difference between private and public is that if patrons or employees of the former become dissatisfied, they can withdraw their support and look elsewhere. Withdrawing support from something like Social Security would mean leaving the U.S. and renouncing all claims to citizenship: not quite as easy as walking away from a dysfunctional startup

Still think things like laws and courts are fundamentally different? They're not. 

When you move into an apartment or a neighborhood with a homeowners' association, part of what you're buying into is a community with a particular set of rules. If you break the rules, there are consequences and you know this going in. The apartment building or association may also provide services like security and maintenance of common areas-things not fundamentally different from what government does on a larger scale. 

Even court functions are often provided for privately. Many businesses prefer private arbitration to government courts for settling disputes. 

The point here is that there is no strict divide between what either the private or public sectors can and do offer.

But in order to get a public sector that is as responsive as the private sector, we have to introduce more individual choice into the system.

By devolving welfare and regulatory functions to the state and local levels, we can better experiment with a number of approaches to governance. This is the Laboratories of Democracy concept in action. 

Putting more authority at more local levels also allows greater scope for differing conceptions of the political good life. It's very likely that residents of Texas and California have differing opinions on social spending and regulation; there's no reason that should be a problem, each should be able to go their own ways-and to a much greater degree than they already do. 

Localizing authority also makes it more accountable. It's far easier for Texans to march on Austin and Californians on Sacramento than it is for either to have any impact in Washington. The more authority is vested locally, the more accessible it is to the people it affects. 

Placing more responsibility in smaller jurisdictions also makes it easier for residents to pick up and leave if another city or state offers a better deal. This is what's called voting with your feet or exit. Where exit is a credible option, authorities are forced to be that much more responsive or risk losing their tax base to better-run jurisdictions. 

Along with devolving welfare and regulatory functions, there needs to be devolution of taxing authority. 

The federal government takes in over $2 trillion every year. Besides supporting one-size-fits-all policy prescriptions, the tax revenues get dumped into the great trough of appropriations. This is the pork the men and women of Congress are perpetually fighting over. 

The problem with this system is it makes it impossible to tell how much bang the citizenry is getting for its appropriated buck. We would have to be able to say from what state every dollar of federal revenues came from and to where it ended up going to even begin to evaluate what we’re getting for our taxes. And that comes before even making an argument that Floridian dollars ought to support a high-speed rail project in California.

Creating a more responsive government isn't about running it more like business. It’s about breaking up the monopoly that already exists. Without a real ability to choose between different providers of governance, politicians and bureaucrats will continue to operate under the often perverse incentives of our current system.

We need to decentralize our politics and create a more competitive market for governance. In short, we need to democratize our democracy.