The Corner

Why Government Can’t Run a Business

Contrary to the Obama administration’s belief, the government can’t run a business. Over at the Wall Street Journal, John Steele Gordon writes a good overview of how badly governments run enterprises and why that is inherently so. Here are some of the reasons he gives:

1) Governments are run by politicians, not businessmen. Politicians can only make political decisions, not economic ones. . . . And politicians tend to favor parochial interests over sound economic sense. . . .

2) Politicians need headlines. And this means they have a deep need to do something (“Sen. Snoot Moves on Widget Crisis!”), even when doing nothing would be the better option. . . .

3) Governments use other people’s money. Corporations play with their own money. . . .

4) Government does not tolerate competition. . . .

5) Government enterprises are almost always monopolies and thus do not face competition at all. But competition is exactly what makes capitalism so successful an economic system. The lack of it has always doomed socialist economies.

6) Successful corporations are run by benevolent despots. The CEO of a corporation has the power to manage effectively. He decides company policy, organizes the corporate structure, and allocates resources pretty much as he thinks best. The board of directors ordinarily does nothing more than ratify his moves (or, of course, fire him). This allows a company to act quickly when needed.

But American government was designed by the Founding Fathers to be inefficient, and inefficient it most certainly is. . . .

7) Government is regulated by government. . . .

And he concludes:

Capitalism isn’t perfect. Indeed, to paraphrase Winston Churchill’s famous description of democracy, it’s the worst economic system except for all the others. But the inescapable fact is that only the profit motive and competition keep enterprises lean, efficient, innovative and customer-oriented.

Read the whole thing here.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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