Mitt Romney: Did I Miss Something?

Could someone please explain the following to me: why is running government like a business a good thing?  How are they related?  From my perspective, a business is fundamentally different from a government.  How are they different?  Let me list the ways: First, in a business, clients or customers are offered a good or service and voluntary pay for such goods or services.  In a government, citizens have money forcibly taken from them.  There is nothing voluntary about paying taxes, unless you consider jail a voluntary decision, which I suppose some may.  Government funding is of necessity coercive and compulsory.  With the exception of some lotteries and the rare donation to government services, governments rely on coercive tactics for funding.  Hence, the IRS is armed to the teeth, lest someone is found in chronic disobedience to the fiat-type mandates.

Second, in the business world, there are always competitors.  Even in the case of Microsoft, for instance, there are still open source operating systems like Linux, or the Apple-based or Unix-based operating systems to choose from.  (Sadly, Amiga and Commodore were finished years ago.  Those were the good ol’ days.)  There are several different oil companies to choose from when we want to fill up our gas tank.  There are several different car companies to choose from when we want a new car.  Or a new computer, television, food product, real estate service, insurance, etc.

What is the net effect of competition?  Profit-driven companies must satisfy a customer base to keep making money.  They must be appealing enough to convince enough people to keep purchasing their product or service.  Even if they are appealing to their customers/clients, they may lose market share or money if a competitor is even better, even in only one or two areas (i.e. image, service, price, quality).  The net effect, then, is that for companies to stay in business, they must be continually looking for ways to improve themselves, to give themselves a leg up on the competition.  Usually this is a multi-faceted approach.  For instance, a retail outlet may revise customer service policy at the same time store layouts are changed.  Otherwise, they run the risk of losing market share, losing money, or even going out of business.  There’s little profit in going out of business.  Unless, of course, the government bails you out.

Speaking of government, What about it?  Governments do not really have competitors.  It’s true, I may move into another country, but in any given country, I really don’t get a choice at government.  I may choose whether to pay taxes or not, knowing full well the consequences of such choices.  I may vote for an individual which may nominally represent part of my views as a cog in a vast bureaucratic machine which I have very little control over.

A man named Lysander Spooner thought that a monopolistic postal service in the 19th Century was unconstitutional.  So he started his own private mail delivery service.  He started making pretty good money.  Now, for him to make good money, he had to have convinced (skeptics may say “hoodwinked”) enough individuals that his service was better than the good ol’ USPS.  Impossible, you say?  Surely you jest.  The Supreme Court put an end to his fun and games when they ruled his business venture unconstitutional.  That’s right: how dare you offer goods and services superior to a government-run monopoly such that individuals actually choose your service over the state-sponsored one!  And so Lysander Spooner was essentially litigated out of business.  Shame.  I wish there was a private mail delivery service every time I go to the local post office.

So with no competitors, the government runs into the same sorts of problems that plagued centrally-planned economies, like the Soviet one which collapsed.  Without the possibility even of losing market share, losing revenue, or losing customers (who would they lose customers to?), then what is the incentive to offer goods and services at increasingly lower prices or higher quality?  There really isn’t one, aside from a disgruntled public, who has little choice in the matter anyway.  So why improve medicaid or medicare or the military-industrial complex beyond election-level promises?  There really isn’t much motive to do this.  (And of course, we remember that election promises are often hallow and empty rhetorical devices.)

The third reason is related to this.  When there is a problem in a private company, what is the reaction?  If the problem is viewed as fixable, and there are sufficient assets available (either to use directly or to borrow against), then there is some restructuring based in cash flow or revenue.  Mitt Romney, as I understand, was a fix-it expert in the private sector.  Sometimes, a company will take a very risky measure of going into quite a bit of debt to finance a significant change (i.e. Ford).  In this case, the benefits must outweigh the risks to be worthwhile.  If the problem is not viewed as fixable, or depending on cash restraints, that program may be eliminated.  For instance, large companies will sell off or spin off divisions and departments all the time, usually in the name of improving the bottom line (profit).  In many instances, problems are sufficiently large and cash flow is sufficiently restricted that the company may go under.  Going under represents a failure to meet market demands effectively.  In other words, not enough customers were kept happy enough to patronize the company.  Individuals choose not to spend money there anymore.  The company is hampered by how much cash is flowing in; another way of thinking of this is by how much individuals are choosing their good or service over their competitor’s.

What happens, on the other hand, when government runs into a problem?  Instead of change based on market demands (individuals’ voluntary choices), the answer is based instead on perceived bureaucratic or governmental pressures.  Who wants to get rid of a government department?  The answer is almost always more money, not less, to solve problems with regards to education, immigration, emergency response, welfare, security, etc.  (This is from both sides of the aisle nowadays.  There really isn’t a fiscally conservative party left.)  It appears that nearly no one in Washington thinks the problem would go away or be lessened significantly if government’s role was downsized.  This appears to not even be worthy of mention.  This almost always means more money, regardless of the nature of the problem, or the fiscal constraints of the government.  Actually, fiscal constraints on government appears to be an oxymoron these days.  (“What fiscal constraints?” is the echo from Washington.)  Deficit spending is the rule rather than the exception, which means the national debt is continually increasing.  On the other hand, continually increasing debts make for bad businesses.  Private companies actually have to pay them off to stay in business.  Or, as I stated before, a government bailout is a historically-viable option.

These three differences, in my mind, constitute a wide gap between the private business sector, in terms of operations, incentives, and motivations, as opposed to the centrally-planned and fundamentally coercive bureaucratic government machine.

So why did so many support good ol’ Mitt because he will run government like a business?  I just don’t get it.

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7 Comments

Filed under Austrian Economics, fiscal policy, Libertarian, politics, role of government, Social Commentary

7 responses to “Mitt Romney: Did I Miss Something?

  1. MP,

    While I generally agree with your analysis, let me say this. There is so much waste in government. The same amount of waste puts a business out of business. Businesses are constantly looking for ways to cut waste, and improve profit. Government often has no incentive to do this.

    So, for someone such as Mitt to look for efficiencies to cut down on all the waste and taxes, I think this is a good thing. You are right–businesses and government are different. But to say that government can’t learn and improve like a business is a bit of a stretch.

  2. mormonpaleo

    Good points made with the article, brother. I also miss the good ol’ days of Algebra Dragons and Snipes on the Commodore 64.

    Correct me if I am wrong, but I don’t think the point of the article was to say that government can’t learn and improve from how a business is run in the private sector. I think the point is that businesses and governments are fundamentally different in nature much as a record player and an electric saw are different. Could there be similarities or common ground? Sure. But their raison d’etre are quite different from each other.

    As for our friend Mitt Romney, judging his record as governor I have a hard time seeing him reduce the waste in the federal government (if he is ever elected president) as he may have done with the Olympics or any other private venture he was a part of especially when government involvement and subsidies are major parts of answers to how he would deal with domestic issues. Could he help save a few billion dollars here or there? Sure, but what is a few billion when the national debt is 9 trillion dollars?

  3. As a Ph.D. candidate in political science with an emphasis in public administration, I can say that your initial arguments have some merit, and others less so. Nonetheless, I am also a Romney advocate, and am looking forward to his 2012 presidential run.

    Taxes are unavoidable. Revolutionary Wars take money and their investors need to be repaid. Keynesian economics takes governmental spending to end depressions and get people working again. Taxes are necessary to keep little 80 year-old widows from starving to death after they’ve lived 15 years longer than they had expected. Taxes and bureaucracy are necessary to regulate germ-ridden chickens and keeping the public safe from their diseases (see Upton St.Clair’s “The Jungle”). Taxes and bureaucracy are necessary to put soothsayers and snake-oil salesmen out of business and ensure that pharmaceuticals do what they claim to do. Taxes and bureaucracy are necessary to put astronauts on the moon. Taxes and bureaucracy are necessary to pave roads, build bridges, put out fires, fight crime, and protect us from terrorists.

    Government does have a bottom line, it is the public good, which is to say meeting the minimal requirements of the people to maintain their complacence. If a nation does not compete for the satisfaction of its people then anarchy will ensue, and then it will be followed by revolution or be conquered. Mexico is an example of what happens when a government fails to meet the public good over a long-term. It failed to institute Weberian bureaucracy until very late in its development, it has had a very poor regulatory administration and corruption safeguards, and it has a very long history of insufficient investment in private enterprise and national infrastructure.

    Most businesses either work as small oligarchies or dictatorships, both of which are quite efficient as far as government is concerned–just look to Hussein and Hitler for governmental efficiency. We call all admit, however, that none of us want to live in these kinds of government. We like to have a say and to debate, but discussion and debate is messy. But on the other hand, Sweden is Uber-democratic, and the government takes the vast majority of one’s income too. So, as Aristotle would have us believe, somewhere between the two extremes that is an ideal middle-ground. Madison, Jay, and Jefferson found this ideal middle-ground in the populist notion of pluralism with factions constantly competing, or as John Stuart Mill would call it, the marketplace of ideas.

    Our government was not designed to be efficient, merely effective. Efficiency in government eliminates debate and individual rights and our civil protections. Can government do a better job, or be less wasteful? Before you answer that you should consider whether or not you give 120% each and everyday to your employer. You should also realize that the U.S. bureaucracy, in proportion to the U.S. population, is one of the smallest democratic governments in the world.

  4. No, you didn’t explicitly state that government can’t learn from business. But your uneasiness with Mitt’s business background seemed to imply that his background was not useful in government.

    I think Mitt did a pretty good job in Mass. With the liberal democratic legislature of that state, I think he had his hands tied on reducing spending. That staet is much more socialist than say, Utah, where he really did some pruning of budgets for the Olympics.

    Would he have a similar problem in the US Congress–yes. However, it seems to me that Reagan was a better president with a Democratic Congress, and Clinton was a better president with a Republican Congress. There must needs be opposition in all things….

    It seems Bush is finally wielding the veto with the Democratic congress–he never used it once with the Republican congress. Now Bush is using spending as a political weapon against the Dems. Why couldn’t he use it in the previous 6 years?

    I really want a balanced budget. If Mitt can help do that, I’m all for it. In fact, I’m for any candidate who offers the same thing, (Ron Paul included.) Mitt just seems much more viable.

  5. plato04

    Mormon Heretic,

    Regarding Mitt Romney’s record as governor in Massachusetts. Yes, budgets were balanced. Fees were also raised. As Mike Huckabee points out, that’s the equivalent of a tax increase. A fee increase in government services used by many individuals (i.e. driver’s license, vehicle registration) may be considered a regressive tax, as the lower income brackets are forced to pay a larger percentage of their income.

    Regarding his presidential bid, Mitt made many campaign promises and statements involving an increase in government. Increasing corn subsidies for energy dependence; increasing government spending in education; increasing defense spending; increasing health insurance subsidies (especially if you use Massachusetts as a model here). He promised the Detroit auto industry billions and billions of federal aid as a bailout. Many believe that’s how he won Michigan. And he laughs at Ron Paul for suggesting the age-old conservative idea of abolishing the unconstitutional Departments of Education and Energy. What’s conservative about that? How would Mitt Romney possibly balance the budget while he maintains a need for low taxes and more spending? It just doesn’t make sense. If he would say, “Here’s where I would cut tens of billions of dollars in federal funding, and scale back the role of government,” then there would be at least some hope. But I never saw it.

    Halospawn, thanks for entering the fray. Your mainstream perspective is enlightening. The purpose of this website is a mouthpiece for Old Right ideas, which largely rejected Keynesian economics. As I understand it, John Maynard himself was a little unsure about the validity of his own perspective. Contrast this with the sure economic foundation of Austrian economists like Mises and Menger, who truly understood the nature of government spending and the origins of the business cycle. There’s a significant difference there.

    I question the conventional wisdom which swallows whole Keynesian assumptions, perspectives, and ideas. I do not consider government spending useful, but destructive. The idea that money can be taken forcibly from someone and used for some public good should have been repudiated (and was by the Old Right) at the time of the New Deal. The fact that the New Deal did not get us out of the Depression should have put this notion to bed.

    Your arguments square perfectly with our popular acceptance of socialism, its policies and practices. Government has all manner of reach into all areas of life. I find this disturbing. You welcome it. I can hardly blame you. Considering the dependence of higher education on government funding, how are we to get another perspective? How are we to even question the mainstream perspective? And considering the reliance that modern day political scientists and lawyers have on an increasing federal bureaucracy, and therefore its incoherence to those not formally trained and schooled, there is every incentive to be supportive of increases in government.

    I am not convinced that any of the Founders would be pleased with the gigantic bureaucracies we have in place. They are essentially permanent. Liberty has been compromised. And the march goes on. The problems are always more government, not less. And yet this is in direct contradiction with the ideals of this country, of freedom and liberty.

  6. Platoo4,

    I never claimed to be a conservative. I lean that way, but am more comfortable as a moderate. Yes driver’s license fees might be considered “regressive”, but is the economy better with a balanced budget? (I think it is.) Tough choices needed to be made, and they are not always popular with everyone.

    The country is very different today than in 1776. Yes the founding fathers might be appalled at the growth of government, but they might also be appalled that slavery was abolished, or that women can vote. Yes large government does threaten liberties, but with abolition and women’s suffrage, new liberties have been created that didn’t exist at that time. Not all changes are bad. Comparing 2008 to 1776 is like comparing apples and oranges in some cases.

  7. mormonpaleo

    @ Mormon Heretic:
    Whether conservative or moderate we appreciate your participation in discussing these concepts and ideas.

    I don’t think the founders would be appalled to see that slavery has been abolished or that women can vote. I think there are strong arguments in defense of the Founders against the idea that they didn’t deal with the issue of slavery or women’s suffrage because they didn’t truly feel all men and women were created equal and endowed with inalienable rights. I won’t take the time now to detail why I feel this way, but possibly in a future post.

    Government in its proper form is built upon fundamental, unchanging principles that are as true in 1776 as they are in 2008. The changes that occur over time should happen within the bounds of these absolute principles. In establishing the Constitution the Founders did not intend to address every injustice existing in their day or injustices that would eventually face this nation. They put forth a framework built on lasting principles that are as true today as they were then. The framework allows for the violation of civil liberties (i.e. slavery and women’s right to vote) to be corrected when the time is right by the people in the form of amendments to the Constitution. You are right that not all changes are bad. We desperately need change today, the kind of change where our government returns to the core ideas and principles found in the Constitution.

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