LANOSGA: Run government like a business? Which business?

March 15, 2014

Which is better: business or government?

Before you answer, consider two cases.

First, the Indiana Occupational Safety and Health Administration. Early this month, a federal investigation confirmed numerous problems at the agency that were first reported by The Indianapolis Star: mishandling of worker complaints, failure to perform investigations, discouragement of whistle-blowers.

Second, IBM. Last month, the Indiana Court of Appeals ruled that the state can continue to press its case to recover $177 million from the company because of the failed effort to privatize welfare benefits processing. IBM was hired in 2006, but three years and nearly half a billion dollars later, the state terminated the contract because of widespread problems with the implementation.

In the first case, a government agency, ostensibly motivated by public service, failed to perform a statutory duty designed to keep workers safe. In the second case, a corporation, presumably driven by the profit motive, failed to provide a service promised to its customer and lost the opportunity to continue earning profits from the job.

What the two cases have in common is that they both involve breakdowns within large, bureaucratic organizations. In that, businesses are actually quite similar to government agencies. Yet in popular discourse, it is business that is usually held out to be the paragon of efficiency.

Some politicians like to proclaim that government should be run like a business. Businesses, they argue, are beholden to customers and driven by competition that keeps them more accountable than government.

But businesses are also much more opaque to the public than government. When inefficiencies or corruption in an industry or business come to light, it is not typically because businesses are required to maintain public transparency. Mainly, as with IBM, it happens because of some catastrophic meltdown.

On the other hand, perceptions about rampant public-sector inefficiency are fed by our system of government openness. It’s a necessary system given the fact of public funding, and the result is that government breakdowns (the botched roll-out of the Affordable Care Act, for instance) are often highly publicized.

We get regular doses of government misfeasance, malfeasance and nonfeasance, whether it comes from the media or government investigators themselves. We see the sausage being made, and it can be stomach-churning.

Not so with the private sector. Corrupt or inefficient business practices are easier to hide and more difficult for journalists and the public to discern. When they are discovered, it’s often too late—the money’s gone.

The IBM story is just the latest rebuke to the notion that business is always more efficient than government. “In the most basic aspect of this contract—providing timely services to the poor—IBM failed,” the appeals court wrote in its decision last month.

There are enough other cases of spectacular inefficiency and corruption in the private sector to complicate our idea of the purity of the profit motive. (See also Enron and the most recent financial crisis. Oh, and is anyone up for investing some money with Tim Durham?)

The point here is not to demonize business but simply to suggest that business bureaucracies are no more virtuous than government ones. Regardless of motive—profit or public service—organizations by nature are susceptible to waste, fraud and inefficiency.

So the next time someone suggests government should be run like a business, it would be good to find out which business. In the end, it’s caveat emptor. Let the buyer beware—regardless of whether the seller is a business or the government.•


Lanosga is an assistant professor of journalism at Indiana University and president of the Indiana Coalition for Open Government. Send comments to ibjedit@ibj.com.


Recent Articles by Gerry Lanosga / Special to IBJ

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