This post explains why government always fails while business succeeds.
Government Failure and Business Success
By: George Noga – March 13, 2022
Have you ever wondered why government always fails, regardless of time and place, while business usually succeeds? There are many amazing business successes: Apple, Amazon, Disney, Walmart, Coca-Cola, Google and Facebook to name but a few. When we think of government, what comes to mind is public schools, the IRS, the USPS, immigration, the war on drugs, crime, pandemic mismanagement, huge deficits, TSA, Medicaid, mindless regulation, crumbling infrastructure, corruption, waste, fraud, abuse, climate madness and dysfunctional cities littered with human jetsam.
Why Business Succeeds
Business closely aligns its risks and rewards and its incentives and disincentives with human nature – which is unchanging. Business so closely aligns personal incentives with the goals of the business such that they are nearly indistinguishable. The need to make a profit creates a sense of urgency, focuses attention and summons great exertion because success confers wealth and status while failure has immediate and very unpleasant consequences. As a result, business attracts motivated, hard-working, talented, non risk–averse people with a strong bias for action over inertia.
Business is based on markets; highly specific knowledge constantly flows from the bottom up and confers valuable information about consumer preferences and prices. All transactions are voluntary, non-coercive and mutually beneficial, otherwise they would not take place; that explains why both parties to a market-based transaction always say “thank you“. In business, one person can improve the lives of a billion people as did Gates, Walton, Jobs, Disney, Zuckerberg and Bezos. Businesses routinely manage vast global enterprises with little waste, fraud, abuse or corruption.
Why Government Fails
Government is unalterably contrary to human nature. Not only are its incentives and disincentives not aligned, they are diametrically misaligned to encourage behavior contrary to the public interest. This problem is dissected and explained by the science of public sector economics, which explains, inter alia, why taxes are opaque, failed programs never end and why borrowing and spending is out of control. It also explains why all forms of collectivism never work outside of a small family, clan or tribe.
The risks and rewards of government do not attract talented, hard-working people; in fact, they appeal to the opposite cohort. Government is not based on markets and gets only the most generalized feedback every few years in elections. Government is top-down, highly coercive, ignores consumer preferences and artificially creates winners and losers; it is rife with waste, fraud, abuse and corruption. One person cannot make a difference; try to name one bureaucrat who transformed government for the better.
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The causes of government failure are systemic and structural; they are deeply rooted, organic and incapable of reform. There is no way to fix government; it is futile to try. Voting different political parties into power, increasing oversight by Congress, forming elite study commissions or hiring gaggles of inspectors general will have no impact. Even bringing in top business executives fails; Robert McNamara comes to mind.
Government cannot be improved; but there is one way – and only one way – its many pathologies can be reduced. That answer is to drastically shrink the overall size and scope of government – nothing else will work. Even then, government still will be a failure – but at least it will be a smaller failure. We do not need more government, better government or even wiser government; we need less government!
