The Government Is Not a Business

Looking Past Profits for a Healthy Society

By Jon Green

“The federal government is in financial disarray. It spends more than it makes and its investments are not based on sound financial principles.” — Kelly Campbell, “5 Reasons the Government Should Be Run Like A Business,” U.S. News

Proposals to treat our government like a business in which we choose to invest and from which we expect to realize short-term gain has led to calls for a balanced budget amendment, privatization or abolition of the social safety net and low, flat taxes because businesses need only focus on profit and efficiency. If society really was just a business transaction between two otherwise unaffiliated parties acting in their immediate self-interest, then such proposals would have merit: we could “become more efficient” by downsizing and doing less with much less. But government is far more than a business transaction: it provides the means for private prosperity, and also the protections for social capital and a well-functioning society, which do not always maximize financial gains in the short term.

In the state of nature, it is advantageous to engage in reciprocal action for protection and long-term gain. Continued reciprocity generates social capital, the willingness put long-term gain ahead of short-term interest. But reciprocal action is vulnerable to cheating; I can choose not to return a favor and reap benefits at little to no immediate cost. In the business community, cheating (failing to honor a contract, for example) is either rewarded by being ignored or punished by a refusal to engage in future reciprocal action. This form of punishment does not work in a society because one cannot just walk away from unreturned favors. Members of a society are constantly forced into collective situations and are unable to choose whether or not to buy the product offered by the state without leaving it altogether. Governments are constructed to set up incentives and constraints around larger-scale reciprocal actions to prevent failure to reciprocate. For example, if the Internal Revenue Service was abolished and taxes became optional next April, how many people would pay? Disaster would ensue when our society would be unable to maintain its military, schools, highway construction and other basic governmental functions. While all of society is obviously better off when taxes are collected, few members pay their dues willingly. Therefore, government is required to impose collective action.

Attacks on the social safety net and other proposals to curtail large-scale reciprocal actions are based on a perverse individualism that discourages the critical interdependence that this nation is built upon. As a society, we have decided that although it may cost money, it is in our long-term interest to provide all of our citizens with a basic floor of economic well-being. We decided that every citizen deserves a shot at a successful career, so we established public school systems. We found it unacceptable that half of senior citizens lacked health care and a third lived in poverty, so we established Medicare. Abolishing these social establishments may help a hypothetical America, Inc. realize short-run financial gain, but the social costs outweigh the financial benefits. This is evidenced by the strong positive correlation between a country’s engagement in large-scale collective action and their ranking in the United Nations’ Human Development Index. There is more to a nation than turning a profit: helping those who cannot help themselves, even at a financial loss, is a moral responsibility and a measure of a country’s worth.

“Businessment” ideology invites statements such as, “I shouldn’t have to pay property taxes to fund public schools if my child goes to private school,” “those old people don’t need Medicare” and “if it doesn’t directly affect me, why should I bother?” This mentality ostracizes the rest of society, establishes boundaries around the individual rather than the community and rejects the idea that a society’s success depends on cooperation with others. It fails to recognize that an educated workforce is in everyone’s financial and moral interest, as is a reciprocal responsibility to take care of those who took care of us. If we are going to accept this ideology and become a nation of prosperity that does not help the poor, then we will have to acknowledge that we are too cold, too selfish and too isolated to continue to be considered a first-world country.

If you want an organization that makes decisions based purely on market fundamentals and “sound financial principles,” I invite you to open an eTrade account. If you are so bound to your individual liberties that you would reject your responsibilities to your fellow citizens, then I invite you to live in a cave with your head in the proverbial sand and avoid the possibility of finding yourself in a collective engagement. If you wish to do so, however, you will have to use roads funded by your neighbors’ taxes to get there. American government, at its core, is not a for-profit enterprise. It is the arbiter of the large-scale social engagement that makes us a first-world country.

“Governments that buy too heavily into the idea that customers are a higher form of life than citizens risk losing the participation of taxpayers as partners.” — Katherine Barrett and Richard Greene, “Consumer Disorientation,” Governing

9 Comments

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  1. Government does not provide the means for private prosperity. Its rightful place is to play referee and enable it to take place should the people choose to pursue it. The two are completely different from one another. When you speak of the means of private prosperity, this indicates a sort of – “we’ll give you a whole bunch of money from other people, Solyndra, so that you can prosper.” This is different than me owning a solar company on my own, and government ensuring that the ground rules do not favor Solyndra over Chris’ Solar Cells. Government establishes the boundaries and the rules that enable private citizens to implement the means for private prosperity.

    Your wording here is poor in the same light, “Governments are constructed to set up incentives and constraints around larger-scale reciprocal actions to prevent failure to reciprocate.” Your proceeding example of the IRS is equally poor in regards to social contract theory. These are not absolute truths you pen, as government does not necessarily have to construct and set up incentives and constraints. A government that sets up incentives and constraints is involved in social engineering – which violates liberty, the pursuit of happiness, and private property rights. The IRS is not an example of setting up incentives and constraints; it is an example of abject law enforcement. An example of setting up incentives and constraints would be things like: monetary policy, tax breaks (or removal of) for charitable giving, first time home buyer tax credits, energy efficient tax credits, CAFÉ standards, and for the sake of your argument, social security and Medicare. None of these things have anything to do with large scale reciprocal actions. Just like the healthcare mandate it is raw social engineering and redistribution.

    What you say about attacking the safety net being an attack on interdependence is perverse hyperbole. Again, rooted in poor “is ought” logic. It’s another false choice where you either support the system as it exists, or you reject the interdependent nature of society as a whole when it is fully viable and possible to acknowledge that we are indeed interdependent, but simultaneously have no right to the property of others for our own benefit as adults. If people of sound mind and body obtained a useful education and useful skills they would have the integrity to respect the property of others while simultaneously caring for their own needs outside of the overbearing mothering of Leviathan. You mention that we created public schools to give everyone a fair shot, which I agree. But then you go on to validate additional adulthood social programs after we’ve given people their fair shot to take care of themselves. In the process of bolstering that social safety net you take away the incentive for people to embrace that fair shot in the first place, while granting them access to the property of others who do. This is explicitly unfair and even contradicts your notions of interdependent social contract. There’s nothing interdependent about people who reject their opportunity for education and remain a steady drain to the productive class. They exist as an albatross that offer nothing useful to the rest of society. They don’t exist as agents who engage in mutual exchange. They simply take.

    This is mess: “As a society, we have decided that although it may cost money, it is in our long-term interest to provide all of our citizens with a basic floor of economic well-being.” First, it’s objectively false. Society would necessarily mean everyone and not everyone shares this feeling. What you are saying is that a majority feels this way, but then there is no analysis on why people feel this way. Some people are looking to get something for nothing. Some people are looking to keep the poor people out of their neighborhoods. Some people want to prevent crime and think that giving out scraps will keep crime down. Some people want to keep people locked into generational poverty to ensure they’ll have a reliable vote. Some people are genuine about looking to assist the less fortunate. Then the very definition of a “basic floor” is in and of itself completely subjective. There’s no clear definition what that basic floor is – and it seems to me to be ever-expansive. And in today’s terms it seems to be predicated on what the most talented individuals in society are able to create.

    It is not businessment mentality to say, “I shouldn’t have to pay for public schools if I send my kid to a private school.” It is grotesque to form an impenetrable government monopoly on K-12 education, force families to support the monopoly by law, thereby restricting their access and ability to send their kids to the private school. It’s a forceful restriction on the will of the people and pursuit of happiness, particularly if the government supplied education is as decrepit as it is in some locales. Your argument is a strawman.

    You say, “This mentality ostracizes the rest of society, establishes boundaries around the individual rather than the community and rejects the idea that a society’s success depends on cooperation with others.” You do realize how easy turn about it is right? Look at Greece. What you espouse is the Greek model of governance. Where government should not run like a business. Where it has the endowed authority to accumulate massive sums of debt to create a “basic floor” for the people, regardless of the systems economic sustainability or the efficacy of the social programs. In the process of creating this system, the Greek people ostracized the rest of society. The rest of society being the industrialists, the ship builders, the bankers, and the richest of the nation that made Greece a functioning nation. Their entitlement mentalities about being paid a living wage, retiring young, getting boat loads of vacation time, working low hours, having free education, and free healthcare explicitly established boundaries around the individual within the recipient class, and rejected the notions of cooperation by creating a massive block of people who were essentially free riders. They ostracized and castigated the rich, who subsequently fled the country. The tax base eroded. Nobody filled in the gaps. They rejected their universal “free” public education, and now they have crashed into third world status – soon to be a sub-third world country due to the fact that their people are completely incapable of taking care of the basic needs that a modern country requires to sustain itself.

    In some respects you are right – a government should not be run like a business. But in another you are completely wrong because you totally ignore the realities of the business world that makes a government run. Especially a government run on debt. If you run a government without any regard to the realities of business on debt, you will eventually exhaust your creditors, and your nation will quickly devolve into Mugabenomics. And once you exhaust your creditors your precious little artificial “basic floor” no longer exists, and your nation devolves into depression until it learns from its inherent mistakes. And this is the problem with chronic trillion dollar deficits and American society. We are a nation of people who believe we are entitled to your “basic floor” at the expense of “that guy” who can afford to pay more. A guy who can pay his “fair share” that we get to determine on the pure basis that he has more money than us. If you think that this doesn’t establish boundaries around the individual as opposed to the community you’re out to lunch. The bottom line is that there are plenty of viable mutually exclusive alternatives for people within American society to pursue that creates a viable interdependent society based on mutual exchange– and instead of pursuing them, we choose to tax other people, we break down interdependence, and merely devolve into wrought dependence. A situation where we believe we are endowed with certain material things at the expense of someone else. This is abhorrent and reprehensible. And just as this mentality has been the end of Greece, Spain, Portugal, Italy, and Ireland, and just as it is sinking the ships of Belgium, France, the UK, and the entirety of Eastern Europe, it will be our end as well. For we are far more like these broken nations than we are like Norway or Denmark.

    Social welfare states can be just as individualistic as a Libertarian state, and Libertarian states can be just as social as Denmark. There is nothing social about the American social welfare state. There is nothing social about an EBT card or a check that comes in the mail once a month. It’s just raw redistribution. Social Security and Medicare are not examples of interdependence, they are now examples of entitlement. Benefits that we deserve at all costs simply because they were promised to us – regardless of their sustainability in the first place, or our ability to support what we demand now.

    Lastly, you say that if we want to reject our “responsibilities to our fellow man,” that we should, again, as tiresome as it is, “go live in a cave.” Well just exactly what are our responsibilities to our fellow man?

    • ok well first off i’m impressed at the length. at this point i think we’re speaking different languages regarding what a society is but let me try to pick out a few things:

      “Government does not provide the means for private prosperity. Its rightful place is to play referee and enable it to take place should the people choose to pursue it.” <- agreed, I don't understand where you got from my article that I was saying otherwise…the whole "incentives and constraints" deal is that refereeing

      "If people of sound mind and body obtained a useful education and useful skills they would have the integrity to respect the property of others while simultaneously caring for their own needs outside of the overbearing mothering of Leviathan." <- that's an extremely normative statement: "if people were as smart as me they'd think exactly like i do"

      "They exist as an albatross that offer nothing useful to the rest of society. They don’t exist as agents who engage in mutual exchange. They simply take." <- so let them starve?

      "What you are saying is that a majority feels this way, but then there is no analysis on why people feel this way" – so what? society doesn't have to be a 100% consensus and it doesn't have to coalesce around one particular 'why.' there is no community homogeneous enough to meet this standard for action

      "Well just exactly what are our responsibilities to our fellow man?" <- the whole social capital/expectation of returned favors that arise from the state of nature…

  2. Incentives and constraints is not refing the game. It’s rigging the game. Social Security and Medicare is rigging the game. Bailouts is rigging the game. Unemployment is rigging the game. Reffing the game is ensuring that Ohio can trade with Tennessee without Kentucky imposing massive tariffs on Ohio’s goods simply because they don’t like Ohio. Reffing the game is protecting property rights, protecting our security, and ensuring that one person does not physically impede our pursuit of happiness.

    Your second point is normative at all. It doesn’t involve me in any way shape or form. It’s a completely generalized statement pertaining to all people of able body and sound mind.

    In order to let someone starve, don’t they have to engage in a willful pursuit of starving themselves in a free society?

    My criticism was more on your use of language. You’re right that there is no 100% vote. In which case you shouldn’t use the term “society” and “we.” It’s simply inaccurate and isn’t even required for your argument.

    Nothing you pen in your piece has anything to do with the state of nature. It’s the antithesis of the state of the nature. Redistribution doesn’t exist in the state of nature, it’s a dog eat dog world. America as we know it, and Europe as we know it, isn’t predicated on mutual exchange. It’s predicated on a generally ignorant tyranny of the majority expropriating the wealth of someone else to them. It is a society without integrity or compass.

    • ok at this point i’m comfortable saying that all of what you just wrote is simply wrong; you have radically different definitions of social capital, collective action, willful and society which i reject. you also completely ignore my transition OUT of the state of nature.

  3. I welcome any criticism or description about why anything there is wrong. Do you understand the implicit problem with your argument the moment you conclude that social capital and collective action are subjective? Almost everything you discuss is subjective. So at what point does the majority, a government board, or a single individual have the right to determine these things in finite terms? IE: This is the check you will get for your SSI, this is what your unemployment insurance will be, this is the poverty line, this is the basic floor, these are your basic healthcare needs that we will provide, this is precisely what you owe society as a percentage of your earned income, this item deserves a tax credit, but this one doesn’t. This is not the description of an equal and just society. This is a society predicated on recipients, beneficiaries, benevolent benefactors, and providers. That is not a society predicated on mutual exchange where I do something for you that is valued at a certain amount, and you do something for me that is valued at a certain amount.

    I don’t have to ignore your transition out of nature, but you said we were talking about the state of nature. Do you disagree with what I described about you and I existing in the state of nature? For instance – would you let me starve given the fact that I had the ability to hunt and gather my own food and water while you risked health and safety to provide for me? If we presume that this is the state of nature, at what point do we turn into a society, and at what point does that type of self-serving edict become moral or ethical!? YOU WILL PROVIDE FOR ME BY MY MERE EXISTENCE!

    This the problem with the Elizabeth Warren social contract theory. It IGNORES the realities of cooperation and mutual exchange at the most basic level of civilization. It examines society as it exists now, views it through a purely static lens, ignores the realities of what mutual exchange is, fundamentally ignores what currency is and what it represents, and sets about the idea that: I am – therefore I deserve this “basic floor” of stuff. Regardless of the real value of input in society or the harm it may end up causing.

    So, if you want to talk about transitions from nature into civilization and modern society, please explain to me at what point it becomes morally and ethically sound for one person to piggyback off of the labor of the majority, or the majority to piggyback off of the labors of the few.

    What is your opinion on my stance that if there are viable alternatives to provide for yourself that you have no right to expropriate the wealth of another man/woman? If you can go to C-Tech in Newark with minimal financial investment, and get a job as a skilled CNC machinist and earn compensation that far exceeds the “minimal standards” we subjectively define, then why is it justifiable for a person to NOT pursue that course, NOT fill in a demand that society wants, but instead withdraw funds from greater society? While, by the way, completely ignoring the fact that it’s bankrupting our country in the process.

    Please, Jon, I am enjoying our conversation. There are stones left unturned. We can continue to discuss this.

    • society is the will of the people. we elect representatives to make policy that reflects the will of the people and if the will of the people isn’t being represented then we elect new folks. to say that in order to use the term ‘society’ you need 100% consensus is absurd. of course where the lines are drawn is subjective, as the will of the people is going to vary from society to society and from election to election. but the right of the government to govern within the constraints that the people put it under (constitution/subsequent court interpretation) is not subjective.

      we were talking about the state of nature…and how BAD it is, hence the need to escape it. as i said in the article, we find it advantageous to engage in collective action, but we need governments to ensure that that collective action is reciprocal rather than one-way. in the state of nature i let you starve because i have no incentive to help you without the guarantee that at some point in the future you will help me in return. but in a society with a government i’m willing to help you because there are consequences for walking away and failing to return my favor, i.e. i have an incentive to generate social capital. without a society that can, to a certain degree, impose the will of the people this falls apart.

      “What is your opinion on my stance that if there are viable alternatives to provide for yourself that you have no right to expropriate the wealth of another man/woman? If you can go to C-Tech in Newark with minimal financial investment, and get a job as a skilled CNC machinist and earn compensation that far exceeds the “minimal standards” we subjectively define, then why is it justifiable for a person to NOT pursue that course, NOT fill in a demand that society wants, but instead withdraw funds from greater society? While, by the way, completely ignoring the fact that it’s bankrupting our country in the process.”

      i think it’d be great if everyone did that, but it’s pretty idealistic. but on your more general point of welfare states bankrupting our country because poor people would rather collect food stamps than have a job:

      75% of families that receive food stamps also receive a paycheck
      many of the social welfare programs that are in place are things like childcare for single mothers SO THEY CAN GO WORK
      subtracting social security and medicare (unless you think that the elderly should be finding jobs as skilled machinists?), welfare spending accounts for 4.4% of the annual budget – ‘lazy poor people’ don’t drive the debt.

      i’m enjoying this too; i’m pretty amazed at how much time you have to write all of this out.

  4. If the right of the government to govern within the constraints that the people put it under (constitution/subsequent court interpretation) is not subjective, then what happens if the clear language of the constitution prohibits our elect representatives from making policy that reflects the will of the people? Furthermore, at what point does it become salient governance for nine judges, who are also citizens of a nation, to throw out the constitution via judicial precedent?

    Our government was formed specifically to prevent this sort of thing. Our government was formed to prevent tyranny of the majority and insulated individual rights. Our government was specifically formed to prevent a fickle populous from running roughshod over itself or classifying citizens as they saw fit. It was formed to limit the breadth and force of the federal government. It was not written in a manner or intent for judges to determine that government can really do whatever the hell they want by altering the meaning and intent of words and language. Even when you boil it down to the substance of, “government is for the people,” there was IMMENSE debate at the original constitutional convention about this. Why? Because by granting the constitution to the PEOPLE instead of the STATES many felt that this would inevitably result in a massive federal government that would subsume the states and render the Executive with the powers of a king. Read the Federalist Papers in their entirety and think about how prescient this foresight was.

    I don’t view the purpose of government as ensuring that collective action is reciprocal. I believe that I should have the right to do is little as I want. Or as much as I want for that matter. I believe that I have the right to be Amish, or go live in that cave. I also believe I have the right to be the next Steve Jobs and that I should be able to do so unmolested by the will of the majority that has the target planted firmly on my products and my wealth. And I don’t believe that any other individual owes me anything in the process. What’s more is that the system you are advocating simply isn’t reciprocating action. The people inhabiting Warsaw, Ohio are simply not contributing equally to society as the executives of Apple Corporation.

    In society are you willing to help me because it will generate social capital? Or are you helping me because you fear the force of law? If social capital is the purpose, then we wouldn’t need law. Again, laws are put in place specifically because people don’t act as we’d like them to. I’ll be honest, I have zero interest in developing social capital by paying taxes to government. In fact, I don’t think this builds any social capital. You build social capital by doing things out of free will, not by the force of government. One is genuine, one is at the tip of a spear.

    I’m not suggesting that it’s realistic for people to do that. I’m merely saying that it’s completely unreasonable, unethical, and immoral to tax another man when you can take another path to care for you and your family. If these mutually exclusive options exist, and if society really wants these skills, aren’t you, as a member who’s supposed to reciprocate, exchange on a mutual basis, and build social capital, endowed with the responsibility to take the path of independence instead of embracing the one of dependence simply because you want to and happen to have won the sperm lottery and live in America?

    How can you simply wipe away Social Security and Medicare? They are huge aspects contributing to our nation being run into the ground by unsustainable redistribution schemes that we’ve erected for ourselves via the tyranny of the majority. Why, we’re ENDOWED with those entitlements! I don’t think that people old people should become machinists, but I do think that people should save for their own retirements and no rely on such systems. This dumbs down society, creates dependence, establishes unreasonable static expectations in a dynamic world, runs on the emotions of the people, and creates an us versus them mentality where those not on the program are expected by those that are to be providers! I can give you a token and say that it was salient in the 1930s when education was not universally available. Now it is. It’s been that way since the 1950s. If you grew up in the 1950s and beyond you had your chance to get your education and pick an in demand career. That is your chance at social welfare. Once you become adult you should be an adult. You should have no need for social security or medicare. The fundamental expectations that have been established by these programs are downright dangerous in the way that the Greek entitlements were dangerous. It’s not sustainable.

    Also, if you take into account all redistributive social welfare we spend roughly 20% of our GDP on it. That’s incredibly substantial.

    • none of that invalidates my argument. i don’t even disagree with most of it. at this point you’re arguing about goalposts, not whether the goals should exist.

      it’s one thing to argue about whether or not social security is a good idea, it’s another thing altogether to argue about whether or not it’s legal. saying that judicial precedent is illegal misunderstands the role of the court in the first place.

  5. What does the constitution say about judicial precedent? That judges can lay down judicial precedent by setting a judicial precedent? You do realize the courts went about sixty some years without declaring a single federal law to be unconstitutional right? A constitutional decision should not be predicated on judicial precedent. It should be predicated on the constitution itself, with past cases acting only as a minor guide, if necessary.

    Social security is a hilarious thing to talk about when it comes to legality. When originally proposed the people didn’t like the idea of raw wealth redistribution. FDR and his cronies assuaged the fears of the fickle people by telling them that it wasn’t a tax – it was old age insurance. A program where you would put in your money, and get your money back. But then, when it came time to argue in court, FDR and his cronies argued that it wasn’t old age insurance at all, but rather, a tax! Being as they argued that the scheme was a tax, it was decided to be constitutional – AFTER the threat of court packing mind you.

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