The Government Industry


Each Monday I post the next section of my 2001 book, which was originally called (by the publisher) Hoover’s Vision but which I have now retitled The Art of Enterprise. I have posted over half of it already; click on the “Monday” column to see all the prior sections. The entire book can be downloaded as a PDF for $10 at






Of course, the single largest industry in the United States is our government. It’s also the last of the big industries to be streamlined. The opportunities for better resource management, for innovation, and for clear-visioned leadership in government are enormous.
It’s easy to forget that government is also among our oldest industries. Visit Washington, D.C., and you will see symbols of traditions and practices that have been with us for over 200 years. While many of these traditions are great, others hold us back.
Recently, I heard this on the TV news: “The Post Office is asking for a rate increase of one cent. The Independent Postal Rate Commission must approve any increase in postal rates, and that process could take months.” This in an era in which things move fast. Even giants Microsoft and AOL can turn on a dime – or at least a quarter. But not the government – not even for a penny.
There are functions only government can provide, such as national defense. But in many other cases, the free market can do a better job. For a hundred years, our train stations and railroad lines were built and run by private enterprise. But when we took to the air, we evolved a system of publicly-owned airports. At first, it looked like a great deal for the airlines – the railroads were mighty jealous. But the net result has been airports that are not consumer-friendly and that do not adjust flexibly to changing times. Today, BAA from England and other for-profit companies are gradually taking over the management of our airports. Better food, better shops, and more attractive and useful amenities are beginning to show up. Many other government industries have the potential for privatization.
Resource allocation and attracting talent. We’ve all heard stories about government waste, from the Pentagon paying $800 for a toilet seat to Medicare paying ten bucks for an aspirin tablet. Some of the stories may be exaggerated, but many have more than a grain of truth.
On the other hand, we sometimes forget that it is just as great a misallocation of resources to spend too little as it is to spend too much. Enterprises that produce great products but are too cheap to advertise them soon disappear. Hotels with torn sheets go broke. Companies with antiquated systems fail. Businesses that don’t pay enough to attract the best salespeople lose out to the competition. But in government businesses, many of these rules don’t apply.
From an entrepreneurial perspective, I believe that one of our greatest mistakes is our refusal to pay senior government managers market rates. Any executive who runs a multibillion-dollar US corporation today is paid at least $500,000 per year – more often a million dollars or more. These are some of the hardest jobs in the world – the pressures are intense, the hours are long. The risks can be great; in today’s world, you can lose your job in a heartbeat. These are not greedy people. They are people who work hard, who want to send their kids to college. Once someone has selected management or leadership as a career, they adjust to these standards of living. By comparison, federal department heads, some of whom manage hundreds of thousands of employees, earn a fraction of that amount, and even the President is seriously underpaid relative to his (or her) “peers.” 
Today, people with the needed management and leadership qualifications are largely excluded from government service. Only those who have already made a fortune in business, or have inherited wealth like a Kennedy, a DuPont, or a Rockefeller, can afford to spend a lifetime in government.
If we paid competitively, I believe we could attract many more people of high quality to public office. Questions about gifts, favors, junkets, and campaign contributions would subside if we paid people market rates. Great mayors and legislators might stay mayors and legislators rather than seeing their jobs as stepping stones to the next office (or to better paychecks as lawyers or lobbyists).
Innovation. Above all, government needs to become more creative, experimental, and customer-oriented. It’s beginning to happen. Anyone who travels overseas has noticed improvements in the customs service under the Clinton-Gore administration. The same administration initiated many other efforts to improve and streamline government, and Al Gore made “reinventing government” one of his pet projects. Former Mayor Stephen Goldsmith of Indianapolis, a Republican, and Mayor John Norquist of Milwaukee, a Democrat, have been noted innovators, and both have written books about creative city management. But there’s clearly much, much more to be done.
Here are some thought-starters about government. I’m not necessarily proposing answers, but merely asking questions that wiser heads ought to be studying. Surely you can add to this list.
¨       What is the best way to reduce congestion and pollution from urban traffic jams? Light rail? Heavy rail (including subways)? Staggered work hours? Telecommuting? What if some of the money currently invested in mass transit and urban highways instead went into incentives to workers and/or employers to start work at 7 a.m. or 10 a.m.? 
¨       Caught in a snowstorm at the Toronto airport, I found that there were no taxicabs in sight. The same thing happens at the big New York airports when storms hit. Everyone blames the taxi drivers for staying home in bad weather. But could it be because the pricing is fixed by law, leaving no flexibility for cab companies to raise prices when supply is low or when the work is harder – or to lower them on nice days when there are too many cabs and too few customers?
¨       What is the best way to price postal services? Is selling batches of stamps whose price periodically becomes obsolete really the only option? What about paying an annual subscription for my mailbox? Could the subscription fee be higher if I live in a remote place?
¨       The US Government Printing Office publishes a huge range of interesting and useful books that are rarely available at your local bookstore or your online bookseller. The US Geological Survey produces the best and most detailed maps in America, but that you cannot find in many stores. Why not sell these publications commercially? Wouldn’t most consumers be willing to pay a slightly higher price (to cover distribution margins) for government publications in exchange for the convenience of being able to find them in stores?
¨       The US Government is the largest and most complex enterprise on earth. As prescribed in the Constitution, it is managed by a president and vice president. But we do not live in the world of 1789. Wouldn’t it make sense to have more than one vice president? For example, why not one vice president for domestic affairs and one for foreign affairs? Big corporations review their top management structure every few years. Shouldn’t we at least take a hard look at the cabinet every decade or so? (While we occasionally “tweak” the cabinet, most Presidents run the government through an ad hoc structure of aides, advisors, and chiefs of staff.)
¨       We elect the large lower house of our national legislature every two years. As a result, congressional representatives have to gear up for fundraising and arduous re-election campaigns every two years. Only two other nations on earth elect members of their national legislature this often – Libya and Yemen. Every other nation gives their legislators at least three years before pushing them through another election cycle. Is it time we took another look at this?
¨       Isn’t there room for differentiation among our state and local governments? What if one state characterized itself as a libertarian state with few limitations on behavior? (I think it might be called “Nevada.”) At the same time, another could offer up an American version of Scandinavian social democracy. (It might be called “Minnesota.”) Giving consumers more choices is generally a good thing.
¨       Is there room for mergers, or at least alliances, among our governments? What if Arkansas and Mississippi merged their drivers’ license programs, their accounting departments, or their voting machinery purchases?
¨       What can we learn from national and local governments abroad? What can we learn from traffic control systems in Singapore and schools in the Netherlands? How does Norway handle election machinery? What can we learn from the Japanese high-speed rail system?
¨       On a global level, is anyone taking a look at the costs of national sovereignty? Traveling the globe, I can’t help noticing that Slovenia has embassies in hundreds of nations around the world – as does every other nation, even the poorest nations of Africa. How much does this cost? Could these nations spend that money in ways that would better serve their citizens? Is there a better way to achieve the same end? Similarly, does every nation need its own unique currency and a national airline?
You can see the overall thrust of these questions. Each governmental enterprise in our country, and indeed the world, needs to ask, Are we doing our job the best we can? Are we wasting resources? Are we observing and applying the best entrepreneurial thinking? Does the free market system offer useful insights into the challenges we face? 
The big news of the early twenty-first century will be the spread of this kind of thinking to all of our non-profit enterprises – our hospitals, our schools, our trade associations, our religious institutions, and, yes, even our governments.



Reading More About Government

The best book comparing the governments of the world and their structure is Political Systems of the World by J. Denis Derbyshire and Ian Derbyshire. And a three-volume set puts it all in perspective: The History of Government by S. E. Finer. The Retreat of the State: The Diffusion of Power in the World Economy by Susan Strange is a great look at how power is shifting away from governments. What Comes Next: The End of Big Government – and the New Paradigm Ahead by James P. Pinkerton – whether you agree with him or not, he will make you think. Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector by David Osborne and Ted Gaebler is another very good book. For more about city government, I recommend The Twenty-first Century City: Resurrecting Urban America by Stephen Goldsmith (the innovative Republican former Mayor of Indianapolis) and The Wealth of Cities: Revitalizing the Centers of American Life by John O. Norquist (the Democratic mayor of Milwaukee). Laws of the Landscape: How Policies Shape Cities in Europe and America by Pietro S. Nivola – this fellow will really make you rethink the common wisdom. More out of the box thinking about city policies by a number of authors in The Millenial City: A New Urban Paradigm for 21st-Century America, edited and with an introduction by Myron Magnet.