Topic: Political Philosophy

Political Governance vs. Corporate Governance

A New York Times columnist says it may be a mistake to try “to make government run more like a business.” Citing research by Matthias Benz and Bruno S. Frey, summarized by Larry Yu, the Times says that government works better than the private sector:

The authority over government is split among the branches of government. In business, Mr. Yu writes, “even if directors have stepped up their governance in recent years, institutional norms still stack the deck in favor of C.E.O.’s.”

And while chief executives and directors can serve forever, politicians need to face re-election regularly.

When it comes to corporate governance, maybe there is something to be learned from governments.

Well, let’s see. According to a Booz Allen study, dismissals of corporate CEOs have risen sharply in the past decade. Among the world’s 2,500 largest public companies, “CEOs are as likely to leave prematurely as to retire normally. Continuing a pattern from 2004, in 2005 nearly half of all CEO departures were due to poor performance or mergers.”

Meanwhile, almost no members of Congress are removed from office involuntarily. As this chart shows, House reelection rates are approaching 100 percent.

Does that mean that the U.S. government is performing so much better than the average company that there’s no need for change? It seems unlikely that even the Times columnist would make that claim. No, if you read the links above from Booz Allen and the Washington Monthly, you can see some of the differences between politics and business: Business is competitive, to begin with. There are 2,500 large companies in the survey, all competing with one another and with millions of upstart challengers. If Sears and K-Mart don’t stay on their toes, Target and Wal-Mart will take their business. Wikipedia lists pages and pages of defunct companies, all of which failed to satisfy customers. Executives lost their jobs, and shareholders lost their money, and those realities are a powerful incentive to executives and shareholders of other companies. Corporate boards are getting more aggressive, and different companies are testing different rules for governance – outsider CEOs, separating the jobs of CEO and chairman, acquisitions, divestitures, going public, going private – in an attempt to find the rules that will produce the greatest customer satisfaction and thus the greatest profits.

Contrast that with government. Failed bureaucrats are almost never fired; indeed, the standard response to bureaucratic failure is to appropriate more money for the agency. Gerrymandering, campaign finance restrictions, and taxpayer-funded constituent service and propaganda make it almost impossible for a member of Congress to be turned out of office. People spend other people’s money far less efficiently than their own.

I think the Times got it backwards. It would be more appropriate to say, “When it comes to government, maybe there is something to be learned from corporate governance” – such as the value of decentralization and competition, retirement ages or term limits, and real penalties for poor performance. Since those factors are unlikely to occur in political systems, the best lesson is to keep as much of life as possible in the private sector.

Michael Gerson Thinks You Are “Morally Empty”

If you like the work of the Cato Institute, that is.  “Morally empty” is how Bush’s former head speechwriter described the “small-government” aspect of small-government conservatism in this interview with Foreign Policy magazine:

It is superficially attractive. But in the long run, it’s politically self-destructive because [candidates] end up talking about the size of government while others are talking about education, healthcare, and serious public concerns. It’s morally empty because, from my tradition and political philosophy, any political movement has to have a vision of social justice and the common good in order to appeal [to people]. And government can play a part in that. I’ve seen over the last five years that it clearly can.

And in case you had caught your breath after almost six years of Bush’s foreign policy, here he is on the question “Which of the president’s speeches do you think best expresses his worldview?”

Probably the second inaugural, which he wanted to be the democracy speech—the culmination of a series of doctrines and approaches that we had defined in the previous two to three years. It talks very frankly about the necessity of democratic transformation for the future of American security. Particularly in the Middle East, the cycle of tyranny and radicalism has produced an unsustainable situation. That dynamic has to be changed, and democracy is the only way to do it. Some of it is working with authoritarian governments that may go down the path of reform, some of it is standing up for dissidents and taking the side of the oppressed, and some of it is confronting outlaw regimes that threaten the international order. This is, in many ways, the clearest crystallization of his foreign policy.

It’d be comforting to think they’ve learned their lesson, but they clearly haven’t.  In case your outrage quotient isn’t yet filled, you can read this interview at Christianity Today.  Gerson on the Democratic Party:

I would love to see the Democratic Party return to a tradition of social justice that was found in people like William Jennings Bryan. During that period, many if not most politically engaged evangelicals were in the Democratic Party, because it was a party oriented toward justice.

I don’t see much of that now in the Democratic Party. Instead of an emphasis on the weak and suffering, there’s so much emphasis on autonomy and choice. And so the party of William Jennings Bryan, the party of Franklin Roosevelt, I’m not sure it exists any more. But it would be good if it did.

Gerson on Republicans:

There are some members of the Republican Party who…have a much more narrow view of government’s role. It would be a shame if conservatism were to return to a much more narrow and libertarian and nativist approach.

Your Republican Party, ladies and gentlemen.  Bomb-slash-democratize the Arabs, accomplish “social justice,” cure AIDS in Africa, and ban gay marriage.  There’s going to be a lot of work left for the federal government, apparently, even after Bush leaves office.

Exit Against Predation

Those who have strong feelings about how wealth ought to be distributed, and who think that government policy ought to be more redistributive, often fall victim to the fantasy that their golden geese will not just wander off into another jurisdiction.

No doubt the members of the Chicago City Council are nonplussed that their attempt to squeeze large retailers has led Wal-Mart, Lowes, and Target to put their plans for new Chicago stores (and new Chicago jobs) on hold. I bet a million billion dollars that at least a few council members have lamented that they can’t legally force the big boxes to open stores within Chicago city limits. They’re learning the bitter lesson that the right of exit is a powerful check on politicians who can’t keep their hands out of other people’s pockets.

Worried about inequality? Why not really sock it to the rich? Because the rich — or their money at any rate — will just leave town. Even champions of the poor, like Bono, head for the greenest pastures:

Irish rock band U2 has transferred part of its multi-million-euro business empire out of Ireland due to changes in tax laws there, a British newspaper has said.

In a report from Dublin, the Daily Telegraph said Tuesday the band had moved part of its publishing company, U2 Limited, to the same Dutch finance house used by the Rolling Stones because royalties are virtually tax-free in the Netherlands.

[…]
According to the Daily Telegraph, the band — whose frontman Bono campaigns against global poverty — made the move in response to Ireland imposing a 250,000-euro (170,000-pound, 321,000-dollar) cap on tax-free incomes.

I bet Bono thinks he knows better than politicians in Dublin how to use his money. And I bet Bono’s right.

A recent Washington Post article details how France is bleeding millionaires thanks to outrageously punitive tax rates:

[High-tech millionaire Denis] Payre, who moved his family to neighboring Belgium eight years ago, is today part of a sizable community of rich expatriate French driven out by the world’s highest tax bills on wealthy citizens. The exodus continues: On average, at least one millionaire leaves France every day to take up residence in more wealth-friendly nations, according to a government study.

Now, I bet that more than a few of those fleet-footed millionaires were in favor of those high tax rates, illustrating that the gap between ideology and actual consequences can open up even within a single soul.

Fear Is the Health of the State

James Fallows has an important–and brave–piece in the new Atlantic Monthly. Important because it reports the underreported good news in the war on terror: we’re winning. Indeed, after interviewing some 60 leading terrorism analysts while researching the article, Fallows has concluded that we’ve won. And the article is brave because one subway bombing while this issue’s on the stands and Fallows’s name might become the punchline to a thousand bitter jokes about pollyannaish predictions.

But if and when another attack happens, it won’t disprove Fallows’s point: we do not now, if we ever did, face an existential threat from the likes of Al Qaeda. As he puts it, “terrorists, through their own efforts, can damage, but not destroy us. Their real destructive power lies in what they can provoke us to do.” If fear, not reason, governs our reaction to terrorism, then Al Qaeda can provoke us into launching unnecessary wars and abandoning the constitutional protections we cherish. If we proclaim this conflict World War III (or IV–the hawks appear divided on this point, if on little else), then certain consequences follow for the American constitutional order. Which is one reason why Fallows urges the abandonment of the war metaphor.

Of course, Al Qaeda is a threat that should be taken very seriously–in some ways, more seriously than the adminstration has in the past. But for nearly five years, too much of the public debate over foreign threats has been dominated by breathless hysteria. The soundbite “the Constitution is not a suicide pact” has become the tell-it-to-the-hand of constitutional debate, as if it is a given that unless we gut the document, we will be committing national suicide. Peace and liberty don’t do well in an atmosphere of panic. Fallows’s calm, sober optimism serves as a useful corrective.

Libertarian Hedges

A headline over a Washington Post editorial reads:

Hands Off Hedge Funds

Sometimes libertarians deserve to win an argument.

Gee, thanks. I’m glad libertarian arguments against over-regulation made sense to the editorial writer in this case. But I’m disappointed in the suggestion that this is a rare occasion.

Indeed, I’ll bet the editorial writer agrees with most of the basic ideas that libertarians advocate: private property, markets, the rule of law, limited constitutional government, religious toleration, equality under the law, a society based on merit and contract not status, free speech, free trade, individual rights, peace.

In the West we live in a liberal world, and in the United States we call liberalism “libertarianism.” (When Americans say “liberalism,” they mean the welfare state.) The Post’s disagreements with libertarianism are really less rare than the headline suggests; they involve how often and how much national policy should deviate from the basic principles we already agree on.

Cross-posted from Comment is free.

Not as Easy as Right and Wrong

Over at The American Prospect, Matthew Yglesias takes issue with the assertion I made yesterday that if Kansas is ever going to have peace over creationism and evolution, parents must be given the right to take their public education dollars and choose their children’s schools. Instead of forcing parents to support – and constantly fight to control – one school system, why not let them choose the institutions they want?

Yglesias argues that whether it’s parents or government that decides what children will be taught, kids will have no choice in the matter. The question to him, then, is “who is likely to teach most children the right stuff?” If it’s government, then there’s no need for choice.

That sounds reasonable enough. That is, until you consider how incredibly hard it often is to know, and to get people to agree on, what constitutes “the right stuff.” Creationists, after all, are just as sure that they are right about Darwin as evolutionists think themselves to be.

Of course, in education, Darwin is just the beginning: Is phonics-based instruction the right or wrong way to teach reading? Should American history be taught in a “traditional” way that focuses on the nation’s great achievements, or is it right to focus on the country’s flaws? What amount of time should students spend studying fine art instead of, say, physics?  Is it wrong for a student newspaper to run an article critical of the school’s principal? And so on…

Clearly, when it comes to countless disputes in education, what is truly right or truly wrong is very difficult to know. With that in mind, we must answer the question: Is it better that government impose one idea of what’s right on all children, or that parents be able to seek freely what they think is right for their own kids?

At the risk of contradicting myself, I think the latter is the obvious right answer.

Republicans for Big Brother

The Cato Institute has noted for some time that conservatives and Republicans have abandoned their limited-government principles when it comes to health policy.  Examples can be found here, here, here, here, and here

The New America Foundation just made our job a little easier, by producing a paper titled, “Growing Support for Shared Responsibility in Health Care.”  In this context, “shared responsibility” means allowing the government to force all Americans to purchase health insurance – a power the Left has craved but no government had dared assume until Massachusetts did so this year.

The paper helpfully compiles a list of comments that Republicans and Democrats have made in support of this new expansion of government power.  The Republicans included:

  • Massachusetts Gov. Mitt Romney (no surpise there)
  • Former Bush HHS Secretary Tommy Thompson
  • California Gov. Arnold Schwarzenegger
  • Former Bush Treasury Secretary Paul O’Neill
  • Former House Speaker Newt Gingrich

One might add to that list the Heritage Foundation (whose health policy scholars wrote the Massachusetts mandate) and Ronald Bailey of Reason magazine. 

Next to those, Schwarzenegger is probably the biggest disappointment, having once bragged that Milton & Rose Friedman’s PBS series Free to Choosehas changed my life,” and that “Being free to choose for me means being free to make your own decisions, free to live your own life, pursue your own goals…without the government breathing down on your neck or standing on your shoes.”  Now that he’s governor, “being free to choose” presumably means being free to choose for you.

This new expansion of state power would be less frightening if it delivered more affordable or higher-quality health care.  But as Mike Tanner demonstrates in two papers on the idea (here and here), it will do neither of those things. 

Unfortunately, there has been too little debate within the limited-government camp over this idea.  This is in part because Heritage Foundation scholars have repeatedly declined to debate Cato scholars or other free-market critics of their proposal.

Until we’re able to have that fuller debate, here’s a helpful algorithm for judging this and other health care proposals:

  1. Does it limit government power?
  2. If not, move on to the next proposal.