In the latest example of China'stransition from authoritarian managementto authoritarian managementby specialists with businesscredentials, Beijing plans to restructureits major government ministries.The reforms passed by the NationalPeople's Congress will attempt to cutcosts and increase efficiency bycreating five "super ministries" ofindustry and information, transport,environmental protection, humanresources, and housing, whilestreamlining existing structures.
Some of these changes might besensible, but they miss an essentialbusiness lesson: that organisationsget better results when individualsare held accountable for deliveringdefined products and punished andrewarded accordingly. However wellone organises government ministries,they're still government ministries,and ministries are always betterat taking control of processes thanresponsibility for outcomes.
As the economist William Easterlyexplained recently, international developmentaid by governments generallydoesn't work, because no one iscredited when it achieves its objectivesand, more importantly, no oneis blamed when it doesn't.
Free markets encourage the creationof firms that specialise in providingparticular goods and services.A firm lives and dies by its ability toserve the needs of consumers, whocan always take their business elsewhere.By contrast, governments andinternational institutions like the UNcan set lofty goals, like ending poverty,but they are unrealistic, largely becausegovernments use other people'smoney, seldom weigh costs andbenefits, or think in terms of tradeoffs.Nor are they ever held accountable;they're never forced to deliver.
Professor Easterly satirised theUN's Millennium DevelopmentGoals. These, he said, had to co-ordinate52 international donor agenciesfeeding aid to 97 government bureaucraciesin the interest of meeting48 different development targets —and no one was responsible for any ofthem. Well, that should be easy, right?
So, what exactly are the mainland'snew ministries supposed toaccomplish for its people? In the US,the Department of Labour compilesand publishes employment statistics,but it can't actually make a dentin the unemployment figures. Howevermuch the idea of an economic"stimulus package" may sound appealing,the government can't simplycreate half a million jobs with a onetimetax rebate. (If it could, shouldn'tit do that each and every day?)
A case can also be made that consolidatingrelated government functionsinto a smaller number of largerministries decreases individual accountability,and thus the effectivenessof the agency, even further. BeforeSeptember 11, 2001, one mighthave expected the director of centralintelligence to be sacked in the eventof a major attack on American soil.That didn't happen but, now, in theera of the all-encompassing Departmentof Homeland Security, it's noteven clear who's supposed to go.
The private sector organises activitiesa lot more efficiently. Take AppleComputer, where the vice-presidentof the iPod division has one objective:to sell as many of the company's ubiquitousMP3 players as possible tomaximise profits. In 2004, he dramaticallyincreased iPod sales, and receivedover US$26 million in stockoptions as a reward.
Central governments, of course,aren't trying to sell iPods, but they aretrying to make a palpable differencein the lives of the people theyrepresent. They do better when theyfocus their resources on accomplishinglimited objectives, and allowlocal governments and privateorganisations to do everything else.
What qualifications must the newheads of the ministries have? Whatexactly are they supposed to provide?And under what circumstancesshould they be fired? A business is abusiness. No government — no matterhow well-structured its ministries,how well-educated its ministers, andhow well-intentioned its policies —can be run like one.