An MBA buddy and I have been chatting a lot about the lessons to be learned from the Subprime Mortgage and Ensuing Financial Disaster. His latest posting came from the venerable Wall Street Journal where John Steele Gordon has a one-sided diatribe on Why Government Can’t Run a Business . The article counts 7 ways in which Government missteps in trying to run a business and then concludes that the Obama Administration is going down the wrong path by trying to run a the US Auto Companies, start a new Health Insurance business and run the US Banking industry. No hyperbole at all here by Mr. Gordon.
Then the article cites the 1913 failure of government to run a steel business for supplying Navy armour plating (no reference found nor could I find any on Google nor Wikipedia) . However, in process of searching for confirming evidence I did find the following article about child labor and how US business only gave up the practice in 1938.
And this is typical implied and explicit commentary by Mr. Gordon throughout his article – all government is horrid at running anything. “Take Medicare … it is a bureaucracy-beclotted nightmare, riven with waste and fraud…“. However just a cursory glance of Google links found this John Hopkins University article to be typical:
“I recently spent a half-day in a meeting discussing a number of issues regarding Medicare. Most of us on the provider side of the street view Medicare as this multiheaded bureaucracy with more pages of regulations than the Internal Revenue Service’s tax code. However, I came away from the meeting with some (to me at least) shocking revelations:
- Medicare beneficiaries are overwhelmingly satisfied with their Medicare coverage, except for the absence of prescription drug benefits;
The administrative costs of Medicare are lower than any other large health plan.
In fact, Medicare is very efficient by any objective means:
According to the Urban Institute’s Marilyn Moon, who testified before the Senate Committee on Aging, Medicare expenditures between 1970 and 2000 grew more slowly than those of the private sector. Initially, from 1965 through the 1980s, Medicare and private insurance costs doubled in tandem. Then Medicare tightened up, and per capita expenditures grew more slowly than private insurance, creating a significant gap. In the 1990s, private insurers got more serious about controlling their costs, and the gap narrowed. But by 2000, Medicare per capita expenditures remained significantly lower than the private sector.”
Now this was written in 2003. Later that year, a Republican Congress limited the role of both Medicare and Medicaid from negotiating better drug prices.
This gets to the heart of the issue of good governance and administration. Government can deliver good services when not encumbered by special interests and lobbyists working for their Business clients to establish non-competitive processes using the relative obscurity of complex legislative processes to help disguise their non-competitive, market debilitating efforts. Mr. Gordon is utterly silent on these ever-present and constantly growing influence of Business sponsored lobby groups who work to the curtailments and corruption of market mechanisms to control goverment spending.
To be sure lawmakers, needing re-election funding and support, are complicit in the process. But to exonerate Business by complete omission of their critical role – It bespeaks of the nature of Mr. Gordon’s diatribe -n, di·a·tribe