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What Role Government?

By - November 04, 2011

(image) As I begin to dig into the work of my next book, I’ve found myself thinking about politics and government far more than I anticipated. (For initial thoughts and stats, see Government By Numbers: Some Interesting Insights).  While the body politic was always going to be one of the main pillars of the book, I didn’t expect it to push itself to the foreground so quickly. Certainly the Occupy Wall St. movement is partially responsible, but there’s more going on than that.

Well before #ows became shorthand for class disparity in the United States, I began to formulate a hypothesis on the role of government in our lives. (I focus on the US for this exercise, as I am writing from my own experience. I’d be very interested in responses from those living in other countries).

The headline: Over the past five or six decades, we’ve slowly but surely transitioned several core responsibilities of our common lives from government to the private sector. Some shifts are still in early stages, others are nearly complete. But I’m not sure that we have truly considered, as a society, the implications of this movement, which seem significant to me. I’m no political scientist, but the net net of all this seems to be that we’re trusting private corporations to do what, for a long, long time, we considered was work entrusted to the common good. In short, we’ve put a great deal of our public trust into a system that, for all the good it’s done (and it’s done quite a lot), is driven by one core motivation: the pursuit of profit.

A corollary to this hypothesis is that this shift has been made – and possibly engendered – by the ever increasing role of digitized information as the central driver of our society. But that’s probably another post.

Now before you start calling  me an aging, anti-corporate hippie, remember that I’ve started several companies, consider myself a free market capitalist, and I’ve done pretty well so far. I’m simply pointing something out here, not making any judgements (at least, not yet).

So let’s consider some key areas:

Identity. We are increasingly going to the Web/Interent as the platform for our lives. There, our identity is not managed by the government. It’s managed – in the majority – by Facebook. When we buy things, our identity is managed by PayPal, Amazon, and Amex/Visa/Mastercard, not to mention a raft of pretenders to our identity throne, including Facebook, Google, and startups like Square. All of these are private corporations. None of them ask us for our government issued identity cards before allowing us to make a purchase. Some do ask for our SSN, of course. But online, the “government layer” is melting into the background of our identity – rather like DOS melted into the background of Windows 3. I expect this to be the source of some serious conflict in the coming decade(s).

Control. It used to be the only entity that was legally allowed to track citizens on a regular basis was law enforcement – agents of our government. Now, of course, we happily leave digital breadcrumbs everywhere, and private corporations, driven by profit, are far more advanced than the government at profiling and tracking us. Again, I expect this fact to be a source of conflict in the future.

Delivery/Communication. For most of the past couple of centuries, you’d use a government agency if you wanted to get something important – either information, goods, or money – from one place to another in our country. That agency was called the United States Postal Service, and it worked really, really well, considering all it had to do. Now, the Postal Service is broke, and we use  UPS or FedEx for physical goods, and the Internet for information. While the government built the infrastructure for all these companies (airports, roads and Interstate highways, DARPAnet, commonly owned airwaves), it has now receded DOS-like into the background, and we now entrust the function of delivery to private corporations driven by profit.

Investment. Do any of you remember when your grandparents would give you a government bond as a birthday gift? Or when people actually believed that they could retire on the government-mandated benefits of Social Security? I do. I have two parents who are drawing on those programs right now. But as the economy has turned to one driven by information and financialization, we’ve entrusted our retirement and our investment to private corporations as well.

Education. Once almost entirely the realm of the government, we’ve watched our public education system crumble, and we’re still not really sure what to replace it with. However, one could reasonably argue that private companies will take this over in due time. Some – like Edison and Phoenix – are already well on the way.

Healthcare. The US has always shied from government-run healthcare, and some might say “Obamacare” is proof we’re moving in the opposite direction from the other trends I’ve outlined. But I’m not so sure. I have a gut feeling the numbers – in terms of Medicare etc. – may prove something different, and as I understand it, the recent legislation was, in the main, about regulating the private industry, not creating a government alternative. I have a lot more to learn here.

Security. This is the one area of government that we all seem to agree should stay in government hands. However, even this realm has been increasingly privatized – from private prisons to vast armies of outsourced mercenaries and support teams for our military.

I could go on, but instead I’d rather that you do, in comments. What other aspects of our lives did we once entrust to government, but now entrust to private corporations?

No matter what your politics, it seems clear to me that most of us no longer trust our government to do anything particularly well. In short, as a culture we seem to be punting on doing anything well if it doesn’t have a profit motive. We are very good at is making corporations that are very good at making money. Is that enough? I don’t  know.

I am not judging this trend, but rather pointing it out. It’s something I plan to lean into as I write the book, and I am simply a curious amateur when it comes to understanding the space of government and the commons. To that end your input and suggestions as to sources and readings are gratefully welcomed.

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17 thoughts on “What Role Government?

  1. Daniel Fleck says:

    Did you just try to say that the government is getting SMALLER? What universe are you living in where the private sector is taking control away from the government and not the other way around? The better question is what aspect of our lives SHOULD we entrust to the government? I’d bet it’s a lot less than it is now, and a lot less than it has been in a long time.

    • Daniel, you’d rather entrust private corporations (insurance companies) for sectors like healthcare? When someone goes to the emergency room, in the United States, they cannot be denied coverage. You and I already pay for them. That’s a free-rider in our system – and there’s a lot of them, millions in fact. The healthcare bill is one example of how we’re fixing what the private sector has screwed up, in miraculous fashion.

  2. In addition to the above, of course, the government provides two other broad categories of services: regulation and direct economic support (food stamps, welfare, student loans and grants, social security — even Medicare and Medicaid is more economic support than it is providing a service per se). In the former case they’re not providing a service, they’re setting and enforcing standards, and in the latter case they are mostly just transferring money in ways we as a society have deemed socially desirable. Medicaid, for instance, is far more efficient than private insurers:

    http://healthaffairs.org/blog/2011/09/20/medicare-is-more-efficient-than-private-insurance/

    I.e., they spend only 2 percent of their budget on overhead, compared to an average of 17 percent for private insurance.

    When we imagine, I think, naively, the government vs private sector debate i think we often tend to think of it in terms of imagining some government bureaucracy attempting to make iPhones vs Apple doing the same thing, and we think well, of course the private sector would be more efficient. But I think the question of whether the government ought to do it vs the regulated private sector vs an unregulated private sector really depends a great deal on the specific task in question.

    Another example is the Department of Education: the vast majority of its budget is simply grants going directly to pay for student education. Administrative overhead is comparatively tiny for that department, a small fraction of the total budget. It’s hard to argue that a student education grant is an example of government “waste” — it’s as close to optimally efficient as you can get.

    It seems to me a salient question isn’t whether government or the private sector should do everything, but for which activities the profit motive actually adds overhead and inefficiency and reduces quality of services, and for which activities it improves quality and efficiency.

    When it comes to regulation, of course libertarians would argue regulation always distorts and therefore reduces the efficiency of the market. But more sophisticated economic analysis I believe shows the market, on its own, is subject to instability and inefficient and unfair distribution of capital. The evidence appears to be that relaxation of financial regulations has resulted in increased market instability:

    http://cje.oxfordjournals.org/content/34/5/929.full

    In this case, it’s obvious the only institution that can regulate markets is the government. It’s interesting to note that Canadian banks did not melt down in 2008 along with banks in the United States and Europe. The key difference appears to be that Canadian banks were regulated differently:

    http://www.economist.com/node/16060113

    http://www.american.com/archive/2010/february/due-north-canadas-marvelous-mortgage-and-banking-system

    Naturally, this isn’t to argue that more regulation is always better: again, the question comes down to which regulations work best, in what combination, etc. Only sophisticated analysis based on realistic models of the market can answer this question.

    Another way, I think, one can look at this problem is simply by comparing the United States to other advanced industrialized nations. A quick look at this table:

    http://en.wikipedia.org/wiki/Government_spending#Government_spending_as_a_percentage_of_GDP

    shows that we already have one of the lowest government budgets as a percentage of GDP in the advanced industrialized world (despite having by far the largest military budget, an order of magnitude greater than nearly every other industrialized nation). Yet our tax collections are even lower than that; only South Korea has a lower amount of taxes collected as a percentage of GDP among the advanced industrialized nations. As a simple matter of math, this is unsustainable. Are we, as a society, really that much more capable of reducing the size of government as everyone else? It seems that at this stage, simply by comparing us with other nations, one might argue that we’re already an outlier, and attempting to reduce government functions radically further may well be folly.

  3. Anonymous says:

    It is interesting to think about a third group of organizations that have influence: NGOs (non-government organizations) and non-profits. They fall somewhere between Government (seeking good for the commons) and the Corporation (seeking wealth for the shareholders). It seems like a lot of people are willing to quickly engage and trust these groups where government and corporations fail.

    Disaster Relief is one example with the Red Cross (and similar organizations) often having more credibility and effectiveness than government. Hurricane Katrina showed how an NGO was able to fill in where government stumbled. United Way also fills in locally where government or business do not meet needs.

    From a technology perspective, there has been a long history of governing organizations that help preserve the commons. ICANN (http://en.wikipedia.org/wiki/ICANN) and W3C (http://en.wikipedia.org/wiki/World_Wide_Web_Consortium) been critical to providing structure to the internet and the protocols surrounding it.

    I’m sure someone more knowledgable than I have written on this subject in detail; however, in the context of this post, I think there are areas today where people seek purpose and common goals over wealth.

    In full disclosure, I work for a corporation, like profit, and believe that these three types of organizations are all necessary to hold one another in balance.

  4. Tom Crowl says:

    When weighing the roles of government vs the private sector its worthwhile to take a moment to remember that both are very new constructs in human evolutionary terms. And they need some serious fixin’!

    Both arose as a response to the needs of scale… when the limits of face-to-face human transaction were reached… technologies were needed to address those limits.

    Money, laws and governments, trade and commerce all arose to handle the scaling of human transaction and decision (both individual and collective decision within a scaled social organism).

    The fundamental that ties them together, the fundamental that they seek to address at root are the problematic nature of scaling human interaction.

    The reason this has been problematic (and I consider this a fatal species problem unless solved soon) is that there are inherent drives and limits to which we have adapted over many millenia that are not well suited to scaling!

    Amongst these are especially:
    * the cognitive limits which in social terms are reflected by Dunbar’s Number and the attention economy,
    * the “Biological Altruism Problem” (its natural but problematic that you’ll be more distraught by the death of your dog than hearing about the death of a hundred-thousand people in a flood on the other side of the world)
    * the mythification of leadership (celebrity culture – in a tribal society there may be plenty of God’s and spirits but leadership and trust is a very local affair).

    For these reasons and others… and I’m sure it must seem a very unclear conclusion… I’m convinced its necessary to level the transaction landscape A.S.A.P.

    Scaling human society will require enablement of a near frictionless P2P transactional capability in currency including but not limited to the microtransaction (there is a need to recognize money’s role as a store of ‘decision rights’ as much as a store of value… and this extends well beyond campaign finance).

    I’m such a fool I’m convinced that eventually this will be clearly seen and recognized as obvious. Don’t know why its taking so long. Its really a very simple concept and pragmatic implementation is not only a feasible but a profitablie prospect.

    P.S. I love Clay Shirky and his arguments against the microtransaction are good in the contexts he addresses. But in this context its a whole other ball game.

    Technology & The Decision Landscape

  5. Michael Aniballi says:

    John it seems odd that you might think that government would do a better job than private corporations of running anything. Private corporations must provide goods and services which meet the exact needs of their constituents/customers otherwise they will be out of business and a better stronger faster corporation will replace them.

    Corporations don’t have four years to figure out if their business model is working, they need to constantly adjust in real time or be replaced. You call it money, I call it survival of the fittest and in the end it is the consumer who benefits from a corporation trying to serve my best interests in the face of daily competition. Please note this excludes Wall Street ;)

  6. Excited to hear your taking on this topic John and sounds like a very thought provoking and relevant topic here inside the beltway as well as for those in Silicon Valley. The geo-political landscape being what it is today has created challenges for Federal agencies to collaborate, crowd-source, and engage with the citizenry more than ever before. The fact is that it wasn’t too long ago that the Regan Era Administration was looking to privatize FAA and formed the ATO (Air Traffic Organization) as well as the Clinton Administrations (GPRA, or Government Performance Results Act) both administrations as well as today’s have had government employees work to try to answer the question of what are “inherently governmental functions”.

    As you point to the shifting landscape and the convergence of the digital domain within the body politic, the movements of Gov 2.0 and the opportunities for Accountability and Transparency are creating a new set of problems as well as new ways of thinking inside the beltway. Building sustainable models of government and the proclivity to leverage blended sourcing solutions such as have been coined “government-franchising” have increased in popularity. For example, in the last six weeks the Office of Personnel Management the HR arm of the Federal government has been grappling with the redesign of USAJobs.gov and trying to duplicate a legacy Monster.com platform much to the dismay of stakeholders and users. Federal Hiring reform could use a break, and it is reaching a tipping point whereby the politicos and corporate vultures are starting to circle while playing it out on the Huffington Post.

    Successful businesses have spent the past two decades retooling and rethinking how to manage their people better. Most big companies that have survived and prospered in the 21st century view employees as a vital strategic asset. In comparison, the U.S. federal government is a Stone Age relic, with its top-down bureaucracy, stovepiping of labor and responsibilities, and lack of training and investment in its own public servants. The inevitable result is a government not keeping up with the complex demands placed on it.

    In The People Factor, Linda Bilmes and Scott Gould present a blueprint for reinvigorating the public sector in order to deliver results for America. Their premise is that the federal government can achieve the same gains as the best private sector and military organizations by managing its people better.

    http://www.amazon.com/People-Factor-Strengthening-America-Investing/dp/0815701411

    As Performance management has become the buzz word within beltway recently so to citizens needs to engage productively and help not the politicos see the light. We need to support the civilian workforce to help them develop the tools, know-how, and potentially cross functional teams of academia, government and NGO’s only then can we start to tackle the ails of our nation and it all begins with the issue of human capital which may very well be the last form of competitive advantage.

  7. John,

    I’m looking forward to your further commentary, but I respectfully submit that you’re off-base on stating that our public education system is crumbling and the Post Office is broke. I’m not an education expert by any means but it’s fairly obvious that the problems with some – not all by any means – vary widely. He’s a great blog post written by an immigrant that examines the issue of comparing test scores among different nations. The results might surprise you:

    As
    http://www.cnbc.com/id/45018432/The_Truth_About_The_Post_Office_s_Financial_Mess
    http://super-economy.blogspot.com/2010/12/amazing-truth-about-pisa-scores-usa.html

    From a more personal perspective, my children are in a very small suburban public school district in the columbus, Ohio area. My public school district is excelling thanks to great teachers, involved parents, and the financial support of the entire community.

    As far as USPS goes – it’s certainly seem better days, but it’s broke because of unique financial burden placed on it by congress:

    John,

    I’m looking forward to your further commentary, but I respectfully submit that you’re off-base on stating that our public education system is crumbling and the Post Office is broke. I’m not an education expert by any means but it’s fairly obvious that the problems with some – not all by any means – vary widely. He’s a great blog post written by an immigrant that examines the issue of comparing test scores among different nations. The results might surprise you:

    As
    http://www.cnbc.com/id/45018432/The_Truth_About_The_Post_Office_s_Financial_Mess
    http://super-economy.blogspot.com/2010/12/amazing-truth-about-pisa-scores-usa.html

    From a more personal perspective, my children are in a very small suburban public school district in the columbus, Ohio area. My public school district is excelling thanks to great teachers, involved parents, and the financial support of the entire community.

    As far as USPS goes – it’s certainly seem better days, but it’s broke because of unique financial burden placed on it by congress:

    John,

    I’m looking forward to your further commentary, but I respectfully submit that you’re off-base on stating that our public education system is crumbling and the Post Office is broke. I’m not an education expert by any means but it’s fairly obvious that the problems with some – not all by any means – vary widely. He’s a great blog post written by an immigrant that examines the issue of comparing test scores among different nations. The results might surprise you:

    As
    http://www.cnbc.com/id/45018432/The_Truth_About_The_Post_Office_s_Financial_Mess
    http://super-economy.blogspot.com/2010/12/amazing-truth-about-pisa-scores-usa.html

    From a more personal perspective, my children are in a very small suburban public school district in the columbus, Ohio area. My public school district is excelling thanks to great teachers, involved parents, and the financial support of the entire community.

    As far as USPS goes – it’s certainly seem better days, but it’s broke because of unique financial burden placed on it by Congress:

    http://www.cnbc.com/id/45018432/The_Truth_About_The_Post_Office_s_Financial_Mess

  8. I have to apologize for how my post looks. Disqus doesn’t work well on the iPad!

  9. Babel Boots says:

    When we imagine, I think, naively, the federal government vs non-public industry debate i believe we generally usually believe of Christian Louboutin Babel 100 Suede Boots in conditions of imagining some federal government bureaucracy attempting to produce iPhones vs Apple carrying out identical thing, and we believe well, obviously Christian Louboutin Babel Boots Brown non-public industry can be much more efficient.

  10. James Kiss says:

    I like your viewpoint on this. It’s a very different way to look at things and I really enjoyed your take on ID management. I definitely think we are moving past government controlled ID’s and putting all of our information into the hands of corporations. For better or worse.

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  12. [...] of key global drivers. One, of course, is how we govern ourselves (you can see posts on that topic here and here). Another is global [...]

  13. [...] nearly as interesting as the role Google and other companies play in all of this. As I’ve written elsewhere, it seems that as we move our public selves into the digital sphere, we seem to be also moving our [...]

  14. Very interesting article. I am not a political person, neither I am an American, but what you mentioned in this post is true. Our identity is now internet, we are going to virtual world from real world.