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Time to Revisit the Public-Private Debate

Several months ago, I attended a local government conference. One of the speakers was a county administrator who described the challenges of his job. A member of the audience abruptly stood up during the presentation and said “You need to run the county more like a business. We will never get our money’s worth until that happens.” The county administrator, taken back, reflected for a moment then replied, “Which business are you referring to, Enron, or perhaps World Com?”

His point, of course, is that there are plenty of businesses that are poorly managed and some that break the law. Even so, with federal deficits today approaching $17 trillion and with more and more questions about government mismanagement in light of the IRS scandals, it is time again to revisit the question about government being run more like a business.

First, government cannot and should not be run like a business. There are too many differences between public and private organizations for them to be managed the same way. Let’s examine just a few of these differences. One of the basic differences is how each is paid. Businesses earn money when the customer buys their products. Production, coupled with customer satisfaction, brings about more sales and produces profits in the private sector.

Public entities, however, are paid from a general budget allocation that comes from the imposition of taxes. Funding that comes from a budget and not from “earnings” or “sales” is not necessarily undesirable. Peter Drucker has written about armies of the 15th century who were paid in “earnings,” which lead them to continuously engage in warfare and led to increased looting and raping of the populace. Defense budgets paid out of taxes were started for the purpose of stopping this free enterprise warfare.

Today, many public entities and the public at large are better off when payment comes from a budget. For example, let’s take a research laboratory. If it were paid for “earned results” or “profits earned” it would likely deflect resources from research into gadgetry. The work that research laboratories do is too important to be “run like a business.”

Another major difference between public and private entities is that decision processes are pluralistic in the public sector. This means that decisions don’t usually come from one individual or a small group of individuals. In the public sector many groups and individuals have access to the decision process, from citizen groups, courts, and boards and commissions. It is difficult for public managers to reach maximum economy and efficiency when all of these outside forces are protruding on them. And it has to be this way. These are democratic principles at work, and for them to be gone would be the end of our democracy as we know it. The public manager simply does not have centralized executive responsibility which is a key component of many profit oriented businesses.

This is not meant to excuse poor management or malfeasance practiced by any public administrator. That is why legislative oversight responsibilities are so important, but unfortunately are often not taken seriously enough. Hopefully, the IRS, for example, will continue cleaning house and those responsible for dereliction of duty will be held accountable by Congress.

There is another factor else to consider as well. The public and private sectors are becoming more interdependent. There has been an increase in collaboration between public, private and nonprofit organizations. More and more public services are contracted out to private and nonprofit organizations.

This has resulted in a blurring of the boundaries between these sectors. Unfortunately, this increases the possibility of problems developing. In research that I have previously completed, I examined Job Corps centers. Job Corps does job training for youth aged 16-24 years. Approximately one half of Job Corps centers in America are managed by private industries through contracts with the federal government. The other half of Job Corps centers are managed by the government either through the Department of Interior or the Department of Agriculture. I found significantly more employee turnover of Job Corps staff among the privatized Job Corps centers, leading to increased training costs as well as disunity of client services, than in those centers operated by the government.

The perils of privatizing were clear at one Job Corps center I visited. This location had been shut down for two weeks and the students were lounging around the Job Corps campus with nothing to do because the private contractor had abandoned the contract and the government was frantically looking for a new contractor to run the center. The employees were sick with worry about what their salary would be (or if they would even have a job) and what benefits they might lose. These are practices that can and do happen during “privatization,” but are rarely considered or discussed by those who support privatization as a means to improving government services.

In conclusion, it is worth remembering what Charles Goodsell uncovered in his research about public reaction to government service. Many people generalize about poor government, but in their daily lives they usually report being satisfied with the results they receive when they have personal interactions with government employees.


Author: Don D. Berglund is Associate Professor and Director of the Public Administration Program at Flagler College in St. Augustine, Fl. His teaching and research interests are in the areas of state and local government, immigration reform and organization behavior.



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