Governing like a corporation?

Yesterday, on his way in to the first meeting of the new Cabinet, Wayne Long, the Secretary of State for the CRA and Financial institutions told reporters:

“I think we’re going to see our government run like a corporation, which I think is long overdue.”

I heard it live and, judging by the number of journalists who quoted it, or the folks who sent the quote to me, I can’t have been the only one to think: Umm… Hang on a minute!!

How is a government not like a corporation?

Let’s take “corporation” to just mean a voluntary association of private individuals, engaged in a shared economic endeavour, with the aim of increasing economic power. That power might be financial resources (profit and accumulating capital), or it might be market share, depending on your preferred theory of firms.

Arguably Donald Trump is running the United States government like a corporation— the Trump Corporation.

But more fundamentally, a government cannot really be “like a corporation”. For starters, governments have monopolies on the legal use of violence. Corporations do not. Governments have monopolies on the levying of taxation (under threat of coercion). Corporations do not. Corporations can fail and cease to exist as legal entities. Political governments can fail, but in a representative democracy, there must legally always be a government.

Maybe Mr. Long meant something else

Maybe he meant that some of the private sector ways of thinking might be brought into the processes, decisions and operations of the Government of Canada.

For example, perhaps government ought to think more about returns on public investment. But government doesn’t have the clean metrics or discipline of “profit” or “market share” (it already has the monopoly!). This makes “returns” harder to measure. What is the realistic expected public return of a government co-investment in a new manufacturing plant? Does the value of that return change when the plant will be built in a politically important riding?

Even with ROI thinking, the risk is that governments come to mistake political returns (like increasing market share in the polls) with public value. But don’t say they aren’t behaving more like a corporation.

Principles in public policy and administration

The new government has committed to a serious review of its spending with the aim of identifying as much as $28 billion in operating efficiencies, as well as improving performance in priority areas.  A new Cabinet Committee on Government Transformation / Government Efficiency seems to be charged with leading (or reviewing? or coordinating?) that work.

If I were running that committee, here’s what I’d do: I’d set a schedule for all ministers to work with their departmental officials to conduct a detailed review of their portfolio spending and capabilities. Ministers would then come to the Committee (in an order or clusters that functionally make sense), to present recommendations that will contribute to the operational savings (within an acceptable time horizon) or significantly enhance operational capabilities.

But as a first order of business, I’d have that Cabinet Committee work out a framework, a set of decision principles that it will require Ministers and officials to apply to the review exercise. The list Jocelyn Bourgon references in her summary of the 1990s program review is probably a good place to start.

I give all of my policy students lectures about some of the key general principles in public policy-making—things like efficiency and effectiveness. The private sector has no monopoly on these.

For a given public good or service, what is the optimal level of funding to yield the best possible results? Assuming a distribution of results, sometimes the more efficient outcome actually requires sliding up the curve so that the marginal returns on the public spending are higher. 

Similarly, there is no universal rule that contracting out (buying) rather than doing something in-house (making) will lead to greater effectiveness or lower cost. There is no evidence that paying for performance yields better results in the public sector (or with parties under government contract), if the assessment of performance is politicized or uses meaningless indicators.

There are also other principles that the private sector is unlikely to adopt in a profit-maximizing context. But policy-makers do have to grapple with these. For example, equity considerations— whether horizontal (treat sames the same) or vertical (treat differents  differently. The priority various forms of equity are given is largely a question of values, not business-style thinking. Fortunately there’s a recent book all about that. It was written by the new Prime Minister.  I’ve got my copy with me as I write this blog on my flight to the UK. It’s actually very readable compared to most books about economics.

Is this just NMP again?

A couple of the very smart people who talked to me about Mr. Long’s quote have noted that it sounded a bit like a call for New Public Management. New Public Management (NPM), which is actually pretty old now, emphasized private sector-inspired ideas like     decentralization/devolution, performance incentives and, later, ‘making the managers manage’.  But it was also accompanied by a serious decline in public accountability. As the inimitable Peter Aucoin argued, NPM in practice became New Political Governance, characterized by blurred lines between the political and public administration arms of government and weakened chains of public accountability.

So if Mr. Long’s remark is in anyway related to some better version of old-school NPM, I have to hope it’s accompanied by a deep commitment to accountability. This means Ministers willing to give account for their decisions and to do the work of ongoing reciprocal engagement with officials to hold public servants accountable for good implementation of those decisions. It requires political staff who understand and respect their swim lanes. It requires a PMO that lets Ministers do their jobs with their officials. And it needs public service officials willing to be transparent with decision-makers so that accountable decisions are well-informed.

That wouldn’t be running things “like a business”. That would be good governing.