Government is not a business

Dave Snowden has a typically erudite post on why Government responsibilities can’t be treated in the same way as those of business. I’ve always felt uneasy at the assumption that businessmen especially big businessmen are somehow better able to manage the complexities of delivering public sector services. Dave lists four key reasons why it’s (often) different for government. The one that particularly struck me was this

as an entity it carries a burden of responsibility for failure, while industry is constructed on the basis of failure as a market mechanism

Dave points to the dangers of pursuing simplistic efficiency in truly complex environments. (An example being how cost-cutting on cleaning in our hospitals has contributed to the rise of superbugs.) He notes the need for

a requisite level of inefficiency in order to provide the system with adaptive capacity under conditions of uncertainty and context shift.

I also liked his point that if a measure becomes a target, it ceases to be a measure. (Because, as I’d frame it, once a target is set, people inevitably start gaming the system.)

2 thoughts on “Government is not a business

  1. Graham Hill


    Having worked extensively in the private and public sector as a consultant, I see more similarities between the two than differences.

    Whilst I accept some of the structural differences between self-regulating government and market regulated companies, the need to be adaptive in free markets is, paradoxically, much greater in companies than in government.

    It is leading companies, not leading governments, who have made the most strides in rebalancing the “Knights and Knaves, Pawns and Queens” problem that Julian LeGrand writes so eruditely about in his book of the same name.

    Graham Hill

  2. Earl Mardle


    Businesses survive and prosper by being able to externalise some costs and by being able to file for bankruptcy protection or, in the last resort, stiff their creditors by going bankrupt.

    Government is the unlimited insurer of last resort against every risk at every level; including attack by some other country.

    It is not just insane, it is criminally insane to imagine that the parameters of business correspond to the parameters of government.

    That is the calculation that LTCM made; that no government would EVER repudiate a debt, however burdensome. That’s the point about a nation, it can’t, ever, go broke without destroying itself. With all the attendant death, destruction and chaos that implies.

    It was the key to their business model and it failed only because Russia was sufficiently self contained to flip a major group of greed driven investors the bird.

    Just because it needs to keep accounts, obey its own laws and “manage” its activities; and those processes are common to all human organisations, does not make the paradigm of business applicable to government.

    Governments are responsible, to the nth degree, for the environment in which business operates, the reverse is not ever true, and no business could survive if it had to accept infinite contingency allocation.

    But is IS very profitable to businesses to convince government that the reverse is true. As the endless run of privatisation failures and PPP fiascos demonstrates.



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