The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government.

Our society is inundated with half-truths and misconceptions about the economy in general and free enterprise in particular. The “Clichés of Progressivism” series is meant to equip students with the arguments necessary to inform debate and correct the record where bias and errors abound.

The antecedents to this collection are two classic FEE publications that YAF helped distribute in the past: Clichés of Politics, published in 1994, and the more influential Clichés of Socialism, which made its first appearance in 1962. Indeed, this new collection will contain a number of essays from those two earlier works, updated for the present day where necessary. Other entries first appeared in some version in FEE’s journal, The Freeman. Still others are brand new, never having appeared in print anywhere. They will be published weekly on the websites of both YAF and FEE: www.yaf.org and www.FEE.org until the series runs its course. A book will then be released in 2015 featuring the best of the essays, and will be widely distributed in schools and on college campuses.

See the index of the published chapters here.

#17 – “All We Need Is the Right People to Run the Government”

Editor’s note: This essay by Ohio businessman and writer Melvin D. Barger appeared in the 1994 edition of FEE’s book, Clichés of Politics, edited by former FEE trustee Mark Spangler. His citations of Ludwig von Mises all come from Mises’s 1945 book, Bureaucracy.

It’s been a time-honored practice in America to “throw the rascals out” when things go wrong in government. This supposedly is merely the political version of what happens when the manager of a losing baseball team is replaced, or the chief executive officer of a failing corporation gets the axe.

Nobody should dispute the fact that government operations require capable, experienced people who know how to do their jobs. We’ve all probably had unpleasant bouts with incompetent public officials and clerks, and we wish they could be replaced.

But when government expands beyond its rightful limits, problems arise that have little to do with the competence and abilities of its officials and employees. The delusion that these problems can be solved by replacing officials only delays the day when people face the hard questions about what government should do and should not do.

Thanks to the relentless expansion of government, however, these questions are being asked the world over, with surprising solutions in some cases. There is growing criticism of government operations and regulations. There is also a rush to “privatize” many services. Though privatization moves are being made for economic reasons rather than to restore liberty, they still appear as hopeful signs.

The most important reason for limiting government to its rightful peacekeeping functions is to preserve and promote liberty. If this is done, people working singly or in groups will eventually find wonderful ways of dealing with the many human problems that government promises to solve, and meeting the human needs that government promises to meet. But as we now know, problems and needs continue to grow while the government colossus has created dangers, such as mountainous public debt and group conflicts that threaten us all and seem beyond solution. These problems worsen no matter who seems to be running things in government. Even people who used to have almost religious faith in the powers of government are becoming disillusioned as its clay feet become more exposed.

A second dilemma with excessive government is that it must always be run bureaucratically. Bureaucracy can be a maddening thing for people who have been accustomed to the speed and efficiency of market-driven services. When confronted with bureaucratic actions that displease us we tend to blame the officials in charge and call for their replacement.

But unless the officials we want replaced are completely incompetent, rooting them out is usually a waste of time and effort. As Ludwig von Mises explained many years ago, bureaucracy is neither good nor bad. Bureaucratic management is the method applied in the conduct of administrative affairs, the result of which has no cash value on the market, though it may have other values to society. It is management bound to comply with detailed rules and regulations fixed by an authoritative body. “The task of the bureaucrat is to perform what these rules and regulations order him to do,” Mises explained. “His discretion to act according to his own best conviction is seriously restricted by them.”

Thus bureaucracy is good (and inevitable, but easily excessive, and even ridiculous and unresponsive much of the time) when it is applied in public operations such as police departments, military forces, and records bureaus. But it becomes oppressive and deadly when it is imposed on business enterprises and other human activities. As Mises shrewdly saw, the evil in bureaucracy was not in the method itself. “What many people nowadays consider an evil is not bureaucracy as such,” he pointed out, “but the expansion of the sphere in which bureaucratic management is applied.”

Mises then contrasted this bureaucratic system with business management or profit management, which is management directed by the profit motive. Managers, driven by the need to stay profitable (which is to say, to keep costs below income), can be given wide discretion with a minimum amount of rules and regulations. And customers will quickly let them know whether the business is providing proper goods and services and prices which customers consider favorable.

This profit-driven system has its opponents, of course, and this creates problems and frictions for entrepreneurs who want to compete for our business. Some opponents fear the new competition, while others deplore the entrepreneurs’ use of resources. And one of the most effective ways of hampering entrepreneurs is to put them under either limited or total government regulation and control—that is, replacing profit-driven management with at least some degree of bureaucratic management.

So what we have in today’s world is a great deal of government with additional regulation and control of private business. There is lots of grumbling about the fact that “the system doesn’t seem to be working,” but nobody is likely to fix it. At election time, glib office-seekers promise to reform the system and “get the country moving again.” This doesn’t happen, and general dissatisfaction is growing.

And there still seems to be a persistent delusion that “putting the right person in charge” will fix the problem. One favorite government response, when conditions worsen in an area, is to appoint a “czar” with special powers to bring everything together with businesslike efficiency. We have had numerous “czars” to control energy and prices, and one was recently named to deal with health reform. However highly touted, these czars soon turn out to be no more effective than the Russian rulers who gave rise to the term.

Another common fallacy, a favorite idea with pro-business political administrations, is that government operations will work better if capable business executives are found to head them. But as Mises perceptively noted, “A former entrepreneur who is given charge of a government bureau is in this capacity no longer a businessman but a bureaucrat. His objective can no longer be profit (generating more value than cost), but compliance with the rules and regulations. As head of a bureau he may have the power to alter some minor rules and some matters of internal procedure. But the setting of the bureau’s activities is determined by rules and regulations which are beyond his reach.”

Some people thrive in this sort of work and turn out to be excellent bureaucrats. They are the right people to run government operations when government is limited to its rightful peacekeeping functions. But if our purpose is to preserve and promote liberty while seeking the benefits of a market-driven economy, we’ll look in vain for reasonable answers and solutions from government—no matter who runs it. We are slowly learning this lesson, though at great cost. We should, of course, continue to follow the time-honored American practice of “throwing the rascals out” when elected officials are performing badly. But in today’s world, the officials we’re criticizing might not be rascals at all, but just conscientious people trying to do jobs that shouldn’t have been created in the first place.

Melvin D. Barger

Summary

As government grows, it creates more and more systemic and intractable problems.

Profit management and bureaucratic management are two very different things. The former seeks to generate more value than cost while the top priority of the latter is the promulgation and implementation of rules and regulations.

The bigger government becomes, the more calls you hear for “reform,” which may suggest there’s something inherently defective about the political system that prevents its practitioners from ever getting things right from the start.

Running government “like a business” is a popular rhetorical point but essentially an illusion that fails to recognize the deep differences between profit-driven business and rule-driven government.

For further information, see:

“No More Czars, Please” by Lawrence W. Reed:

http://tinyurl.com/jwaqzmb

“What’s So Bad About Big Government Anyway?” by George C. Leef:

http://tinyurl.com/lfddmj3

“Hayek Was Right: The Worst Do Get to the Top” by Lawrence W. Reed:

http://tinyurl.com/nxv4tmt

“The Economy Needs More Planning—Central Planning, That Is” by Lawrence W. Reed:

http://tinyurl.com/mudp5lu

“Can Government Manage the Economy?” by James L. Payne:

http://tinyurl.com/pq44dld