Infrastructure and the limits to Government as ‘Big Business’

When Nick Greiner, a graduate of the Harvard Business School, became the Premier of New South Wales he declared that Government was ‘Big Business’. It was said that he required a signed commitment from each of his Ministers about the way they were to manage their portfolios and that to properly manage the assets of those portfolios was one of his requirements. I never saw one of these contracts so I cannot vouch for their existence but I do know that it was the Ministerial offices who were first in line for copies of  New South Wales’ Total Asset Management Manual.  At the time I thought that this ‘big business’ approach was breath of fresh air, particularly as it led Nick Greiner to override the advice of his head of Treasury and to be the first state adopter of accrual accounting. He wanted to be able to compare the performances of his state authorities with large private companies. They used accrual accounting so he figured that the government should as well.  This was a good move for better management of public assets so I applauded it. But there are limits to the application of business principles to the work of government, as Greiner himself found out some years later when he was charged with corruption. It wasn’t corruption. What he did would have been considered good management practice if it had been done within a business context. But it wasn’t. (See: ‘An Act of Corruption?’by Michael Gleeson and published by the Sydney Australian Broadcasting Corporation, 1992)

Business looks after its customers in order to make a profit.  That is its job.  It is not the job of business to care for the environment or for the social fabric of the community or for the damages it causes to others by its actions. It is not the job of business to act on behalf of the citizenry.  That is the job of the government.  So if government is doing business’ job – who is doing the government’s job?  More specifically, who is ensuring that infrastructure is designed for the benefit of the community as a whole? Who can?  Unless we know the ‘who’, the ‘what’, is a moot question.

3 Thoughts on “Infrastructure and the limits to Government as ‘Big Business’

  1. I think a sharp distinction between government and business is unhelpful. Steve Denning (in his 2013 Forbes article “The origin of the world’s dumbest idea: Milton Friedman” – available on the web) contends that a change in thinking is already underway that I think more closely aligns the roles of business and government in our community: he cites the growing recognition that the sole purpose of a business is to create a customer (the profit motive is there simply to stay in business and create more customers).

    Governments are no different: while they don’t so much create customers because they often have a monopoly over many of their services, they do need to generate a surplus to stay in business and continue to provide services to their (monopoly) customers.

    If there’s community objectives (social, environmental, etc.) that ‘fall through the gaps’ it comes down to good leadership from politicians and other leaders to address these.

    Governments are just as good at pursuing selfish ambitions as business (I fear the USA under Donald Trump will be an example of this, but there’s plenty more). The challenge with government is to facilitate a decision making process that makes poor decisions transparent, and those who make them more accountable. I think the same opportunities are there for business: if they can make the benefits of their products/services more transparent (including social/environmental), they’ll create more customers.

    • Ben, There is no dispute that the government has to be efficient and spend our money wisely but this definitely does not mean that ‘they have to make a surplus to stay in business’ That is what taxes are for. To enable governments to make wise decisions on behalf of the citizenry as a whole. Infrastructure services are shared services. We lose sight of the benefits for the country if we treat them as consumer goods.

      • I think you’ve misunderstood me, Penny: the ‘surplus’ I refer to, made by governments, takes account of taxation. I’m saying that governments must generate enough tax revenues to pay for our services over time (including asset consumption). Governments need to act like a business in that they need to focus on how they’ll stay in business, how their business is sustainable not just for now (so politicians can win the next election) but for the next generation.

        These principles of business sustainability apply whether products/services of the business are for public or private benefit… it doesn’t follow that this is treating infrastructure services as consumer goods.

        But then it strikes me that an aspect of consumer goods sales is highly transferable to this situation: if they are going to make responsible decisions, our politicians need to get better at ‘selling their product’ (and we need to help them to do so – to be effective, it needs to be simple, something that would be at home in the consumer advertising market).

        Responsible policy decisions often entail people making sacrifices (in terms of services &/or paying more) in order to make the business (government) more sustainable… but if their ‘competitors’ (the opposition) are promising that they can have their cake and eat it too and we don’t give them a way to refute this, then they won’t survive the next election.

        Take a NSW council that identified (as part of NSW govt’s ‘fit for the future’ program) that it needed to increase rates to fund renewal expenditure on infrastructure… but this became an election issue and the politicians (to get back in) had to backpedal on the plan. Back to the original post, this isn’t a case of “the government acting on behalf of the citizenry” but rather the politicians acting on their own behalf.

        The only way to overcome this is to improve our ‘marketing’ about the need for sustainable investment decisions in infrastructure (and other services) and taxes to pay for it so people want to “buy what the politicians are selling”.

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