Bill Gates Says Government Should Be Run More Like a Business: Why That's a Bad Idea

In an interview with Politico published Wednesday, Microsoft co-founder Bill Gates criticized the government for its current dysfunction. Gates, the second richest person in the world, argued that the government is currently on a “non-optimal path” and that a “business that is maximizing its output would proceed along a different path.” Back in February in the wake of the debt ceiling saga he also attacked the short-term budget planning of the government, arguing that “it’s terribly inefficient” and that the constant battles over the budget are “absolutely insane.” All of which begs the question: should government be run more like a business?

Talking to Politico, Gates remarked of the government’s dysfunction, “You don’t run a business like this.” Maybe so, but government is not a business, and should not be run like one given its distinct priorities and goals.

Running government more like a business is an often-repeated trope. Sageworks CEO Brian Hamilton called for government to behave more like a business. As did former eBay CEO Meg Whitman in her run for governor in California. And former CEO, turned Republican governor, Rick Scott. Mitt Romney also argued for this during his 2012 presidential campaign. The list goes on.

According to Gates, businesses thrive by selecting the most appropriate performance indicators and measuring the results of their actions. The idea is that this allows them to operate more efficiently, which is what Gates is arguing government should be doing. And to an extent he has a point. Few people would disagree that the battle over the debt ceiling was unnecessarily drawn out and ridiculous, or that government agencies, programs and processes can often be dysfunctional.

Underlying Gates’ criticism is the logic that businesses are efficient because if they were not then they would lose out to competitors. By contrast, government agencies, and the government in general, are seen to be inefficient because they face no competition. Short of moving to a different place, disgruntled citizens can’t simply choose to use a different fire department or parks department.

The logic of efficiency, however, is misleadingly simplistic and ignores both the widespread inefficiencies in the private sector, and the fact that the priorities and goals of government differ from that of business.

Firstly, the argument that businesses are necessarily more efficient is a sweeping generalization. As John T. Harvey notes in an article for Forbes, there are “many businesses that also make the customer’s life very unpleasant because simply being in the private sector does not guarantee effective competition.” Harvey gives the example of the health care industry, in which he argues customers actually have little real choice and which is a “very concentrated industry, meaning that they can demand payment while giving only a vague idea of coverage (which may well change over time and with little to no notice) and they can delay reimbursement.”

Secondly, “efficiency” in the private sector simply means profit. But the point of government is not to generate a profit. The primary function of government is to provide socially beneficial goods and services to citizens. In the private sector, the provision of goods and services to customers is a means to an end: profit. Yet in the public sector, the provision of goods and services to citizens is an end in itself. The problem, as Harvey points out, “is that not everything that is profitable is of social value and not everything of social value is profitable.” While reality TV, gambling, fast food, cigarettes, etc are of questionable social value, they are immensely profitable. And while the fire department, parks, libraries, pubic schools, etc are of obvious social value, they are not profitable, nor could they arguably exist in their present form if forced to turn a profit.

There are plenty of examples of where a business, profit-driven mentality has not worked in the public sector. Furthermore, one only needs to look at events such as the collapse of Enron or the sub-prime mortgage crisis that triggered the global financial crisis to see that operating like a business does not necessarily provide a good model.

While Bill Gates to an extent has a valid point in that government can sometimes be dysfunctional, making it operate more like a business is not the solution and ignores the distinct priorities of government. The overriding goal of business is all about generating a profit. The overriding focus of government, however, is, or at least should be, about providing goods and services to citizens.