A business playbook to ease of governance

For decades, conventional wisdom in global politics has been that the government has no business to be in business. Led by Ronald Reagan and Margaret Thatcher in the West, and Deng Xiaoping and Manmohan Singh in the East, several of the world’s major economies privatised public sector holdings in order to get the government out of business.

These measures unleashed creativity, entrepreneurship and efficiency, and lifted millions out of poverty. Private sector skill and prowess was used to build roads and highways, produce electricity, and even run a national biometric identity programme in India. Yet, years later, the world now appears to be heading for the other extreme: too much business in government.

Facing economic slowdowns, rising costs and widening deficits in the wake of the pandemic, many major economies are beginning to rely on business instincts to get things back on track. This month, for instance, Donald Trump returns to power in the United States – a man who has globally epitomised the role of business in government.

A large part of Trump’s campaign appeal hinged on his business background. Arguing that the US government is terribly wasteful, Trump has vowed to set up a Department of Government Efficiency headed by Elon Musk and Vivek Ramaswamy – two men with no government expertise but plenty of business experience. Their goal is to cut a whopping $2 trillion in government spending.

Trump’s return to power follows in the footsteps of former British Prime Minister Rishi Sunak – another man who believed in the power of business instincts. A long-time investment banker with limited experience in politics or government, Sunak took a hard-nosed attitude towards public spending and chiseled away at the UK’s most cherished public welfare institution – the National Health Service.

Britain and America aren’t alone. The most popular politician in Canada today, Pierre Poilievre, has also vowed similar policies if he is elected prime minister. “A dollar left in the hands of consumers and investors is more productive than a dollar spent by a politician,” he had once written.

The appeal of businessmen-politicians is not unreasonable or surprising. At a time of economic distress and scarcity, voters may be inclined to trust outsiders who bring dispassionate business instincts to government. Through much of the pandemic, many Western economies racked up public spending in order to shore up the economy and cushion the fall for working-class families. That effort did not go far enough in creating security, but it did cause widespread inflation. Broken global supply chains and fiery trade wars did not make things any better. Under such circumstances, if billionaires still managed to make billions more in wealth, why not send them to the government to do that for the rest of us?

But the grave risk of putting too many businessmen in politics is that the role of government is in some ways the opposite of the role of businesses. Governments must often spend and incur losses for social goods that may not make financial sense. Businesses would go bankrupt if they did. Decision-making in government also often involves balancing several competing interest groups on the outside. But business leaders rarely need to cater to a constituency larger than their own organisation.

The answer to these tensions is not to close off politics and policymaking to business leaders. Career politicians have often used the resources of government for narrow political ends rather than maximising social gains. But maybe, the goal should not be to get the government out of business or bring business into government. It should perhaps be to figure out how to get the government to do its costly business better.