Tuesday, April 4, 2017

Why Jared Kushner is Going to Fail at Running the Government Like a Business

President Donald Trump has announced that his son-in-law, Jared Kushner, will head up a “SWAT team” dedicated to making the government "run like a business."

The White House Office of American Innovation, to be led by Kushner, will operate as its own  power center within the West Wing and will report directly to Trump.

According to the Washington Post,  the office will be viewed internally as a SWAT team of strategic consultants, that will be staffed by former business executives.

There is a problem with this, Government can't be run as a business. A business faces profit and loss decisions. It compares costs versus revenue generated. There are no such profit and loss calculations in government.

Government is about spending. Its calculations are not about a revenue generated versus cost analysis. IGovernment is about "Where should I spend money that makes the most sense politicall." In this sense, it is a political calculation, not a business calculation.

Ludwig von Mises explained this in his 1944 book, Bureaucracy, published by Yale University Press.

In the book, he wrote:
The plain citizen compares the operation of the bureaus with the working of the profit system, which is more familiar to him. Then he discovers that bureaucratic management
is wasteful, inefficient, slow, and rolled up in red tape.
He simply cannot understand how reasonable people allow such a mischievous system to endure. Why not adopt the well-tried methods of private business. However, such criticisms are not sensible. They misconstrue the features peculiar to public administration. They are not aware of the fundamental difference between government
and profit-seeking private enterprise. What they call deficiencies and faults of the management of administrative agencies are necessary properties. A bureau is not a
profit-seeking enterprise; it cannot make use of any economic calculation; it has to solve problems which are unknown to business management. It is out of the question to
improve its management by reshaping it according to the pattern of private business. It is a mistake to judge the efficiency of a government department by comparing it with
the working of an enterprise subj ect to the interplay of market factors.
There are, of course, in every country's public administration manifest shortcomings which strike the eye of every observer. People are sometimes shocked by the degree of
maladministration. But if one tries to go to their roots, one often learns that they are not simply the result of culpable negligence or lack of competence. They sometimes turn
out to be the result of special political and institutional conditions or of an attempt to come to an arrangement with a problem for which a more satisfactory solution could not
be found. A detailed scrutiny of all the difficulties involved may convince an honest investigator that, given the general state·of political forces, he himself would not have known how to deal with the matter in a less objectionable way.
It is vain to advocate a bureaucratic reform through the appointment of businessmen as heads of various departments. The quality of being an entrepreneur is not inherent
in the personality of the entrepreneur; it is inherent in the position which he occupies in the framework of market society. 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, 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....

In the field of profit-seeking enterprise the objective of the management engineer's activities is clearly determined bureaucracy by the primacy of the profit motive. His task is to reduce costs without impairing the market value of the result or to reduce costs more than the ensuing reduction of the market value of the result or to raise the market value of the result more than the required rise in costs. But in the field of government the result has no price on a market. It can neither be bought nor sold....

A police department has the job of protecting a defense plant against sabotage. It assigns thirty patrolmen to this duty. The responsible commissioner does not need the advice·
of an efficiency expert in order to discover that he could save money by reducing the guard to only twenty men. But the question is: Does this economy outweigh the
increase in risk? There are serious things at stake: national defense, the morale of the armed forces and of civilians, repercussions in the field of foreign affairs, the lives of
many upright workers. All these valuable things cannot be assessed in terms of money. The responsibility rests entirely with Congress allocating the appropriations required and
with the executive branch of the Government...

The conduct of government affairs is as different from the industrial processes·as is prosecuting, convicting, and sentencing a murderer from the growing of corn or the
manufacturing of shoes. Government efficiency and industrial efficiency are entirely different things. A factory's management cannot be improved by taking a police department for its model, and a tax collector's office cannot become more efficient by adopting the methods of a motor-car plant. Lenin was mistaken in holding up the government's bureaus as a pattern for industry. But those who want to make
the management of the bureaus equal to that of the factories are no less mistaken....

[N]o reform could transform a public office into a sort of private enterprise. A government is not a profit-seeking enterprise. The conduct of its affairs cannot
be checked by profit-and-loss statements. Its achievement cannot be valued in terms of money. This is fundamental for any treatment of the problems of bureaucracy.

A bureaucrat differs from a nonbureaucrat precisely because he is working in a field in which it is impossible to appraise the result of a man's effort in terms of money. The
nation spends money for the upkeep of the bureaus, for the payment of salaries and wages, and for the purchase of all the equipment and materials needed. But what it gets for the expenditure, the service rendered, cannot be appraised in terms of money, however important and valuable this "output" may be. Its appraisal depends on the discretion of the government.
So when you see Kushner tooling around in a military helicopter in Iraq, don't think for a minute that he is going to somehow bring business calculations to the military operations there. His calculations are going to be about how much to spend on the killing machine to meet the goals of the Empire---and how to spend it in a manner that doesn't get the masses all riled up, while at the same time calculating who to buy from that will be the most politically beneficial.

Kushner is going to fail at running a government like a business because it is an impossibility.

General Joseph Dunford, chairman of the Joint Chiefs of Staff, didn't invite Kushner to tour Iraq because he thinks that Kushner is some kind of whiz-bang at negotiating the purchase of bullets. He did it because he knows that it is a politically shrewd way to get his desires advanced with the President, since Kushner apparently has influence.

That's what government is about, attempts at advancing various spending programs. There are no profit and loss statements. Trump and Kushner may not realize this yet but Dunford and the rest of the bureaucracy do.



  1. Wow, what a long piece to support the view that politics is not a business (that's like saying the mafia is not a business). Tell that to the millionaires in office. There's no profit riding (taxing) the backs of the workforce? Sorry, but I just don't believe this viewpoint.

    1. What you're describing is a racket, not a business. Graft, not profit is the domain of politicians.

    2. Kushner leaking to MSNBC according to Roger Stone:


  2. How much will government spend in the name of achieving efficiency?