Guv Cries Foul
Indiana Gov. Mitch Daniels is not happy with the House Ways and Means Committee. This should come as no surprise since the Committee’s new budget calls for the inclusion of a comptroller general position that would review privatization efforts, and the Governor is not someone who believes in oversight on his sales pitches.
His view seems to be that oversight was needed during past administrations when Indiana had “the worst welfare system in America,” but not now that we are moving at the speed of unethical light.
He has also stated that, because of their opposition to the sale of the Hoosier Lottery, Democrats either don’t care about higher education and it’s potential benefits to the state, or they are playing political games. For more in-depth coverage of this topic, see Masson’s Blog.
The point, however, is that government–despite what Daniels believes–is not a business. It is not in existence to make money for stockholders. The benefits Hoosiers expect from government are not dividends, but efficient and uncorrupted service.
Efficiency, of course, is in the eye of the beholder. One cannot have excellence of product while maximizing profit. The two concepts are simply not compatible. The best that we can–and should–reach for is a medium between the two. The selling off of State assets to private industry is not a compromise, however; it is the slow ceding of control to those whose ultimate loyalty is to making a buck rather than looking out for the needs and desires of all citizens.
There are 6 Comments to "Guv Cries Foul"
You wrote: “One cannot have excellence of product while maximizing profit. The two concepts are simply not compatible.”
Could you please expand on what you meant by this? It really bugs me because I keep thinking of when my girlfriend owned a cafe and knew a lot of other people who owned cafes and restaurants. They were always striving to maintain the excellence of their products from the understanding that in the long term this practice would maximize their profits. The saying is that in the restaurant business you never make money on the first time someone comes to eat at your place, you really only make money on repeat business.
Now, we do know people who offer half-assed products at high prices. We all can think of bad restaurants with bad service and bad products. For what it’s worth, not everyone knows what’s best for them and sometimes people can get away with the half-assed.
What is the more generally useful point?
Sorry to be vague. I mean that when one truly has an excellent product or provides excellent service, then one is not really maximizing profit, because in order to maintain a superior product one cannot slash expenditures to the bone.
In business, generally, finance takes precedent over production. This is not a concept that I see as beneficial to public service.
If you slash expenditures and the quality of your product falls your profits will fall as well. There will be some
lag, but in the long term you will suffer. You can maximize your profit margin while at the same time
maximing your product’s value if you understand that you operate in a system of opportunity costs and
information, i.e., you can fool some of the people some of the time….
Within a certain niche, say the Bently or Rolls Royce market, one can maximize proft, though, like with Fiat
and Ferrari, this might give rise to disagreement. Of course, Ford, which produces the Focus, also owns
Aston Martin. Boutique brands have a place and make their owners enough money to forgoe the opportunity cost/benefit
of changing.
Of course you are right. I did not mean to imply that everybody could afford a Bentley or it’s equivalent. The point was that when short-term profit becomes more important than long-term quality, problems will arise.
To continue with your example; in the ’50′s, the giant US carmakers turned to the principle of cost over quality, in the belief that they could maximize profits by skimping on money budgeted to production, and substituting bells and whistles for true improvements, which were more costly. They refused to consider development of smaller vehicles because of the initial outlay that would be required in R&D and in retooling production lines.
This short-sightedness would lead to the rise and eventual domination of the imports. Not until the ’70′s did they try to fight back, and by then it was too late.
In the very long run this has led to layoffs, outsourcing, and the decline of American industry. Virtually every US corporation has followed this path.
Although the world economy has changed, I cannot see how following the same roadmap that led us to this predicament will somehow save us in the end.
First, what’s the possible alternative?
Second, is the car industry a good example (given the barriers to entry)? I’m sure there are plenty of industries/companies that have set the correct balance between quality, development, and profit. Slashing expenditures to the bone in order to maximize short term benefit seems to be against the interest of most industries and that few, if any, follow this model. Weren’t the car companies also caught in the predicament of paying extraordinarily high benefits to there workers, meaning that if costs were to be competitive something, like development, had to go?
Yes, the unions got greedy, too, but to ascribe the decline of American business to the workers is disingenious. Both labor and management bear some fault in that occurance. Elimination of union power in favor of trickle-down economics has certainly not proved to be the answer.
Offshoring of American jobs is the bane of the middle class, and will certainly cause our downfall in the long run. There are many good articles on the web about this. Here are two.
Fast Company
Review
While I am not against outsourcing per se, the offshoring of jobs must be slowed for all our sakes. The future of US soverignty depends on it.