Private Enterprise: Sometimes Mean But Not Very Lean

The myth of the "efficiency" of the private sector as compared to the wasteful, bloated bureaucracy of government is one of our era's most striking examples of the power of propaganda to induce people to believe things contrary to ordinary experience.

Now's a good time to take a closer look at this myth, since the looming debate on dismantling Social Security will include many paeans to the benefits investors will supposedly enjoy once their accounts are managed privately rather than in Washington.

The myth implies that government offices are flooded with unnecessary tax dollars that are inadequately controlled and ripe for the looting by greedy, lazy bureaucrats.

How well does this square with everyday experience? Think about your acquaintances who work for government at any level. Are they the most prosperous people you know? Do they earn salaries far higher than their counterparts in private business? Are their perks especially generous?

When I was growing up, my mom and dad both worked for the government. Mom was a public school secretary in New York City, Dad was a letter carrier. We got by at a lower-middle class level, with one car, one TV, and an annual vacation in the Catskills. There was certainly nothing lavish about the perks or privileges their jobs provided. I remember Dad talking hopefully about the possibility that one day he might retire to Nalcrest, the modest Florida retirement community funded by his union, the National Association of Letter Carriers. (Instead he stayed put in Brooklyn and died fairly young.)

In my innocence, I assumed that life in the private sector was pretty much the same. So when I got a white-collar job at a publishing company, I was startled by the amount of money that got wasted on frankly unproductive things, from lavish holiday parties to sales conferences in the Caribbean attended by hundreds of employees with grand nightly buffets, dancing, boat rides, and golf outings for the executives. People chuckled over stories about bizarre incidents of waste, like the publisher who called the company's limousine service to carry his umbrella home from the office one day after the rain unexpectedly cleared up.

Around the same time, my sister was working in the movie and television business. She would regale me with stories about the perks enjoyed by the stars, not to mention the vast quantities of catered food ordered up for every day on the set--most of it never eaten and simply thrown away.

(Of course, show business is legendary for its wastefulness as well as for the pharaonic demands of its leading men and women. A recent college graduate I know is building up his filmmaking resume with a job as one of the assistants to a major star in a current production. His sole responsibility: to ensure that the star has access to no fewer than four Internet connections at any given time.)

The theory is that competition forces business to be lean and efficient, to purge itself of waste. Well, the last time I looked, book publishing and show business were both competitive businesses. Neither one looks especially lean or efficient. And if you think that other businesses are much different, you haven't been reading the papers. CEO compensation sets records every year; sales of corporate jets are soaring; spending on executive "coaches," physical trainers, club memberships, multiple apartments, and other privileges has become commonplace even in smaller companies.

There is a trend toward "leanness" in many industries. But it's focused exclusively on the bottom end of the business. That's why some hourly employees at Wal-Mart have reportedly been forced to work overtime without pay, while the Walton heirs are featured on the cover of Fortune magazine as "America's richest family."

Think about the most ambitious people you knew in college--the ones who had their eyes fixed on making the big bucks. Where did those people go to work? Did they apply for jobs on Wall Street, at the big consulting firms, or elsewhere in corporate America? Or did they opt for one of those "bloated, wasteful" bureaucracies like the Department of Education or Health and Human Resources, where they could really make a killing?!

These arguments are anecdotal, of course, which makes them vulnerable; one anecdote can be countered by another. We've all heard stories about unjustifiable perks at the highest levels of government, like Congressional "fact-finding missions" to island resorts. But it's obvious that no one chooses government work with the goal of becoming rich--except indirectly, since you can get rich after you leave government by going to work as a lobbyist for private industry.

And there's plenty of hard data to back up the point that the private sector is not highly efficient compared with the public sector. For example, contrast the administrative costs of Social Security (they average about sixth tenths of one percent of the total moneys paid out in benefits) with the much higher management fees and sales charges imposed by most mutual funds.

At the very least, it's time for the conservative myth of efficient private business versus wasteful government to stop getting a free ride in the public discourse. Where's the evidence to support it?