Forget What Government Should Do—What Can It Do?

The trick isn't to figure out how to do everything Washington does better. It's to figure what Washington role should be in the first place.

The U.S. Capitol doesn't look the way it did in 1846. Why should the government? (Library of Congress)

If you were trying to right a capsized business -- let's say a book company -- you wouldn't ask, in an ideal world, how much of the gross national product should be spent on books. Or how profitable the book business should be. Or whether, in the abstract, you should print only books on public safety, or only books that people read in 1789.

Instead, you would ask: Is there a market for such books? Even if people bought them in 1789, are they still relevant to anyone today? Have new technologies, like e-books, fundamentally changed the nature of what I can and should provide? Do competing offerings like movies or the Internet affect my business strategy and how much I should invest in it? Do these changes mean that I should give up on the book business entirely? Or do they open up new opportunities if I simply think differently about what it means to be in the "book business"?

We tend not to think about government in this way. After all, we all know what "government" is, has always been, and should be. But, in fact, what government does and has done has varied widely over time and space. We think of the government providing public safety, or at least meting out punishment for criminal offenses -- but it hasn't always done so. The modern welfare state only emerged in the late 19th century, and, in fact, the state itself is a relatively recent invention. And it simply isn't true that governments only increase the size and extent of their activities over time: Many governments used to develop and impose religious beliefs, determine the disposition of the labor force, or decree what clothes people could wear.

What governments can do today is, in fact, different from what they could do in the past -- not just the distant past, but the recent past, as well -- thanks to the development of new demand for or ways to deliver their services, or the emergence of new competitors. In my last post, I discussed the fact that, like just about everything else today, governments face challenges from a new range of competitors -- in everything from providing social services to torturing enemies. Who does which isn't obvious. Private-sector companies increasingly "do government," providing war-fighting and military intel and issuing their own currencies. But the alternatives are hardly limited to private companies. Non-governmental organizations and multi-state authorities, not to mention a wide variety of extra-legal entities such as drug cartels, rebel armies, and terrorists, all compete with governments now in various ways. The terrorist group Hezbollah, for instance, fights wars and maintains its own social-service organizations and construction company to deliver housing and social services. Countless current governmental services are migrating to the private or non-governmental sectors.

But increased competition isn't just going one way: As I'll explain later, government is out-competing private companies in product lines from handling retirement investments to health coverage to student loans to gift-wrapping (yes, gift-wrapping). And not only can government often offer the best buy as the producer of a range of competitive services, it also now goes head-to-head with businesses in its expanding role as consumer-in-chief, using market clout rather than mandates. This offers possibilities for government that go against the grain of both current liberalism and conservatism.

For instance, Social Security, perhaps the most popular and successful government program ever, could actually be its most "commercially competitive," as well -- if given the chance: The Social Security Administration is so efficient that it requires only about 2 percent of total funds to run the program, far less than private investment managers. For the basic retirement security most Americans want, the government program would be by far the best choice. So why not give citizens the choice -- instead of mandating it, as liberals would, or taking it away, as conservatives would? As long as the private sector is more efficient, and people have a choice, they'll bail out of government programs at the first opportunity; government will have to compete -- and will perform better as a result.

There's a flip side to this competition: The private sector obviously can do many things better than government -- but often won't unless the government makes it, through either regulation or competition. Competition is by far the more efficient and effective. In the 21st century, we'll see government driving businesses to provide better, cheaper service -- not by regulating and mandating it, but by delivering these outcomes itself and letting people choose. This so-called "public option" has application far beyond the health insurance context where it engendered great ideological division.

Diverse policies like the "public option" advocated by the left in health care and private accounts beloved by conservatives for Social Security both form part of a coherent competitive approach to balancing the public and private sectors.

That brings us to the central point. There will always be an ideological component to discussions of government, because it involves the exercise of power by one or more individuals over -- or, more simply, their interactions with -- others, and thus raises questions of right and wrong. But it is my thesis that government can be discussed and considered in descriptive, not just normative, terms; that we can discern what governments "can" do separately from what they "should" and, more importantly, that the former tells us much more about the latter than abstract, normative reasoning; that, in short, government can be approached usefully from a business strategy, rather than a political theory, perspective.

In the end, every ideological prescription, whether liberal or conservative, will have to prove itself in the "market" of government services. If high levels of public regulation, or underinvestment in public goods, or any number of other alternatives stifle growth, those economies and nations that adopt such practices will wither, cease to lead and exert influence over others, and better models will overtake and eventually replace them. In any event, ideological arguments do little to change minds: The more useful discussion, then, on all fronts, about what government should do concerns what government usefully can do.

Ultimately, then, we need to move past the current political debate to confront the real challenges of the 21st century. This doesn't mean moving further left or right -- or center -- but forward. Itdoesn't mean more government or less government, but different, and hopefully better, government.