The CEO President: The Promises and Pitfalls of Business Experience Being Applied to Government

There is a popular belief among the American public that if government operated more like a business or adopted the principles of business, then public policy would be more efficient and effective. This sentiment led 2012 Republican presidential nominee, Mitt Romney, to declare that every president should be constitutionally required to spend three years running a business. Romney’s point was presidents can only be truly successful if they understand the struggles of businessmen and have the business background to run government more effectively. With the election of Donald Trump to the presidency of the United States, the country has a leader who wholeheartedly agrees with this sentiment. Although business success can be indicative of certain qualities, how transferable is business experience to government? Is the ideal model for president that of a CEO running Uncle Sam Inc.?

On the whole, I argue business success is not indicative of successful management of government because government and business have different goals, operate differently, and diplomatic negotiations are not easily relatable to business negotiations. For one, past experience would seem to show business experience is not necessary, nor is it sufficient for effective presidential leadership. Effective presidents like Abraham Lincoln, Franklin D. Roosevelt and Dwight Eisenhower had no business experience and all are regarded as successful presidents. Even some presidents who were mediocre or bad businessmen like Teddy Roosevelt (failed cattle ranch) or Harry Truman (failed haberdasher) went on to become effective executive leaders. On the opposite end of the spectrum, President George W. Bush and Jimmy Carter both had business backgrounds, but neither is seen as outstanding presidents.

Government and Business Have Different Goals

The primary reason for this is the fundamental goals of business and government are different. Businesses operate to maximize profit. Governments, on the other hand, are concerned with increasing social utility. Governments provide public goods the market simply cannot provide or is unable to provide sufficiently like national defense or large-scale infrastructure projects. These goods do not operate with the same price incentives as business products so the business skills used to produce goods efficiently to maximize profit are not really applicable.

Furthermore, the customer relationship for public goods is much different than with private markets. Since governments are tasked with providing a social good, they are providing services that are a financial drain. Unemployment checks, Social Security, and food stamps are all services to people who are, for various reasons, not being optimally productive. They can be temporarily unproductive like unemployed people looking for work or the elderly and severely disabled who are permanently unemployed. Society has determined it is beneficial to provide assistance to them and so government shoulders the financial cost. Businesses like to cut financial costs and thus cut unproductive labor and do not sell products at a loss. This operating principle makes sense when one wants to maximize profit, but it would run counter to providing assistance to people who incur financial costs. Therefore, to operate government like a business would mean cutting people off who are a financial burden, which would run counter to the government’s purpose of improving these people’s social utility.

The Art of the Deal in Politics

President Trump touted his deal making skills when running for president and says he will apply the same principles when he runs the government. There are problems though translating these business negotiating tactics to the domestic and international arena.

Let’s start with the domestic. Trump wants to be president like he was a CEO: barking orders with quick compliance from his subordinates. However, the power the president exercises over the government is much more constrained than a CEO over their company. Given the nature of the U.S. system of checks and balances, a president usually cannot act unilaterally on an issue. They need the cooperation of Congress to craft legislation and they need buy-in from the bureaucracy. It demands persuasion, not command. Trump is already running up against these realities. Bureaucracies have been resisting his changes from the intel community to the EPA and Congress has pushed back against the rollout of some his policies like the travel ban. Therefore, the streamlined management approach CEOs are used to does not reflect the complex give-and-take present in the U.S. federal system.

On the face of it, the international stage seems much more applicable to apply President Trump’s business negotiation skills. The president has much more flexibility and is not as subject to constitutional constraints when negotiating with foreign leaders. However, diplomacy has important distinctions to business. For one, some diplomatic problems involve a permanent, particular set of actors. For example, the South China Sea crisis will always involve dealing with China. One cannot pick and choose who one wants to do diplomacy with to solve the problem like in business deals where there is more flexibility about who and where to eventually land a business deal. Secondly, diplomatic negotiations sometimes pursue intangible goods like human rights or national security. These goods are less measurable than profits, which are the focal point in business negotiations.

Further compounding Trump’s dilemma is his bombastic negotiating style might not be well suited for the more subtle form of diplomatic wrangling needed to resolve problems. High stake negotiations may very well leave Trump with no deal to speak of when partners consider it not worth their while to deal with him directly.

Where Business Experience is Beneficial

Business experience has generally little to do with governing effectively, but it can be helpful in some respects. On the practical level, there are certain cross-overs in managerial techniques. Although executive officials have much less authority on how they manage their personnel than CEOs, businessmen who have overseen large personnel operations probably have a good handle on the mechanics of handling some of the intricacies of large bureaucracies. Logistics are another area where business management could be applied to more efficiently handle the process of supplying the government or providing services.

People from the business world may also have a greater willingness to employ market incentives to resolve externalities. Because business people have a more profit-incentive mindset, they will look more at changing the price incentives of market actors to resolve public issues than implementing command and control style solutions. This sometimes does not work, but other times it can be highly effective and efficient. An example is using pollution taxes or permits instead of complex regulations to reduce pollutants. This is much easier to implement than complex regulatory structures and it can lower pollution faster (A successful example of this was sulfur-dioxide pollution permits in the 1990s, which lowered sulfur-dioxide one of the key ingredients in acid rain).

Conclusion

Business backgrounds can provide useful managerial experience and a greater propensity for efficient market-based solutions to solve some public problems. However, government and business have such radically different goals and institutional structures that being a businessman is no guarantee of success. President Trump is in the uncomfortable phase of realizing how much the U.S. government is not like his business empire. You’re fired is a nice catchphrase, but it does not eliminate the basic premise that the presidency is ultimately a position requiring persuasion over coercion. If he plans on running a successful presidency, he will have to jettison the notion the U.S. government is Uncle Sam Inc. and get on with the business of governing.