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Since market ruthlessness encourages extra checks and balances, bad governance must, on average, be weeded out faster in the private sector.

That said, it is usually weeded out by companies failing to survive – so it doesn’t guarantee that any particular company will be better run. Just, in a random sample, a given private sector company is likely to be better run than a civil or government body.

But even then competition for funds in the civil sector is so tight that survival is incredibly difficult – I know from personal experience that we need red-hot governance to have any chance of making it at all. Otherwise we just scratch by on a few bucks and volunteers. That’s hardly an economic evil.

I guess government bodies are more-or-less guaranteed survival, which is where the inefficiencies creep in. And once the private sector gets good at exploiting those, as they have in the US and are increasingly good at in the UK, then we’ve got a big problem.

Like, a REALLY big problem. The profit incentive ends up favouring companies able to exploit weakness in government. That;s not a competitive advantage I enjoy spending time thinking about.

Not sure why, but my comments aren’t automatically linking to my bad blog, so I’m going to plug myself here:
sixteenvoices

SixteenVoices this is a great point, and I bet Icahn would agree. My take is that the bad stuff is weeded out *faster* in the private sector due to market ruthlessness, but even that argument gets weak in the face of “cost plus” military contracts and such. Eisenhower’s nightmare has partly come true (Military Contractors in private sector exploiting the Government’s bureaucracy and politics to their profit and ideological advantages). As a fiscal conservative this… more than anything… pisses me off.

The lesson I take from what he’s said on his blog so far is that inefficiencies and bad governance are not restricted to the public and civil sector.

I guess that’s an odd lesson to take (maybe I just have an axe to grind), but working for an environmental organisation I hear a lot about how the world would be a better place if corporations took over a lot of the work done by us and by the government.

The assumption is that shareholders and the profit incentive somehow guarantee better governance. In reality, they are just more checks and balances – bad governance can still happen in the private sector. And charities can still be well-managed.

It’s reassuring for me to be able to draw on a gun as big as Icahn when arguing against that line. I’m not sure he’d appreciate me doing it (has he ever spoken abou public sector inefficiencies?), but I’m still reassured.