The private sector and its alleged efficiencies

It’s common to argue that the private sector is more efficient than the public sector. In the private sector, competition drives businesses to relentlessly cut costs and maximize output. Private businesses run lean and mean, with none of the waste associated with the public sector.

If this is true, why is that if you want expense account lunches, business class travel, and posh marble lobbies, you go to the private sector? Shouldn’t the private sector be running lean and mean, and cutting out this stuff as wasteful? Shouldn’t relentless market competition be making employees of GE or Citibank or Apple travel coach class and sit at used desks scrounged from a surplus sale? Eat peanut butter and jelly sandwiches?

Because there’s an oversupply of MBAs and marketing majors, and if twenty years of being bombarded with free market rhetoric have taught me anything, it’s that competition trims away waste, and that perks have to go. I can’t see what’s efficient about a posh marble lobby, and I can’t understand why you need the marble lobby in the first place if the goal is maximizing income and minimizing cost, i.e. “profit.”

It’s necessary to impress clients? But surely the client wants to know that you are running lean and mean, and cutting waste, and maximizing output? If I were the client, I imagine I’d walk away thinking “why, the Glypso corporation is wasting all its money on marble lobbies and steak dinners, instead of R&D! I’m outta here.” But I guess I just don’t understand business.1

People like to mention the local DMV as an example of the public sector’s inefficiency. But have you ever spent any time navigating the phone tree/help line of your health insurance company, or, say, Verizon?  And it’s not as if the next health insurance company will be better, because market incentives work against good service. Good service means more payouts for the health insurer, which it doesn’t at all want, and “efficiency” means something like “obfuscate with customers so that marble lobbies may be purchased with the money saved.”

Where you do find “lean and mean” in the private sector is down near the bottom of the food chain, down among the people who actually make stuff.

There you can’t have a pension or overtime, because market efficiencies so demand. Why don’t the same efficiences apply at the top?

We’re told it’s because you need to pay high dollar to attract top talent. And you need to reward that kind of talent—the kind of talent it took to nearly destroy the American economy in 2008—with not just big salaries, but lavish, wasteful extras, like the marble lobby. The salaries are high because the talent is so rare. But as Charles DeGaulle reportedly said, “The graveyards are full of indispensable men.” Surely in 2008 there were thousands of biz school grads who would have been willing to recklessly speculate the economy into disaster for less?

“Efficiency” entered the American business lexicon in a big way on the back of Frederick Winslow Taylor, the “father of scientific management.” Taylor understood “efficiency” in terms appropriate to the age of steam: maximizing output for a given set of inputs, 1.e. “a shovel full of coal equals X pounds of steam pressure equals Y amount of work.” In human terms, it meant maximum output with minimum wages, maximum profit with minimum costs. Machines were his model and he wrapped himself in their miraculous aura.

Taylor turned machine “efficiency” into an objective good: if it produces more widgets in the same time, it must be better: if it does more with less it must be better. It’s a logic we’re all familiar with.

But “efficiency” obviously isn’t just some blind, neutral term: the Nazi concentration camps were efficient, but not good, and making them more efficient would not have made them more good. If we are going to advance efficiency as our watchword we ought to ask “efficient at producing what, exactly?”

What should jobs produce? One answer might be “happiness.” A good job produces maximum happiness and satisfaction with minimum pain. There’s an attractive notion of efficiency! Does anyone here not want that job?

We’re often told that we want government to be more efficient. It’s true I want, say, the justice system to be efficient, but more than that, I want it to be careful and fair. If I had to rank my priorities for a court system, I’d put “efficient” lower on the list, after “fair”, and “affordable” and “transparent” and “careful”

Because of course “efficient” isn’t some blind, neutral term. In a court system, efficient might be defined as “good at moving the maximum number of cases in the minimum time.” Or maybe “producing the maximum number of guilty convictions in the shortest time.” That’d be a good definition for an authoritarian dictator.

Or it might be defined as “good at finding the truth.” Which is better? Ideally you want both, but you can’t really have both: careful and quick rarely go together. Efficient at finding the truth might not be compatible with “efficient at saving time.”

The American economy is extremely efficient if efficiency is defined as “making sure money flows to the top,” and “lavishing the top with luxury.” It’s less efficient if efficient is defined as “maximum happiness” or “maximum job satisfaction,” or, say, “maximum leisure time.” It’s not efficient at all if efficient is described as “equitable distribution of wealth.” It’s highly efficient, in the last decade at least, at enriching the very wealthy while tolerating 9% unemployment and stagnant wages.

There’s nothing wrong with efficiency, per se. It’s just reasonable to ask what it is we’re efficiently producing.


  1. a great example would be CHNM’s open source products, like Zotero or Omeka, produced on low budgets and, I can attest, with few posh accoutrements , yet rivaling or exceeding the best commercial software.

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