January 20, 2001
When I wrote this piece during the first week of—sigh—the first Bush Administration, I could little have anticipated how right I was going to be. It took almost three years for the other pundits to begin opening this discussion, and I still don't feel that it's been opened satisfactorily.
|From the Secretary of Energy to the Department of the Interior, George W. Bush has appointed a cabinet dominated by former business leaders and MBAs. "Dubya" himself holds an MBA (Master's of Business Administration), as does Elaine Chao, Donald Evans, and Lawrence Lindsey. Paul O'Neill is the former chairman of the Alcoa Aluminum Corporation, Andrew Card was the chief executive of the American Automobile Manufacturers Association, and Condoleeza Rice was a board member of Chevron Inc. and Charles Schwab. Bush introduced many of these appointments with a characteristically brief declaration of their alleged successful business experience: "X will make a very good Y Secretary," he has said of just about each person. The public is left to conjecture that by "good" Bush means that they will be "effective," and perhaps more charitably, that Bush is suggesting that these figures are themselves not ideologically disposed, but rather impartial evaluators of the economic market and America's needs.
Show me someone who emphasizes effectiveness but proclaims political impartiality, and I'll show you a person with an ideology.
I mean "ideology" here in the bad way, in the way that it was once used, earlier, before it became vogue to describe any set of political beliefs as an ideology. I mean "ideology" to refer to an uncritically adopted set of political beliefs oriented toward power and control. The problem with ideologies, in this traditional sense, is that they prescribe numerous policies, all the while masking many of the underlying assumptions on which these policies are based. Given the make-up of George "Dubya's" cabinet, it may be worthwhile to discuss some of the assumptions that accompany the mentality of the MBA and its degree-bearers. I'll be touching on these arguments and reasons here, pushing the point that government players of the Bush-picked variety are hostile to the very institutions in which they now play critical roles.
First, policy reasoning in a welfare democracy can be roughly divided into two subcategories: those arguments that emphasize the great efficiency potential in the market, but take seriously the possibility that markets fail; and those that eschew discussion of efficiency by appealing to higher ethical standards. For lack of a popular term, we might coin the first set of efficiency-oriented arguments "instrumental" or "amoral" (because the positions are goal-oriented and based on non-ethical or non-moral grounds—which differ, I might add, from being based on "unethical" or "immoral" grounds). For instance, an instrumental argument might assert that we should regulate coastal fisheries because if we do not, independent fishers will over-fish available stocks. This argument suggests how policy should be used as an instrument to facilitate the smooth operation of society. It makes no ethical claim about whether fish or species have a right to exist. To take another example, an instrumental argument might push for government intervention in urban planning because it is optimally efficient (from the perspective of monetary returns, political feasibility, public accountability, and future litigation) to, say, locate power plants away from residential sections. Both of these arguments appeal to what will work, given a particular context.
The second set of policy arguments might aptly be named the "normative" arguments, insofar as they appeal to norms of rightness and ethics. These arguments center around ethical reasons for justifying government intervention. For instance, one might argue that we should help the homeless because it is the right thing to do, and that it is right because people are people and were we homeless, such aid would be welcomed. This is an appeal to standards, not to efficiency.
What's important to recognize in this division between instrumental and normative arguments is that while Democrats and Republicans in our "post-conventional" economy have often disagreed on the morals of policy—whether we ought to practice abortion, whether the income gap ought to be so large, whether we ought to provide for the poor—until recently they have mostly agreed about the need for public policy on such matters as efficiency. This is because, while the normativists dispute about what ought to be, the instrumentalists dispute about what will yield the most efficient outcome. Instrumental arguments are more about market failure than morals, and they, probably more than normative arguments, have been defining public policy for much of the last few decades.
Enter the MBA:
The MBA (Master's in Business Administration) is a professional degree oriented toward a comprehensive examination of the principles of business administration. It carries with it a host of background assumptions that influence the ways in which MBAs are taught to think about the world. The MBA education tends to emphasize market success over market failure (no surprise, since one could hardly design a program for Businessfolk around the appeal of market failure). It tends do downplay or to look harshly upon government regulation or intervention. And it tends to focus on market optimization.
Kept to its own sphere—that is, business—talk of such business success is rather innocuous. Sure, it's great that company X mastered the electronics market in the late 70's and 80's. How'd they do it? Ask any MBAs and they'll list a covey of possibilities ranging from extensive research, to good management, to low interest rates. You'll notice, however, that none of their explanations have any reference to the things that X, or any other company, did not do. This is because the MBA ideology insists that where there is a need, a market will arise. It suggests that people are perfectly aware of their needs, and that when it makes financial sense to address a need, not only will they rationally consume as they see fit, but astute business entrepreneurs will respond to these needs. It does not accept the possibility that there are in fact real needs in which efficient markets have not arisen, for which markets have been largely silent. This is the case when markets fail, and the policy literature commonly refers to such cases as "market failures."
This brings us to part two of the MBA Ideology: It's great that X has managed such a profitable company, but the MBA will reason that X could have been much stronger were it not for pesky government regulations. The MBA would be correct to assert this, for if X were allowed to continue, say, dumping dioxins into the Hudson River, X wouldn't have to worry about the costs of disposal. Operation without regulation would be a big plus for the X company, but it certainly would not be a big plus for people living in the Hudson River Valley. This argument brings to light a tendency of the business world to be hostile to regulation and restriction. Such hostility is frequently noted, of course, so it should be no surprise that I list it as a part of these dispositions.
Part three of the MBA Ideology is really only an elaboration on the first two points: market idealists tend to reason that businesses act in optimally efficient ways. They reason so because when run well, business can be optimally efficient. Business has only one bottom line. With a free exchange of information, no barriers to entry, and no regulations, a business will act to maximize profits. Given the right conditions, it will probably succeed. Government, on the other hand, has multiple, and often conflicting, bottom lines. Government is not only interested in the optimization of productivity, but also in protecting citizens from harm, securing citizen rights, guaranteeing freedoms, enabling responsible citizenship, and ensuring that citizens can maximize their profits without degrading the actions of others. The MBA will reason that optimized productivity in the private sector reflects an optimized productivity in the public sector. Unfortunately, this reasoning mistakes the public for straightforward consumers of tangible goods, as though all of our interests can be reflected in our propensity to consume cigarettes, candy, condominiums, and other commodities.
So where instrumental reasoning justifies public policies by appeal to efficiency concerns and concerns stemming from proven market failures, the MBA ideology turns a blind eye to the existence of market failure, emphasizes deregulation, and pushes market efficiency. This is why we see such apparently contradictory moves on the part of our new commander in chief. We now have Spencer Abraham, a man who two years ago argued vehemently for dismantling the department of energy, sitting at the helm of the very department he desired to undo. We have Elaine Chao, a decidedly anti-labor Labor Secretary. We have Gale Norton, former lead industry lobbyist and James Watt protege, riding the bucking bronco of the Department of the Interior (which means that she oversees the management of our parks, fish, wildlife, streams, dams, and lands).
Gale Norton is a prime exemplar of the MBA ideology. She is a staunch "takings legislation" advocate. She, along with numerous other market fanatics, proposes that the U.S. Government should reimburse citizens and industries for losses that they incur due to regulation. In cases of, say, pollution, this would mean that the U.S. Government pay polluting industries for not polluting—as though these industries have a constitutional right to pollute. In the case of endangered species, this would mean paying resource extractors for not killing the species. The upshot of such a principle, of course, is that almost all environmental legislation, pollution regulations, and consumer protections will become toothless in the interest of protecting the potential offenders from economic loss. Thus, legislation enacted with the intention of righting an established market failure, in the face of such reversalist policy-making, will become effectively moot. Great for the companies; bad for the neighbors.
Now, finally, we come to an important question. What if the MBA bearers are right? What if markets really don't fail? What if a market is the most efficient way of organizing a government? Well, I've seen pretty strong evidence to suggest that even robust markets have high incidences of failure. Market failures manifest in any number of ways and can detrimentally affect both the economy and the consumer. Barring the simple point that many a mom-and-pop start-up goes under within the first year of business, there are other prevalent market failures in which it is virtually impossible for business to act efficiently. "Natural monopolies," like those endemic to the distribution of water and electricity, occur because of the difficulty of maintaining competition in areas where costs can be prohibitive for more than one provider. "Tragedies of the Commons," like those that have destroyed crab, oyster, and clam fisheries in the Chesapeake Bay, occur because the act-now-or-lose-profits-to-your-competitors attitude that drives private industrialists tends to work—as if by an invisible hand—against both the industry's and our best economic interest. "Negative externalities," like those off of which the coal, oil, and gas industry can reap huge profits, are the uncalculated but nevertheless real costs and damages—like pollution, health, and environmental costs—that are sloughed onto the public. (Real people actually pay the clean-up and health costs, though rarely, in an unregulated economy, is the generator of the externalities the one who pays for them.)
Here's the problem: Much of the reason for having a government in the first place is precisely to provide security from those areas in which business fails (just ask Thomas Hobbes or even Adam Smith). When private enterprise doesn't build roads, government does. When private industry doesn't provide energy, government steps in to straighten things out. When it doesn't provide reasonable health care options, government mandates that all citizens are entitled to some degree of security. In fact, much of modern welfare-economics relies on the very supposition that governments exist in large part to overcome market failure. Now that we have a president and a cabinet ideologically geared to dispose of these protections, to open the United States up for business (as new EPA Director Christine Todd Whitman's former New Jersey slogan proudly exclaimed), the only protections that citizens will have against market failure will be their own meek and disorganized voices. Such an arrangement will only serve to further the arguments of the business ideologues, through yet another market failure: "coordination costs." Small clusters of people will never be able to wield the same administrative influence as organized industries. It simply costs too much—in terms of time, money and energy—for individual citizens to band together. Plus, industries have a vested interest in protecting their profits and will spend down to the very last profitable cent to protect their unregulated functioning.
None of this, I should note, is to say that business is evil—remember, these are non-normative arguments—or that business can't work in happy tandem with the public or with government. Rather, the point here is that one of the major reasons that we have a government in the first place is to coordinate the interests of the people in such a way that all citizen interests (monetary and non-monetary) are optimized, not just a few. Once market ideology creeps into the sundry ways in which the world is run—like, say, government—the gap between governing people and running a business becomes that much smaller, and the potential for unmitigated market failure becomes that much greater. While we have certainly witnessed a recent narrowing of this gap, if the Bush cabinet has its way, we can expect an even accelerated merging of the two disparate spheres. Whatever does happen during the next four years, one thing's for certain: the administration of the Administration will surely mirror the positions advocated by many an MBA program. To defer to idiom, the Bush cabinet empowers the profit-taking fox to guard the regulatory hen-house. What should we expect? Fewer hens and fatter foxes. How do we stop the foxes? We remind them that market failure is real.