I was looking through TH's cartoons today when  I found one that struck me as particularly amusing:



This is not only funny for the obvious reasons, but also because of the insight it gives, not only about our president, but about government in general.

I admit Obama has been particularly shameless in his passing of the buck, but it is hardly unique to him. After all, when was the last time anyone heard a politician say "It was my fault?" Or at least say it without instantly adding a dozen qualifiers intended to show it was really the fault of someone else? For all the talk of "accountability" and "responsible government", government still operates by a single principle, and that is blame avoidance. For all the differences of party, of ideology, for all the differing approaches to government, and even despite all the personal distinctions between politicians, they all recognize one simple rule: Never accept blame.

Not that this is a new topic for this blog. We first mentioned this tendency toward blame avoidance explicitly in terms of bureaucrats in my post "The Bureaucratic Mind",  which I followed with a more detailed examination in "Bureaucratic Management".  I then elaborated upon those two posts, drawing conclusions for all government run enterprises in my post "The Inevitability of Bureaucratic Management in Government Enterprises". (I also used it in a small way in my post "Consolidation and Diffusion" on the importance of federalism, but that is not relevant here.)  Outside of the bureaucratic sphere, I mentioned a similar tendency among politicians in my posts "The Difficulty of Principle", "Don't Blame the Politicians", "What We Deserve", "Who Is To Blame?", "What is Wrong with Us", "The Single Greatest Weakness" and "The Presumption of Dishonesty", though rather than blame avoidance I phrased it in terms of avoiding any action which might arouse the displeasure of voters. Still, in both cases the actions and motives are the same. Both politicians and bureaucrats are motivated to avoid political difficulties and scandals at all costs.

But that has already been covered at great length. What makes this topic interesting to me today is a realization I mentioned in my post "Somewhat Off-Topic Rants". That is the realization that, as the government increases the amount of control it exercises over the private sector, and as the courts increase their oversight through ever more intrusive rulings in the areas of employment law, worker safety, consumer protection and so on, the private sector is increasingly evolving to mirror the public sector. And that, inevitably, means that the private sector is coming to concern itself more and more with avoiding blame, rather than pursuing profits, and over time profit managements is disappearing to be replaced by bureaucratic management, even in firms still nominally interested solely in profits. Of course, it is more prominent in those firms most strongly regulated, or most closely associated with the government -- union shops, government contractors, universities, and industries subject to heavy regulation -- but gradually other firms are following suit. Slowly but surely, the amount of regulation is causing the whole economy to adopt a bureaucratic cast.

And that is why the Obama cartoon interests me. Not just because it is simply funny, but because it is a portent of what the future holds for all of us. That is, sadly, the face of the future. Eventually all firms will be run with the sincerity and efficiency of government offices.

Having made such a prediction, I suppose it is incumbent upon me to offer some support for my prognostication. After all, the single post I cited concerning the private sector ("Somewhat Off-Topic Rants") is, itself, admittedly incomplete and promises a future elaboration upon the topic. And the remaining posts are concerned more with the mechanics of blame avoidance, and the consequences -- as well as the contrast between bureaucratic and profit management -- rather than describing how bureaucratic management would come about in previously profit-driven firms. And so, it seems I should probably go back to the beginning, even if it duplicates a few of my older posts, and explain the differences between bureaucratic and profit management, and demonstrate why each style is suited to specific situations. I can then show why modern firms are losing their profit-driven management and point out what pressures exist that are likely to make that tendency continue.

 Private enterprises are normally managed in the manner I describe as "profit driven". That is, workers are encouraged to assume risks in order to earn profits, there are some restrictions on worker freedoms, even for management, but within those restrictions, the for profit enterprise tends to be willing to accept risk in order to increase profits. And the reason is obvious.One's position is generally based upon the value one's efforts bring to the company. You do not get promoted based on simply serving time, you are promoted based upon your earnings. As a result one must be willing to assume risks to get ahead. And so, in terms of risk aversion, the private firm has very little, as the assumption of risk is a part of life. Yes, mistakes bring consequences, but except in the most disastrous cases, the consequences of past mistakes can be wiped out through future performance.

Government firms, on the other hand, tend to have no way to easily measure performance. As explicit political patronage or favoritism is frowned upon, this means that advancement is normally through time served, sometimes coupled with competitive tests, though in that case there is still usually a time element involved. As advancement is not helped by taking risks, the worker generally is unwilling to do so. Especially as any mistake will be long remembered, and has no potential to bring any additional benefit. In fact, given the few criteria for judging between competing claims for advancement, past errors weigh quite heavily, as they are one of the few objective measures available. And so, the bureaucrat tends to avoid risk at all costs, as there is no benefit, and a disproportionate harm.

I won't go into the consequences of the two differing approaches now, as I have covered that elsewhere. Perhaps a bit later I will go into a bit of detail about why such management is dangerous for productive enterprises, but for the moment, let us leave that alone. Instead, let us look at why modern times have seen private firms adopting more and more of the trappings of bureaucratic management.

Probably the single greatest pressure to adopt the bureaucratic style is the prevalence of regulatory agencies. Regulatory agencies have become ubiquitous in many sectors of the economy. In fact, it is hard to list a segment oft he economy which is not subject to some form of regulation. And, as regulation has proliferated, so have the rules, and not just rules, but the various interpretations of those rules, the many glosses upon the regulations, and all the rulings of both administrators and courts. As a result, most regulatory agencies have a lot of leeway in the exercise of power. Both because the sheer volume of rules make almost every firm in technical violation of some regulation and also because vaguely worded regulations give administrators broad discretion  in choosing how to interpret them. As a result, regulated industries often find themselves relying more on the good will of regulators than upon the ability to comply with rules. (I discussed some of the consequences of this uncertainty in my posts "The Problem With Evolving Standards",  "In Praise of Slow Changes", "Predictability", "Conservatism, Incremental Change and Federalism", "Empathy" Threatens not "Justice" but Predictability", "Sotomayor and Empathy", "Interpretation and Activism", "Why Judicial Activism Hurts",  "The Problem With Tort Reform", "Red Herring", "A True Conservative Platform" and "A Perfect Example".)

This uncertainty, and the consequent reliance on the arbitrary decision of regulators mean that firms end up making decisions based on political rather than profit motives. For example, when deciding whether or not to close a plant, a firm must not only consider the profit and loss, but they also need to consider whether the local workers will cause a political incident which could bring regulatory attention. Likewise, when an opportunity comes to get "good PR", they need to consider whether the cost of such PR will be worth the good public opinion which might protect them from regulatory harm. In short, regulation often makes firms behave more like bureaucrats than businessmen.

A similar situation exists thanks to the courts. As I described in  "Principles Versus Outcomes", as the courts have shifted from impartial and certain laws to attempts to produce "just" and "fair" decisions, more and more rulings have come to rest on jury sympathy.  And that sympathy means that a firm must not only have sound business reasons for every action, but also must have a reason which will be pleasing to a potential jury. For instance, in employment decisions, a firm may have every reason to fire a non-productive employee, but, if he can manage to convince a jury that his dismissal was due to some personal animus, then he will have a shot at getting a ruling in his favor. Which, once again, drives private firms to act like bureaucracies, carefully documenting every action, keeping records of every misdeed, and, most importantly, being very careful to do nothing that could be used to make them look bad to future juries or political figures.

I am sure some will wonder why this is a bad thing. Shouldn't businesses base decisions on something more than simple profit and loss? Shouldn't they be fair?

But that is the problem. "Fair" is a meaningless word, as I described in "Protean Terminology" and "A Question of Fairness". What is fair to one is usually not fair to another ("The Right Way", "Deadly Cynicism"), which means any dispute over fairness ends up being special pleading between two parties for the jury's sympathy. As I have said elsewhere, such rulings produce nothing but uncertainty, which leaves individuals unable to form long range plans, as they cannot anticipate what might happen in the future.

No, the only way to be fair to all involved is to respect the rights of all, including business owners. Provided they abide the terms of an employment contract, there should be no second guessing of employment decisions. Likewise, provided they respect the rights of others, businesses should not be subject to government interference. That is the only way to ensure that every individual is treated equally ("Symmetry and Asymmetry in Government"), not to mention the only way to produce the greatest satisfaction for the greatest number. ("Planning For Imperfection", "Greed Versus Evil")

Or we can take the opposite approach, continue chasing after some ill-defined abstract "fairness" ("Utopianism and Disaster", "Life Is Not Fair - And Trying To Make It So Makes Things Worse"),  and force every private firm to adopt the management style of the post office and the welfare office. But, just remember, such choices have consequences. And the moment you force private businesses to adopt the management style of the government, they also will end up adopting the efficiency and customer service quality of the government as well. And I am sure you can imagine how happy we all will be should that come to pass.