The public sector is, by definition, more efficient than the private sector.
The main difference is the profit motive. When a government department does something more efficiently, it has to use that efficiency to either reduce cost or improve quality.
When a private company does something more efficiently, it can take the spare money and shove it in the pockets of its shareholders.
It's not a guarantee that a particular public sector project or department will be more efficient than an equivalent private sector one; the Peter Principle may well scupper any efficiency improvements.
I am sorry, but I think you live in a different world than I do. Where I live, many government offices get all-new furniture at the end of every fiscal year, because if they manage to come in under budget, their budget gets cut in the next year, so they make sure to come out over-budget. This is not the behavior of an organization trying to "reduce cost or improve quality".
In addition, corporations which are closely-held have a very strong incentive to be efficient, as the officers/owners are the residual claimants. In larger, public corporations, their checks are shareholders, and their competitors, who (if more efficient) can drive a corporation bankrupt by under-pricing, or out-competing. I cannot recall the last government department driven to bankruptcy by a competitor.
I have seen the exact same bahavior ("get all-new furniture at the end of every fiscal year, because if they manage to come in under budget, their budget gets cut in the next year, so they make sure to come out over-budget") occurring in large multinational corporate companies, where individual departments are very, very away from the top decisionmakers and spend a majority of their effort on budgets and infighting, and not on company results.
It's not a symptom of public vs private, it's a symptom of lack of oversight, agency problem, and 'too big to manage' problems.
the difference is, if a private company generates waste, its shareholders pay and competitors benefit. If government generates waste, everybody pays and nobody benefits
> Where I live, many government offices get all-new furniture at the end of every fiscal year
Government offices I've visited are no comparison to lush corporate settings; in fact they tend to be old buildings with old equipment and furniture. Consider what Silicon Valley corporations provide to their employees.
I've heard this story before and I believe it's a myth. I am aware of what goes on in many government offices, local and federal, and never heard of such a thing.
Throwing money around at the end of the year is a product of a dumb budgeting process, not a govt. vs. private issue. I've worked at businesses where some units were funded the using the same process who did the same thing - coming in under budget, and squandering cash on things to avoid losing funding the next year.
Private organizations have this wonderful ability to fail if someone else can do the same job better and cheaper. This does not prevent subsets of a private organization form being wasteful, but if the organization as a whole is significantly more wasteful than their competition, they will lose.
TARP? GM? AIG? It seems like private organizations under a certain size threshold have the ability to fail if someone else can do the same job better and cheaper. Beyond a certain size, they are indistinguishable from government.
You have a valid point (although your examples not failing was the results of public action, not the private market). I think there is a trade off between economies of scale and "too big to fail". There is some size that is still too small to hide colossal mistakes, but big enough to streamline its processes.
Yes, private orgs. can fail if someone can convince them to move to another party for their goods/services. Ideally - it happens occasionally, though not often.
Democratic societies can choose to elect better suited leaders for their governance to do the job better, and vote to improve their models of governance to be more effective and provide better services/efficiency. Ideally - it happens occasionally, though not often.
Voting with dollars works about as well as voting with ballots, though. People are driven by the exact same irrational drives and misinformation whether they're behaving as consumers or voters.
government offices get all-new furniture at the end of every fiscal year, because if they manage to come in under budget, their budget gets cut in the next year, so they make sure to come out over-budget. This is not the behavior of an organization trying to "reduce cost or improve quality".
The organisation includes the bit setting the budget, so if they are willing to cut it next year if this year's isn't spent, that looks a lot like the behaviour of an organisation seeking to reduce costs.
Besides, end of financial year budget spends in divisions of large multinationals also look like that.
What is the last large public corporation you can recall driven to bankruptcy primarily by private sector competition under-pricing or out-competing them? Let's say "large" is roughly as productive as, say, Luxembourg.
Well, large corporations that are failing usually (but not always) get purchased, and subsumed by more successful corporations, or bailed out before they go bankrupt. Some examples of this would be RCA, Lockheed, Delta Airlines, Chrysler (twice), Enron, General Motors.[1][2][3][4][5][6]
I even found this convenient little slideshow.[7]
Here is a challenge: find more equivalently-sized government departments shut down for their failures. Examples of such failures would be the two dozen financial market regulators (as well as Freddie Mac and Fannie Mae) who failed to anticipate or mitigate the housing problems of 2006-2007, the various police agencies which regularly shoot innocent civilians (such as the LAPD), the department of Veteran's Affairs which caused untold suffering, or the education departments which have greatly increased spending without any improvement in outcomes.
Apologies for not addressing the second sentence, I wrote this reply before you had added that.
This makes no sense. Say we shut down The LAPD or the VA. What would it be replaced with? The idea of a private sector police force is a little scary, and what private business would perform the function of Veteran's Affairs?
The point is that there are some things which only government can and should do. Shutting down vital services isn't practical nor popular. People wouldn't stand for it. If a the leaders of a city the size of LA decided to shut down the police force and replace it with something different, they would be immediately voted out of office. The government isn't some external actor forcing its will on the people. The government serves the majority, a majority that prefers that not to have basic services shut down because they aren't performing optimally.
I agree with all but your first sentence. Perhaps I am projecting my own beliefs on nickff, but nowhere did they say that government should not provide police or similar services. They correctly stated that the private sector has the substantial advantage of being able to fail if they do a bad job. The obvious conclusion is that Government should not do things unless there is a compelling reason not to leave it to the private sector. As you point out there is a reason for the government to provide police (and other services) that outweighs the private sector's fundamental advantage.
The issue is that if the public is unhappy with the police force there is no way for them to vote in a re-organization.
However in the private sector this happens all the time; either forcing one company to re-organize or a re-organization happens by a company going out of business and getting replaced with another one.
Voting for a politician (especially when you are stuck with two political parties) hardly constitutes voting for a re-organization.
Maybe there is a way to create competition in some way shape or form by having several different police forces (still government sponsored) that compete for your vote or maybe something else. But there definitely is a problem that there is almost no way to properly restructure a bloated government organization when it is underperforming, and somehow that should be addressed.
> The issue is that if the public is unhappy with the police force there is no way for them to vote in a re-organization. However in the private sector this happens all the time; either forcing one company to re-organize or a re-organization happens by a company going out of business and getting replaced with another one. ... But there definitely is a problem that there is almost no way to properly restructure a bloated government organization when it is underperforming, and somehow that should be addressed.
The public is unhappy with Thames Water, a private company, but no amount of private sector competition pixie dust is going to make another company start digging up London's streets to provide a re-organization.
It's not a problem with governments, it's a problem with natural monopolies and that's difficult to solve. Saying "government bad" is oversimplifying.
How so? The very fact that someone makes a profit means that the end consumer is paying more than cost price.
If I pay £10 for something that costs £5. The organisation that just pockets the difference is less efficient from my perspective than the one that either reduces my next bill by £5 or gives me an extra £5 worth of service.
The point is that even if a private sector company operates with perfect efficiency, there is a built-in inefficiency from the consumer's perspective because investors need to make money on the deal.
Efficiency is not part of the definition of public sector or private sector, so clearly your statement is false. It's inconsistent with the rest of your comment because you wrote "It's not a guarantee that a particular public sector project or department", which could not be case if it were true by definition. Your argument that public sectors, depending on circumstance, tend to be more efficient is quite different from your assertion that they are more efficient by definition.
What I mean is that all else being equal, public is more efficient than private. The same team doing the same task with the same information, constraints, and money will be able to provide better value to the consumer in the public eector than the private.
The caveat is there because a handful of strategically placed idiots or geniues could easily make more of a difference than the fact that all the money stays within the system.
The main difference is the profit motive. When a government department does something more efficiently, it has to use that efficiency to either reduce cost or improve quality.
When a private company does something more efficiently, it can take the spare money and shove it in the pockets of its shareholders.
It's not a guarantee that a particular public sector project or department will be more efficient than an equivalent private sector one; the Peter Principle may well scupper any efficiency improvements.