The Issue is Ossification

Lawrence Summers has a straightforward account of why people don't trust government. What he would like is a similarly straightforward account of how to fix it.

...what should have been a routine maintenance project on the Anderson Memorial Bridge over the Charles River next to my office in Cambridge. Though the bridge took only 11 months to build in 1912, it will take close to five years to repair today at a huge cost in dollars and mass delays.

Investigating the reasons behind the bridge blunders have helped to illuminate an aspect of American sclerosis — a gaggle of regulators and veto players, each with the power to block or to delay, and each with their own parochial concerns. All the actors — the historical commission, the contractor, the environmental agencies, the advocacy groups, the state transportation department — are reasonable in their own terms, but the final result is wildly unreasonable.

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More than questions of personality or even those of high policy, the question of how to escape this trap should be a central issue in this election year.

The person who can help you answer this question is Joseph Schumpeter. His insights on economics are relevant to government, too.

Our institutions are so large and so intricate in their approval chains that [our enemies have] a huge advantage in terms of how fast a decision can be made and acted upon for streamlined organizations. Putin just issues orders, after all. ISIS isn't very big. USEUCOM or USCENTCOM has to socialize a plan among all their staff sections, who reach down to subordinate commands for input and then hash out a plan among themselves before they present it to their general. Most likely, he will need to push that plan up to the Pentagon if it represents a radical change to existing strategy. They have their own process before an answer comes back down, and the easiest answer is to push the suspense for the decision to the right while we ask a few more people. If the change requires a change from an interagency partner, their bureaucracies have to get involved too.

Even if the President were replaced with someone with new-blood ideas and the will to enact them, the bureaucracy would still have to go through at least a basic staffing process to ensure that it carried out the decisions in an orderly fashion. Because the bureaucrats are part of the existing order, there will be many who drag their feet or otherwise resist firm leadership (remember the CIA's campaign of leaks to the press about Bush's programs?).

That's just what Summers is describing. Each process is fine on its own: the problem is that there are dozens of them. These dozens of bureaucracies are each interest groups, which makes them hard to eliminate. There are whole buildings, and large buildings, full of people whose living depends on things not being streamlined.

Ultimately, in economics, what happens when a corporation becomes this ossified is that new, smaller, leaner competitors eat it alive. They may not be able to do everything that the big monopoly does, and they lack its economies of scale, but they still outperform the giants because they can make decisions and act upon them quickly and cheaply. The giants may not die -- IBM's $8 billion loss from the 1990s didn't kill it, and it's still a major world corporation though it has shed a lot of the functions it performed in the 1980s. Still, IBM and similar tech giants now don't even try to compete with startups -- they just find the ones they want and fund them.

There is no similar governmental process. You aren't allowed to compete with the EPA, nor take over parts of its functions if you do a better job for less. That isn't to say that the private sector doesn't try: Delta just invented a better way of doing airport security because its business is being harmed by TSA incompetence. However, all Delta can do is try to help streamline the steps before the TSA bottleneck. They can't replace the TSA. They can't even compete with it, or offer an alternative to it.

In economics, the ossified bureaucracy full of rent-seekers is self-correcting because of competition. In government, the problem is much harder. We have to find the political will to disband much of the government in spite of entrenched interests with their hands on the levers of power. If we can't do that, government will just get more and more incompetent the older and more ossified it becomes.