Wal-Mart vs. Bureaucracy

In this editorial, Sheldon Richman, of the Foundation for Economic Education, points out that bureaucracy (government) is unable to successfully provide services that can (and should) be provided by the free market simply because it is devoid of the natural feedback that the market provides...that of profit-and-loss.

In addition to this lack of performance accountability, there are other factors regarding the nature of bureaucracy that contribute to its failure. The one that strikes me as the most baffling is this:

Bureaucracy rewards failure.

Hurricane Katrina, and the resulting disaster provide an excellent example of this phenomenon. Among the various things government failed to do either in preparation for, or in response to Katrina, the most obvious was the failure to maintain the levees protecting New Orleans from flooding. The levees have been in disrepair for years, and the Army Corps of Engineers diverted tons of money from levee maintenance to other projects.

Still, the result of this failure will undoubtedly be to throw more money at the body responsible for it. Those who failed to protect New Orleans from flooding will see a salary increase next year. The power and influence of the agency that failed will grow. Taxpayers will have more of their earnings garnished to fund a continuing debacle. And this is true of any government activity.

Failed government projects do not get cancelled. They don't go away with budget cuts. They get bigger. They get fatter. Their very failure is their success. There is not a single government program that is working to make itself obsolete. The perverse incentives created by this mechanism should be obvious.

But what if government hadn't been put in charge of protecting New Orleans from flooding in the first place? What if government was powerless to protect anyone or any place from flooding? Would the need for flood protection simply vanish? No...not at all. Where, then, would flood protection come from? Quite simply, it would come from those who have a vested interest in protecting their property from flooding.

In New Orleans there are a great number of businesses, homeowners, and industries that would obviously benefit from flood protection. Oil companies, for instance, have a vested interest in protecting refineries located near seaports from being destroyed. Business owners working together to prevent loss have a much greater incentive for ensuring that efficient, effective protections were erected and consistently maintained. Government has no such incentive.