Money and power

Schumpeter

Money and power

Beware the lure of the businessman-politician

MEG WHITMAN is one of the few bosses who deserves most of the garlands laid at her feet. From the moment she saw the business plan for eBay she knew the online auctioneer could be big. Ms Whitman turned a start-up with 30 employees into a 15,000-person colossus. She also created a perfect platform for would-be entrepreneurs: eBay has probably given birth to more businesses than any organisation in American history.

Ms Whitman is now engaged in an even riskier venture—running for the governorship of California. Business has not only provided her with the wherewithal to take on her opponent, Jerry Brown, a professional politician who is the son of a professional politician: so far she has sunk $119m of her $1.3 billion fortune into the race. It also provides the rationale of her campaign. She says she wants to take a scythe to California’s business-hobbling regulations. She also promises that she will apply her successful business skills to running the state.

Ms Whitman is hardly alone in her dream. In California, Carly Fiorina, a former boss of Hewlett-Packard, is running for the Senate as a Republican. Dozens of other Republican candidates from Dino Rossi in Washington state to Carl Paladino in New York state are brandishing their business credentials. Mitt Romney, Ms Whitman’s mentor in both business and politics, is a leading Republican candidate for the presidency in 2012 (and perhaps the only man who stands between the Republicans and a Sarah Palin-induced meltdown).

This enthusiasm for drafting in businesspeople is not confined to the Republican Party. Barack Obama is likely to replace Larry Summers with a prominent boss as director of his National Economic Council. Nor is it peculiar to the United States. David Cameron, Britain’s prime minister, has asked Lord Browne, BP’s former boss, to inject a business ethos into the government machine, and Sir Philip Green, the owner of Topshop, to lead a review of government spending. The Indian government has asked Nandan Nilekani, one of the founders of Infosys, to help redesign the country’s ramshackle state apparatus.

What explains this enthusiasm for turning to businesspeople to solve political problems? You might have thought that people would have tired of it after George Bush’s two administrations or Silvio Berlusconi’s three. Mr Bush, a Harvard MBA, appointed four former chief executives to his first cabinet; Mr Berlusconi has done more than any man alive to blur the distinction between the public and the private sector. You might also have thought the economic crisis had increased hostility to highly paid businesspeople. But in America attitudes to business have changed little since the crisis—49% think positively of big business and 95% of small business—while attitudes to government have continued to curdle: a Pew poll shows that the proportion of people who trust government has declined from 42% in 2000 to 22% today. The Republicans, like other right-leaning parties, calculate that they can gain advantage by arguing that government is smothering the rest of the economy under its ever-growing weight and that injecting a dose of business discipline will make things more efficient as well as cheaper. “Silicon Valley is 130 miles from Sacramento,” Ms Whitman likes to say, “but it might as well be a million miles away given how it operates.”

How likely are these bosses-turned-politicians to keep their promises? There are a few successes. Michael Bloomberg has been such a hit as mayor that normally irascible New Yorkers have elected him to a third term. Businesspeople do have more experience of squeezing efficiency gains from the internet than professional politicians and they have less of a vested interest in expanding the supply of government.

But there is little evidence to support the common belief that businesspeople possess management skills that can easily be imported into the public sector. On the contrary, government and business are built on very different principles. For all the fashionable talk about empowering employees, bosses are ultimately the masters of their own domains. There are no civil-service style regulations to protect employees from the wrath of an angry CEO: when he or she says jump, you jump. Company bosses can usually escape from the pressure of public opinion and the glare of publicity that defines political life. Even those who are drafted into politics rather than forced to stand for election, find they are in a far more confusing world than the one they are familiar with.

The politics of disastrous management

A striking number of businesspeople prove to be failures as politicians. Paul O’Neill was one of Alcoa’s most successful bosses. But, as Mr Bush’s first treasury secretary, he was rapidly reduced to a laughing-stock. Ross Perot turned Electronic Data Systems into a giant. But his two runs for the presidency left most Americans with the impression that his tray table is not in the fully upright and locked position. Donald Rumsfeld was a successful boss of two big companies. But his name is synonymous with one of the worst-managed wars in American history.

Bringing businesspeople into politics can also produce corruption and cronyism. Russia’s oligarchs flit between government and business. Mr Berlusconi has built conflict of interest into the heart of Italian life. Dick Cheney, a former boss of Halliburton, an oil-and-gas company, made sure his secretive energy task-force relied heavily on his buddies from the energy industry.

This is not to imply that politicians are paragons of either virtue or competence. But the most important thing in politics is structure, not personnel. The best way to inject the virtues of business into public life is not to draft in a few ex-bosses—even outstanding ones like Ms Whitman—but to introduce as much choice and competition as possible into the public sector.