Unlike inefficient private sector businesses that go broke, disappear, and fade from view, inefficient and poorly run government departments and agencies just carry on. There is no penalty or consequence for poor performance.

There’s a tongue-in-cheek website promoting a gizmo called Magic Mint. It lets anyone print fancy looking IOUs. The site’s promo says, “No matter what you owe, who you owe or why, impress your obligator…” Then it suggests you can obtain what it calls a “bodacious personal loan,” even if you’re a real loser and down on your luck.

When most people hear the IOU acronym, they immediately think of one person owing something to another, like the above story describes. But the term IOU has a dual meaning. It’s also an acronym that explains the characteristics of government: Inefficient, Overpriced, and Unresponsive. Here’s why:

INEFFICIENT: Privately-owned businesses strive for efficiency because without income and profit, everyone the business employs is out of work. It’s why private sector managers and workers are rewarded for responding to customer needs and coming up with ways to do things better, smarter, and more efficiently. The penalty for inefficiency, lousy service, and lousy products, is bankruptcy. Investors lose their money; workers lose their jobs; managers lose their reputation. In the private sector, wages, benefits, and pensions are always tied to a business’s profitability.

For government managers and workers, the incentives are upside down. Wages, benefits, and pensions have nothing to do with profitability and customer service. And instead of being based on economic efficiency and customer satisfaction, compensation for government managers is tied to the bigness or sheer expense of the program(s) they manage. The subtle incentive is therefore to expand, and to keep expanding. Unlike inefficient businesses that go broke, disappear, and fade from view, inefficient and poorly run government departments and agencies just carry on. There is no penalty or consequence for poor performance.

OVER-PRICED: Government is overpriced because of the inefficiencies just described, and because government never competes against anyone. If McDonald’s were the only fast food burger joint or restaurant anywhere in Canada, imagine the cost of a Full Meal Deal, and how high the salaries and pensions would be for its unionized government workers. (Someone once suggested a Big Mac would cost $32 if the government ran McDonald’s.)

UNRESPONSIVE: When regulatory bureaucrats show up at a private business, they are not there to think about the company’s needs. And when individuals, businesses, or landowners can’t get questions answered, or have needed approvals processed in a timely fashion after contacting a government department or agency, the people who work for the government will never experience the same outcome as someone working in the private sector. There is no consequence when a government agency or department is slow or unresponsive.

When you put it all together and add it up, the acronym that describes the characteristics of government performance is IOU—Inefficient, Overpriced, Unresponsive. It explains why the best governments, by design, deliberately seek a lesser role in peoples’ lives. And why the best politicians are those who work to make government smaller.

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