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Government Of, By, and For Government Employees

Monopoly power and ripping off the taxpayer.

By Will Offensicht  |  June 16, 2011

We at Scragged are so convinced that our government has become incapable of doing anything constructive that we occasionally challenge readers to suggest any recent government program which did what it was supposed to do.  NASA put a man on the moon by the end of the decade, to be sure, but that was a long time ago.

There were no surprises in the Wall Street Journal's "My Summer Road To Perdition" which told how one of their writers spent the summer of 1973 working for the Virginia Highway Department:

What did I learn as a young man laboring for the Virginia Highway Department?  How to work slowly to slipshod standards.

The author told how they'd flip roadkill off into the bushes instead of burying it as required and explained the fine art of looking busy while not shoveling.  This gave the writer background for documenting federal job-training outcomes:

... many of the participants in the two largest programs, the Comprehensive Employment and Training Act (1974-1982) and the Job Training Partnership Act (1983-1997), earned less later in life than those who never received government training.

The government has always been radically incompetent at imparting job skills or good work habits. Unfortunately, as long as politicians can profit from handing out jobs and paychecks, the waste and character damage will continue.

In Unions There is (Wasted) Strength

Some of the ways government employees wasted time seemed familiar - we'd seen them in private businesses, albeit large unionized ones.  UAW union regulations keep car companies from firing workers who'd been found sleeping on the job, for example.  In one incident, a contractor's employee who pointed out a sleeping worker was fired instead, because drawing attention to the matter "harmed union relations."

This isn't unique to unionized work places - the Virginia Highway Department has never been unionized.  The damage is not due to unionization per se, it's caused by monopoly power.

At both GM and at the highway department, there was one source of labor: for GM, the union, and for highway repairs, the highway department.  To get any work done at all, GM management had to work through union members who couldn't readily be disciplined or fired because of the union's monopoly power.  Managers had little resource but moral suasion - basically begging and pleading.  This does have an effect since anyone willing to get up at 4AM to get to the factory on time probably has some work ethic, but the severe limits on management's ability to actually manage led to shoddy performance as all monopolies do.

The highway department had a different problem.  The workers weren't unionized, but unlike GM which competes with Ford, Toyota, and a myriad of others, the highway department had a monopoly on state road repairs in the Commonwealth of Virginia.  GM's managers and even some of the workers realize that somebody has to choose to buy their cars or eventually the company will run out of money.  They got lucky in having Barack Obama in office to throw them a huge pile of your tax dollars, but this can't be counted on next time.

In contrast, the highway department has merely to beg for more funds from the state legislature.  Since the obvious solution to fixing bad roads is to spend more money, this isn't a hard sell.

To some extent the highway department has a negative incentive: the worse the roads are, the more likely they are to get more money next year.  There's nobody in the entire department who has a financial incentive to fix the roads quickly and cheaply, so they generally don't.

The unfortunate reality is that government, like all organizations, is staffed with human beings.  Despite high-sounding rhetoric about public service being a noble calling, government workers on the average are as lazy and selfish as anyone else.

It's no surprise to see them use whatever political or economic power they can acquire to raise their pay and reduce the amount of work they have to do.

The Cost of Monopoly

This fact of life is not unique to government because businesses, too, are staffed by human beings.  You'll find abuse whenever any department manages to achieve a monopoly on providing any service to the rest of the firm.

Long, long ago, back when electricity was becoming common in offices and factories, mysterious humming boxes called "transformers" were located here and there.  Cables were run to the box and after due incantations, the lights came on!

The few people who could cope with this mysterious force called "electricity" had a monopoly - they were the only ones who could keep lights lit.  They received relatively high pay from management and respect from their colleagues.

After a time, managing electricity became well enough understood to become a blue-collar trade.  Power now comes out of the wall and isn't mysterious any more.

Having become accustomed to higher than average pay, however, electricians and plumbers lobbied government to require long, expensive licensing programs before anyone is allowed to work with wires or pipes.  Plumbers and electricians may not have the respect they once had, but they exploit their license-based monopoly to get better than average pay.  Electricity became demystified over the years so that only government support allows electricians to maintain their monopoly.

More recently, offices have mysterious humming boxes called "network switches" here and there.  There are a lot more wires than with electricity and a desktop computer is harder to use than a lamp, but after enough incantations, you can surf the web and send email.

Computer guys have more power and influence than electricians ever had.  There hasn't been a "Chief Electricity Officer" in living memory, but we have "Chief Information Technology Officers" who get big bucks.

Unfortunately for users, computers take a lot more maintenance than lamps and motors.  There're viruses to find, upgrades to install, and new applications to roll out.  This generally leads to the creation of an in-house "help desk" whom users call when they need help.

These organizations are monopolies in that companies specify one phone number employees call.  As with all monopolies, opportunities abound for abuse, and the sort of organization that is used to being abused by unions is equally primed to be exploited by artificial technological monopolies.

Electronic Data Systems was founded by Ross Perot in 1962.  Mr. Perot persuaded a number of large businesses to hire his firm to manage their data centers because he could run their data centers more cheaply than they could.

EDS was acquired by General Motors in 1984; the transaction made Ross Perot a billionaire with time on his hands.  Having bought a company which managed computer systems efficiently, GM required that all computer equipment be purchased through EDS.  My Detroit friends immediately complained about EDS' prices.  "I can buy a PC for half that at any store in town!"

As a wholly-owned subsidiary, EDS became so profitable that GM was able to spin it off as a separate company in 1996.  The numbers looked like it made a lot of money for GM, and it certainly made vast amounts in bonuses for GM executives, but there were hidden costs as all of GM overpaid for PCs.

It's easy to tell whether an internal IT department might be an inefficient monopoly: compare its performance with Amazon.  Over the past decade of being one of the Internet's largest retailers, Amazon has discovered that in the Internet age, instant gratification is too slow.  Their data showed that every additional second it takes their web page to display reduces the probability that someone will hit the "Buy" button.  They've spend huge sums and worked very hard to avoid delay of any kind; as a result, despite serving countless millions of pages every second all over the world, their website responds virtually instantly almost all the time.

Most internal corporate networks which employees are required to use seem enormously slower.  This is odd - Amazon doesn't pay customers for the time they spend entering orders whereas companies pay for every second employees wait for the corporate system to respond, and every company has far fewer employees than Amazon has customers.

You'd think companies would have financial incentives to make their internal networks at least as fast as Amazon's, but no.  Google can search the entire world-wide web faster than most internal systems can supply an employee telephone number.  Could there be a hidden, inefficient, unaccountable monopoly at work?

The Challenge

It's understandable why companies establish internal monopolies on computer services - letting employees go elsewhere for support would compromise security and consistency.  As anyone who's worked anywhere near computers in a big company knows, however, it's hard to keep computer support monopolies working efficiently.

What computer people do is mysterious enough that it's as easy for information technologists to look busier than they really are as for highway departments to look busy while not shoveling.  Many of these departments seem to be of, by, and for the people in them as opposed to the company's computer users.

A corporate IT support department such as the help desk is similar to a government agency: it doesn't have any way to demonstrate contribution to profit and it's difficult to define a performance metric that bears any relationship to efficiency.  All that the help desk person has to brag about is the size of the budget and perhaps the number of trouble-tickets resolved.  Unfortunately, a perfectly run IT department would have no trouble tickets because nothing ever broke and would be a ripe target for budget cuts next year.

If all the roads in the state were smooth and well-designed, it would be hard to argue for more money.

If all the children in the state were above average, the education department wouldn't be able to declare a crisis urgently requiring more money "For the Children!"

If all the mail were delivered correctly and on time, what need to raise the price of stamps?

Somewhere, there must be a corporate titan who has figured out how to get good performance out of his internal monopolies.  Unlike most aspects of the business world, this one has the potential to directly apply to governance, as both are otherwise unaccountable and hard-to-control bureaucracies.

Whoever that leader may be, we beg him to run for President - the federal government needs his skills.