Essential Insights for American Students on Government Operations

In college classrooms, students often hear the assertion that “advanced societies require extensive government intervention to flourish.” However, this perspective is shortsighted in understanding how America has prospered and operates. The reality is clear: governments currently control around 30 percent of GDP, non-profits add another 10 percent, leaving the vast majority, 60 percent, generated and utilized by the private sector, encompassing businesses and households.

In the U.S., activities and roles often overlap.  Congress’s Governmental Accountability Office confirms the importance of government and private sector cooperation across a broad range of policy areas.  “Achieving important national outcomes, such as food safety, local economic development, environmental restoration, and homeland security, requires coordinated and collaborative efforts of a number of programs spread across the federal government, other levels of government, and private and nonprofit sectors” validating that government, private sector. Citizens share roles and activities across policy areas.^[1]

The federal government has a range of key roles, including national defense, retirement security, health, affordable housing, education loans, welfare benefits, wealth creation, taxes, infrastructure, conservation laws and regulations, flood insurance, housing finance, and public lands stewardship. Each of these roles is crucial to the country’s functioning and its citizens’ well-being.

State governments are the major prison operators and important actors in health, especially Medicaid, education, housing, elections, government worker retirement, and conservation regulation.

Local governments have major roles in preventing crime, ensuring government worker retirement, providing health care, providing affordable housing, regulating housing, providing education, maintaining infrastructure, and supervising and controlling elections.

Private corporations have key roles in retirement and health care funding, housing construction, wealth creation through employee jobs and benefits, building infrastructure, and producing and distributing agricultural products. Small businesses are also the major generators of new jobs.

Over three-quarters of all taxpayers work in the private sector. The U.S. private sector controls a large portion of the world’s resources. Not-for-profit organizations provide services to tens of thousands of low-income persons and families in areas such as housing, food aid, energy assistance, and health services. Creating public and or private partnerships (P3) is often the financially and socially responsible way of solving social and economic needs.

Governments are seen by citizens as important for keeping the country safe from terror (94 percent), responding to natural disasters (88 percent), ensuring safe food and medicine (87 percent), managing immigration (81 percent), maintaining infrastructure (76 percent), and helping people out of poverty (55 percent). At least 80 percent of Republicans and Republican-leaning independents support smaller government with fewer services, whereas about a third (31 percent) of Democrats and Democratic leaners support a smaller government role. This partisan divide will ensure that a full discussion of what governments should do will be forthcoming.

This debate should focus on which sector can offer a service economically and with consistently high quality. Thus, performance is key. The promoted path measures performance and outcomes that are most helpful to citizens. Finally, the optimum size of government is a value judgment, which should be based on traditional American values backed up by cutting-edge analysis.

Governments cannot do it all; the private sector and citizens must do more—a lot more cooperatively. As economists Matthew D. Mitchell and Peter J. Boettke have observed “Many problems that were once thought to require top-down government intervention are actually better resolved through bottom-up polycentric orders.” ^[2] Polycentric order’s importance was recognized by chemist and philosopher Michael Polanyi as “mutual adjustment of a large number of centres.” ^[3] Applied to governance, it recognizes that “Families, voluntary associations, villages, and other forms of human association all involve some form of self-government.  Rather than looking only to states, we need to give much more attention to building the kinds of basic institutional structures that enable people to find ways of relating constructively to one another and of resolving problems in their daily lives.”^[4]

Governments and the private sector are working together today in housing, health, education, infrastructure development, job placement, and economic development. These partnerships must be greatly expanded. Public-private partnerships (P3) operate on fundamental principles that aim to optimize service provision and government responsibilities. These partnerships empower beneficiaries to select the most suitable service providers based on their needs. At the state and local levels, governments play a pivotal role in defining the scope and extent of P3 initiatives, spanning critical areas such as housing, health, education, infrastructure development, employment opportunities, and economic services. Meanwhile, the federal government assumes a broader role by establishing priorities, channeling financial resources to state and local entities as well as the private sector, and upholding national security, defense, and international relations. This collaborative framework ensures a dynamic interplay between public and private entities to address societal needs effectively.

Governments, businesses, and not-for-profits can improve program results accountability by clearly articulating missions in the context of statutory objectives and citizen expectations; reaching agreements on realistic, outcome-oriented goals, as well as roles and responsibilities and data needed to assess progress; developing implementation plans for goals and objectives and specific measures of progress toward achieving them; setting interim targets for operations; regularly reporting on progress; actively overseeing performance in key areas, and using strategic benchmarks when categorizing important citizen priorities.^[5]

What is obvious is that the government and private sector cannot take on health care, retirement security, tech development, and other activities alone. The private sector, citizens, and governments must work together as a team.

[1] US Congress, Government Accountability Office, “Collaboration Across Governments, Nonprofits, and the Private Sector” https://www.gao.gov/key_issues/collaboration_across_governments_nonprofits_private_sector/issue_summary (2/25/2019)

[2] Matthew D. Mitchell and Peter J. Boettke, Applied Mainline Economics, Bridging the Gap between Theory and Public Policy, Mercatus Center, 2017, page 62.

[3] Michael Polanyi, The Logic of Liberty, Liberty Fund, 1951 and 1998.

[4] Vincent Ostrom quoted in Paul Dragos Aligica and Peter J. Boettke, Challenging Institutional Analysis and Development: The Bloomington

School, Routledge, 2009, page 146.

[5] Based on the suggestions of Government Accountability Office, https://www.gao.gov/products/T-GGD-92-35, in their Performance Measurement: An Important Tool in Managing for Results.

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