Friday, June 11, 2004

Too much talent in government 

In an interview broadcast on television on Tuesday evening, Senior Minister Lee Kuan Yew said that in global competitive rankings, Singapore scores very highly on its public sector systems but not on criteria such as the level of entrepreneurship and venture capital. He suggested that there is “too much concentration of talent, drive and energy in the public sector”.

His remedy? “Let half go, let one third go and get them to be entrepreneurs, not just managers,” he suggested.

Will the suggestion work? Doubts exist.

In an editorial today, The Straits Times pointed out: “Business leaders and aspiring businessmen have on occasion assailed civil servants for being rule-bound and tone-deaf to the dynamics that drive businesses. The two categories of talent and energy are as different as chalk and cheese.”

Nevertheless, the editorial acknowledged that with talent so scarce, the government would have to allow more to move into the private sector.

“In the end, it could boil down to making the public service less of a cocoon,” the editorial suggested. “In some positions, it pays much too well relative to what firms pay. There is security of tenure. Bureaucrats do not face the terrors of market appraisal to the extent found in companies.”

What was not mentioned explicitly by either SM Lee or The Straits Times is that a re-allocation of talent from the public sector to the private sector can raise the overall efficiency of the economy, regardless of whether they become entrepreneurs or not.

The government bureaucracy is an inherently inefficient form of organisation. Whatever services it provides, it does so as a monopoly. Therefore, there is no proper, free-market-based measure of the value of the services, and hence, no proper measure of the value of its output. That in turn means that there cannot be a proper measure of the efficiency of a government bureaucracy.

As the management slogan goes: “If it can’t be measured, it can’t be managed”.

So government bureaucracies cannot be properly managed. Having talented management in government probably reduces mismanagement, but it cannot reduce it to the same level as it potentially can in the private sector.

However, governments cannot be done away with altogether simply on grounds of its inefficiency. Law and order can only be provided by a government. The same with national defence. And natural monopolies will arise even in a free market; some sort of regulated, arbitrary management will always be required for such services.

The only viable solution is to limit the role of government as much as possible in order to avoid its inevitable inefficiency. This in turn means limiting the amount of resources, including the amount of talent, going to the government.

The resources and talent can instead go to the private sector, where they can potentially be more efficiently utilised.

If this is what SM Lee’s suggestion leads to, then I am for it.


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