There are, especially in Europe and East Asia, and to a limited extent in the Western Hemisphere, small countries that are well governed. But among large, populous countries, there appears to be only one well-governed country: Germany. The United States is the third largest country by land mass (after Russia and Canada) and population (after India and China), the wealthiest, the militarily most powerful, and generally regarded as the leading nation in the world—its geopolitical center. But all these are negatives from the standpoint of governance, as are the nation’s ethnic and cultural diversity, political divisiveness, high crime rates, and highly unequal distribution of income. Another major negative is the difficulty of changing the U.S. Constitution. Although there have been a number of amendments, the basic structure, set by the original Constitution of 1789, has not been changed significantly.
A serious problem of governance, or management, that all but the smallest organizations, whether private or governmental, encounter is the tension between the goals of the organization and the personal goals, which typically differ, of the individuals who comprise the organization. Stated differently, the individuals have personal utility functions that differ from the organization’s utility function. The larger the organization, the greater the divergence is likely to be and the more difficult to minimize. The organization that is the federal government of the United States has more than 4 million employees.
Competition between organizations is an important control on the divergence (which economists refer to as “agency costs”—the costs created by the fact that the employees of an organization have their own goals that often conflict with those of their employer). But nations do not feel the same competitive pressures as corporations. Even a small, miserable, effectively bankrupt nation like Greece does not disappear, as large corporations not infrequently do, because of its inefficiency. Because corporations are simpler and smaller and also more constrained by competition than nations, we can expect them to be managed more efficiently, and specifically to adopt an organizational structure that minimizes agency costs. So let’s glance at the structure of the typical large corporation and compare it to our federal government structure. There will be a board of directors to exercise a general but loose supervision over the corporation (and in turn subject to very loose control by the shareholders), intervening decisively only in crisis situations or where there is vacancy in the office of the Chief Executive Officer. The CEO will be the dominant figure in the corporation, exercising something close to dictatorial power, assisted by a small personal staff. Often he will overshadow the chairman of the board of directors—he may even double as chairman and CEO. There will be a Chief Operating Officer, exercising day to day management, while the CEO, as the public face of the corporation, will formulate policy, provide overall guidance, inspiration, and “vision,” appoint the major subordinate corporate officials (general counsel, chief information officer, chief financial officer, etc.), and maintain personal relations with important investors, customers, competitors, and regulatory officials. The corporation will have several or many operating divisions, reporting to the COO or CEO, each headed by a vice president or equivalent. The employees in each division will serve at the pleasure of their superiors; no one will have fixed tenure.
Compare the federal government. The closest to a board of directors is the Congress, but it differs mainly in having a good deal of policy responsibility, and, since it does not appoint and is not appointed by the President (corresponding to a corporate CEO), there is no presumption that its policy preferences will coincide with the President’s. The President’s exercise of his own policymaking powers will often work at cross-purposes with Congress’s exercise of its powers; nor can he appoint senior officials without the concurrence of a division of the Congress, namely the Senate. A further dilution of presidential power results form the existence of an independent federal judiciary, headed by the Supreme Court. Federal judges and Justices have lifetime tenure, can invalidate legislative and executive action both federal and state, and rarely (because of that tenure) will a President be able to appoint a majority of the Supreme Court Justices or other federal judges.
The President has a personal staff (officially the “Executive Office of the President”) that numbers more than 2000. The staff assists him in overseeing the large number of “divisions” (executive departments, such as State and Defense and free-standing agencies such as the Environmental Protection Agency) into which the federal government is divided. The heads of these divisions, however, do not have hiring or firing authority, as a practical matter, over most of the employees, who are tenured civil servants. The heads serve short terms, and often are appointed for political reasons unrelated to experience or competence. The brevity of their terms and frequent lack of relevant skills or knowledge create tense relations with the tenured bureaucrats. As a result, the President’s control over the more than 4 million federal employees (of whom about 40 percent are military) is as a practical matter quite limited.
A further division of government is brought about by federalism: the division of the nation into 50 states, each with quasi-sovereign powers. The federal government has considerable power over the states, but far less than a CEO or COO would have over the operating divisions of their corporation.
The structure of the federal government reflects the state of the nation in the eighteenth century. The population was roughly 1 percent of what it is today, there were only 13 states and as a result the Congress was small, and the federal government was tiny. It is doubtful that starting over in today’s circumstances a constitutional convention would create a similar system.
The most glaring deficiency is the limited authority of the President and the absence of an official corresponding to the Chief Operating Officer of a private corporation. From an efficiency standpoint the President should be able to promulgate laws (not just regulations), subject to override by supermajorities of Congress; appoint subordinate officials without the concurrence of the Senate; and create a position analogous to that of a COO; this would result in a structure analogous to that of France, which has both a President and a prime minister, the latter being in charge of day to day governmental operations (though France is not an example of a well-governed country). The President should also be authorized to control the finances of the states, alter their boundaries, appoint their principal officials, and veto their laws. And no civil servants should have tenure. The result of all these changes would be to conform American government to the “government” of a large private corporation.
Maybe the President would become the “outside” partner and his Chief Operating Officer the “inside” partner, the former dealing with relations with foreign countries (in the broadest sense, comprehending not only foreign relations in the conventional sense, but also immigration, trade, and military assistance and intervention), the latter with the formulation and implementation of domestic policies.
Of course these are not feasible reforms. Anything that strengthens the President weakens other sources of power, not only in the government itself (legislators, civil servants) but also in the private sector, which through campaign donations and other forms of political activity exert a powerful and self-interested influence on governmental action, resulting in enormous waste and perversity.
In an interesting and ominous book by Joseph A. Tainter called The Collapse of Complex Societies (1988), the author points to historical episodes of collapse of societies that had become too complex to manage effectively, such as the Mayan civilization of Central American and the Western Roman Empire. Successful societies, such as Britain, the United States, and Germany, in the nineteenth century, and Japan and the Soviet Union in roughly the first half of the twentieth century, tend, like successful companies, to expand. Expansion makes governance more complex, which can lead to ungovernability and eventual collapse. Companies that become ungovernable can shrink to a manageable size by selling off parts of themselves; or they can simply liquidate, in which event their assets are sold to other companies. There are examples in the government sphere, as in the peaceful division of Czechoslovakia into Slovakia and the Czech Republic, or the peaceful dissolution of the Soviet Union, but more often such fragmentation is involuntary, often indeed violent.
