Freeman

ARTICLE

The Inherent Inefficiency of Government Bureaucracy

JUNE 01, 1977 by ALLAN BROWNFIELD

There are few who will disagree with the fact that, in recent years, the governmental bureaucracy has grown dramatically while its effi­ciency has deteriorated in an equal­ly dramatic manner.

The data is instructive with regard to this state of affairs. In the twenty years between 1952 and 1972 the nondefense government payroll jumped 117 per cent. At the present time, there is one govern­ment employee in domestic services for every 5.5 workers in private employment, with a ratio of 1:9.3 twenty years ago. More individuals were added to government service in these twenty years than in the preceding 163 years since the founding of the United States.

From 1952 to 1972, the cost of the public payroll multiplied more than fourfold, from $35 billion to $150 billion. The 330 per cent increase over that period exceeds the 247 per cent growth of employee compensa­tion in private industries ($161 billion to $557 billion). In 1952, the average worker in private employ­ment earned 5 per cent more than his counterpart in government. By 1972, he had fallen 10 per cent behind.1

The growth of the government bureaucracy has been accompanied by a decrease in its rate of efficien­cy. Consider several examples.

Employment in the Department of Agriculture went up 47 per cent between 1952 and 1972 (78,000 to 115,000) although the number of farms in the U.S. dropped by 45 per cent (from 5.2 million to 2.9 million) and the farm population shrank 56 per cent (from 21.7 million to 9.6 million). More significantly, the cost of stabilization of farm prices and incomes multiplied seven times in this twenty-year period—from $689 million to $4,243 million.

In the Internal Revenue Service, the staff grew 28 per cent between 1952 and 1972 (56,336 to 72,085), almost parallel to the number of tax returns filed, which increased 26 per cent, from 89 million to 112 million. Yet, the number of tax returns per employee dropped from 1580 to 1554, even though during this same period the I.R.S. underwent its most intensive computerization and mechanization. At the same time, audits declined from 4.4 million to 1.7 million and delinquent notices from 19.8 million to 8.8 million.

Trends in Public Education

In the field of public education, enrollment almost doubled between 1952 and 1972 while the number of teachers and other school employees tripled. In 1952, there was one employee for every 14.8 students, while in 1972 there was one for every 9.2. Comparing the trends in public education and in other areas, Professor Roger Freeman notes that, "Trends in public education and in the American economy generally have been running in opposite directions. While throughout most of industry and agriculture, employee produc­tivity, that is, the ratio between manpower input and product out­put, has increased consistently and substantially, it has just as con­sistently and sharply declined in public education."

The fact is that there seems to be a decline in American educational standards just as the expenditure of money and the number of person­nel have dramatically increased. Results of scholastic aptitude test scores show a decline in almost every knowledge and skill area.

In yet another area of public employment, police protection, we find precisely the same trend. Dur­ing the 1952-1972 period there was an increase of 129 per cent in the number of employees while the U.S. population expanded only 33 per cent. There were 1.6 police employees per 1,000 population in 1952 and 2.8 in 1972. Despite this increased ratio of protection, crime did not decrease—it increased. Between 1957 and 1972, the U.S. population grew 22 per cent, the number of police employees in­creased 84 per cent—nearly four times faster—while the estimated number of crimes jumped 309 per cent, from 1.4 million to 5.9 million.

These examples are, of course, on­ly skimming the surface of the available material. A look at the regulatory agencies—the Civil Aeronautics Board, the Interstate Commerce Commission, the Food and Drug Administration, and the like—will bring us to the same con­clusion. So will a look at the U.S. Postal Service and, unfortunately, at almost every other U.S. govern­mental agency—including the Department of Defense.

Reasons for Inefficiency

There are some who look at this data, which is difficult to dispute in itself, and argue that the bureau­cracy needs to be reorganized, supervised in a better manner, be made more responsive to the peo­ple, and so on. The proposition they seem to accept is that bureaucracy is not necessarily inefficient and uneconomical in itself, but can be corrected. The more legitimate con­clusion to be drawn from the data, however, is that it is governmental bureaucracy which is inherently inefficient—and for a number of very good reasons.

That we are faced with gross inef­ficiency is clear. In a review of re­cent academic studies of govern­ment bureaucracy in The Public Ad­ministration Review (March-April, 1974), Kenneth F. Warren con­cludes: "The authors’ consensus, with Mainzer dissenting, is that American bureaucracy is guilty of gross mismanagement of the public interest. The real accountability crisis is that even if our bureaucrats act inefficiently and against our in­terests, as is too often the case, we cannot realistically hope for ad­ministrative abuses to be checked by the present ‘watchdog’ system."

Similarly, in the book, Democracy and the Public Service, Frederick C. Mosher found that professionalism in governmental bureaucracy and the power of the civil service pose a distinct threat to democratic con­trol; that is, they are self-serving rather than serving the public in­terest. In another study, Richard S. Rosenbloom, in the Harvard Business Review (September-October, 1973), noted that, "The largest employee group in the U.S. has shown the least concern for worker productivity. This seems ab­surd in a society that prides itself on management and efficiency, but the fact appears to be indisput­able. . . . Not only is productivity in these groups lagging, but little is being done about it . . . One is less surprised at the absence of evident productivity growth in government when it is recognized that none of the major forces operating in the private sector applies in govern­ment."

The fact which must be remem­bered is that inefficiency is by no means an accident in public enter­prise but is built into such non­competitive endeavor. In his impor­tant book, The Growth Of American Government, Dr. Roger Freeman makes this point: "We must recognize that, in contrast to private industry, where competition and the profit motive impose pressure for greater efficiency and a natural and generally reliable gauge of productivity, governmental pro­grams have built-in counterproductive trends. It is a natural tendency for a public employee to want to handle fewer cases—pupils, tax returns, welfare families, crimes—in the belief that he could do a better job if he had a smaller workload, and most certainly have an easier life. For the supervisor there is a definite gain in stature, position—and even grade—by having a larger number of subordinates. This and the ideological commitments to the program goals and methods of their professional fraternities provide a powerful and well-nigh irresistible incentive for empire building."

The Direct Beneficiaries

Government programs are so structured that the incentive is never to solve whatever problem is being dealt with—but to see to it that it is exacerbated, and that more money becomes necessary to fight it. In the so-called "War On Poverty," for example, programs were not designed to give money to the poor, whatever the merits of that would have been, but, instead, to give money to people who were to provide "services" to the poor.

The result has been that the only poverty such legislation corrected was that of its own employees.

Today, many thousands of well-organized individuals and groups have a vested interest in the con­tinuation of many otherwise useless and costly programs. This is the "Education-Poverty-Social Work­er" complex discussed by many who do care about the poor.

The cost of Medicaid, which is on­ly one of many such costly pro­grams, is now approaching $15 billion annually, more than triple the cost in 1970. The beneficiaries, largely, are not the poor, but the ever-growing number of profes­sionals who receive the money. The incentive is to spend as much as possible, not as little. The poor are simply pawns in someone else’s game. The same is true of urban renewal, job training, and a host of other bureaucratic programs. The poor are not helped—and are often harmed—while the building con­tractors and "job trainers" get rich with public funds. "Poverty," as Barron’s correspondent Shirley Scheibla has said, "is where the money is."

Child Care

The same is true with Federally sponsored child development and day care centers. The motivation for such programs is not the idea that the poor need help. It is, instead, the notion that the govern­ment is better equipped to take care of children than are their parents—a presumption which flies in the face of most medical evidence.

Dr. John Bowlby, a distinguished British physician, has done exten­sive study on the effect of material deprivation, entitled "Maternal Care and Mental Health." His conclusion: "It is plain that, when deprived of maternal care, the child’s development is almost always retarded—physically, in­tellectually, and socially—and that symptoms of physical and mental ill­ness may appear." This conclusion is corroborated by Dr. Jack Raskin, director of the Seattle Children’s Orthopedic Hospital Psychiatry Service: "There is no good substi­tute for the mother’s presence. The best day care center in the world cannot begin to compete in this regard with the average mother."

Whether we turn to medical care, housing, jobs or day care, the presumption of those who urge ex­pensive government programs is always that government is best equipped to efficiently deal with the problem. In fact, the idea of social programs to help people to help themselves has itself come to an end. Now, we seem content to place whole classes of people upon welfare or some other form of public sup­port, with little concern about their long-run well-being or the well­being of society as a whole. Un­fortunately, a class of people—government bureaucrats and those hired by government—profits from such a system. Professor Aaron Wildaysky summarized the situa­tion: "Middle class civil servants hired upper class student radicals to use lower class Negroes as a bat­tering ram against the existing local political system." In his book, In Our Time, Eric Hoffer points out that, "Those in charge were less in­terested in healing and conciliating the weak than in aggravating their illness and sharpening their grievances. Thus, by a perverted dialectic, our wholehearted effort to right wrongs was shown to be proof not of our concern for righteousness but of our present and past in­curable wrongness."

A War to Lose

Unfortunately, those who in­stituted the War on Poverty had a vested interest in losing it. If pover­ty were ever to come to an end, so would their jobs. The incentives in almost all such government pro­grams are negative—for, if they were positive, those carrying out the work would find themselves, before too long, unemployed. That is why, as was indicated earlier, the number of employees at the Depart­ment of Agriculture increases each year—while the number of farmers declines.

We have thus come to the point where the real constituency of government’s expensive social pro­grams are the bureaucrats themselves. Former Senator James Buckley notes that, "We must count not just the numbers of in­tended beneficiaries, but the enor­mous influence and wealth of the in­terests that are their indirect beneficiaries—interests that can play an extraordinarily persuasive role in defining the areas of ‘com­passion’ they are called upon to ser­vice."

Ludwig von Mises on the Nature of Bureaucracy

The evidence is persuasive that government bureaucracy is in­herently inefficient precisely because it is not faced with any of the forces which make private business management its opposite. This point has been made frequent­ly. In his book, Bureaucracy, Lud­wig von Mises goes to some length to explain it. He declared that, "It is a widespread illusion that the effi­ciency of government bureaus could be improved by management engineers and their methods of scientific management. . . . What they call deficiencies and faults of the management of administrative agencies are necessary properties. A bureau is not a profit-seeking enterprise; it cannot make use of any economic calculation. . . . It is out of the question to improve its management by reshaping it ac­cording to the pattern of private business."

To those well-meaning but ill-informed observers of bureaucratic inefficiency, Von Mises addressed this message: "No reform can remove the bureaucratic features of the government’s bureaus. It is useless to blame them for their slowness and slackness. It is vain to lament over the fact that the assiduity, carefulness, and painstaking work of the average bureau clerk are, as a rule, below those of the average worker in private business . . . In the absence of an unquestionable yardstick of success and failure it is almost im­possible for the vast majority of men to find that incentive to ut­most exertion that the money calculus of profit-seeking business easily provides. . . . All such defi­ciencies are inherent in the per­formance of services which cannot be checked by money statements of profit and loss."

The Reorganization Snare

It is high time that those speak­ing of governmental "reorganiza­tion" understand that this is not, in the long run, the proper manner in which to approach the question of an ever-increasing and increasingly expensive and inefficient govern­mental bureaucracy. In an impor­tant article, Rowland Egger, writ­ing for the National Tax Association, discussed the whole notion of "administrative reorganization." He provided this assessment: "The attempt to sell administrative reor­ganization legislation on the basis of tax reduction, however honorable the motives and however laudable the hopes of those who support ad­ministrative reorganization for this reason, is a snare and a delu­sion. . . . Administrative reorgan­ization never saved large sums of money. . . . The plain fact is that the only way to save significant sums of money in the federal establish­ment is to eliminate activities and reduce the scale of operations. . . . There is no royal road, no painless way, to government economy."

A projection of governmental employment trends to the year 2000 would show that government employees totaled 16.2 million in 1972 and had increased 124 per cent in nondefense positions in the preceding twenty years. If these trends were to continue for the balance of the century, defense employment would fall an addi­tional 1.3 million to 2.2 million, while all other governmental employment would triple from 12.7 million to 39 million for an ag­gregate of 41 million in the year 2000. The entire labor force has been projected to rise from 89 million in 1972 to 112.6 million in 1990. It could reach or exceed 120 million by the year 2000. Assuming that 94 per cent of the labor force were then employed, there would be 113 million jobholders of whom, ac­cording to these projections, 41 million, or 36 per cent, would be in government.

The Trends Projected: All Government!

Professor C. Northcote Parkinson in 1958 calculated that if the trend in Britain’s public employment were to continue at the prevailing rate, everyone in Britain would be working for the government by the year 2195. In 1971, New York’s Morgan Guaranty Trust Company applied the same idea to the U.S. and found that if things continued at the present rate, every American would be on the public payroll by 2049—a century and a half sooner than in Britain.

The illusion that bureaucratic in­efficiency can be corrected should come to a rapid end. Such inefficien­cy is inherent in public enterprise. Once this premise is accepted, it will rapidly be seen that the only form of government reorganization which will be effective is to reduce government itself. Whatever the reformers of bureaucracy may tell us, the inefficiency of the bureaucrats is no accident.

 

—FOOTNOTES—

1 These and other statistics that follow are from The Growth of American Government by Roger A. Freeman (Stanford, California: Hoover Institution Press, 1975).  

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June 1977

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