Private is just the public minus one

Brian Tue, 2011-05-10 11:00

Do you know how big the largest possible private sector organization is? That's easy. It's the public sector, minus one.

That's the essence of the private sector—it excludes. In fact, that's the point of the private sector. It's the definition of the private sector.

It's not that the public sector is essentially different from the private sector—it's just big, and inclusive. It's not that the public sector behaves differently from the private sector—it behaves like a very large, inclusive organization. As private sector organizations become very large, they act more like the public sector than like small, private organizations, simply because they're large.

They become more bureaucratic. The need for large-organization accountability systems is a drag on innovation. Think IBM, Microsoft. The people in one part of the organization don't have a clue what the people in other parts are doing. What the heck are they doing, anyway? How does that help? Management is more distant. Etc.

If there is a benefit to being part of a private sector organization, then those that are not a part of the organization are excluded from those benefits. The fact that other members of the largest possible private sector organization, plus one—the public—are excluded from those benefits is what makes the creation of wealth possible.

The point of the public sector is that everyone is included. Everyone benefits.

We're not very good at this, the inclusion of everybody, because we've only been doing it for about three hundred years. And it's hard. Including everyone means we have to abandon the struggle for the fittest to survive, which we've been doing for tens of thousands of years. Many of our deepest-seated reflexes (e.g. fight or flight) are there because they give individuals a leg up in the process of natural selection.

Many of the leaders in democratic societies—and many of their electors—don't get it yet. They think of acquiring the right to hold the reins of the public sector as a good way to make sure a subset of the public gets the benefits, in essence running the public sector as if it were a private organization.

So the leaders of our society try very hard to convince us that the creation of wealth is very important to us, even though most of us are excluded from the benefits of its creation. Largely, they've succeeded.