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President Obama schools Silicon Valley CEOs on why government is not like business

The hoariest chestnut in the larder of anti-government conservatives is that government should be run like a business. This assertion is typically just a stalking horse for policies that narrowly benefit conservative patrons — lower taxes on corporations and the wealthy, less regulation, the contraction of social programs … you know the list.

President Obama frequently has pushed back against this viewpoint, most forcibly in remarks last week at Carnegie Mellon University in Pittsburgh. The White House Frontiers Conference on Thursday aimed to promote the administration’s initiatives in science and technology, but Obama took a couple of moments to remind his audience of high-tech adherents that while Silicon Valley may produce lots of cool stuff that can improve our lives, its methods are no substitute for the principles of government.  Let’s hear him out, at length:

“Government will never run the way Silicon Valley runs because, by definition, democracy is messy,” Obama said. “This is a big, diverse country with a lot of interests and a lot of disparate points of view. And part of government’s job, by the way, is dealing with problems that nobody else wants to deal with. 

“Sometimes I talk to CEOs, they come in and they start telling me about leadership, and here’s how we do things. And I say, well, if all I was doing was making a widget or producing an app, and I didn’t have to worry about whether poor people could afford the widget, or I didn’t have to worry about whether the app had some unintended consequences … then I think those suggestions are terrific.

“Sometimes we get, I think, in the scientific community, the tech community, the entrepreneurial community, the sense of we just have to blow up the system, or create this parallel society and culture because government is inherently wrecked.” 

It’s worthwhile to unpack some of this bit by bit. Obama’s point that government takes on jobs that “nobody else wants to deal with” — often, indeed, that no one in the private sector can deal with — is important.

There are two main circumstances when the public sector must perform a job, rather than private enterprise. One is when the task is so large or complex that no private entity can detect potential profit in it. That was the case with the Internet, which began as a Pentagon effort to force its disparate computer science grantees to communicate with each other in a single language. 

At the time, every computer manufacturer based its products on proprietary hardware and mutually unintelligible software languages. The nation’s communications network was under the thumb of AT&T, a private monopoly that resisted opening its voice lines to data communications, pleading that doing so would wreck the system. If the government wanted a data network, it would have to build it on its own, working around the AT&T monolith. Once the so-called ARPANET matured and proved its value, private companies were ready to step in, and the government allowed the system to become privatized.

A similar process gave birth to Hoover Dam. California farmers and municipal boosters agreed on the necessity for harnessing the Colorado River for flood control, irrigation supply and hydroelectricity, but while growers were willing to fund a canal, and electric utilities were willing to build a generating station, and cities were willing to build electric lines to light their streets and power their factories, no one was prepared to take on a single project that achieved all three goals. So the federal government fronted the money and supervised the construction of a record-breaking dam, and upon its completion, turned its bounty over to the beneficiaries (for a price). 

Interstate highways? Private enterprise wouldn’t build them, but they’re happy to have them. 

The discomfort that anti-government forces feel with this concept is clear from their reaction the first time Obama discussed it. That was in his famous “you didn’t build that” speech during the 2012 presidential campaign. Obama’s words have been misrepresented to mean that small business owners and entrepreneurs deserve no credit for their lifetimes of work, but his point was wholly different. Again, his words in context:

“Look, if you’ve been successful, you didn’t get there on your own. … If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. … The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. So we say to ourselves, ever since the founding of this country, you know what, there are some things we do better together. … We rise or fall together as one nation and as one people.”

Obama wasn’t the first to articulate the idea that even the most independent business builds on the infrastructure, legal safeguards and security provided by government. In recent years, it can be traced back to linguist and political theorist George Lakoff, who observed in 200: “There is no such thing as a self-made man. Every businessman has used the vast American infrastructure, which the taxpayers paid for, to make his money. (See video below.)

Elizabeth Warren, in her 2012 Senate campaign, picked up the theme: “There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But you moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate.” 

All three were making the same point implicitly: Promoters of anti-government ideologies almost always ignore all the benefits that government has given them.

That brings us to Obama’s other major point: that it’s government’s responsibility to limit the inequities inherent in a free-market system. Markets are good at allocating capital resources, but not everyone comes to the market with equal standing. The producers of widgets and apps have their eyes on the main chance — hoping that serving a market will benefit them personally.

But there’s lots of collateral damage inherent in the free market — in “blowing up the system,” as Silicon Valley entrepreneurs like to say. Such explosions are great for the bomb manufacturers, but not so much for innocent bystanders.

Uber and Lyft have brought considerable benefits to ride-seekers and probably to the company’s founders, but at the expense of their drivers, who now have to shoulder expenses that in the past often were borne by taxi fleet owners. Who’s looking out for them? Government agencies, including the Department of Labor and the National Labor Relations Board. Not the board of directors of Uber.

The business model of drug companies such as Turing and Mylan exploits shortcomings in the regulatory system, but their sky’s-the-limit pricing strategies victimize patients who can’t afford their life-saving drugs. 

Obama made the case that “blowing up the system” because it doesn’t serve entrepreneurs perfectly is the wrong answer. No, he said, government “is not inherently wrecked; it's just [that] government has to care for, for example, veterans who come home. That's not on your balance sheet, that's on our collective balance sheet, because we have a sacred duty to take care of those veterans. And that's hard and it's messy, and we're building up legacy systems that we can't just blow up.”

He’s correct. Private companies work well when they need to concern themselves with their own balance sheets. But that’s not how government works. Caring for veterans, or the poor or aged appear on the surface and in the short term to be liabilities on the public ledger. But in the long run, they’re assets, because they underscore the cohesiveness of society, which is priceless. What’s sad about this is that President Obama’s statement of the principle needs to be repeated over and over again, time without end.

Keep up to date with Michael Hiltzik. Follow @hiltzikm on Twitter, see his Facebook page, or email michael.hiltzik@latimes.com.

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