Government Systems

Self-Destructing Governments In Crisis

Editor's Note: I was going through some old documents, and found this article that I wrote twenty years ago. And it sure seems to me to be accurate and timely for today, 2013.

The recent budgeting exercises at the civic, provincial and federal government levels, have many things in common. First, they involve sustained efforts to reduce costs by re-examining service and cutting service. Second, the discussions, and examinations are being undertaken in a climate of crisis, where important decisions need to be made in a very limited time period. The third commonality is that it appears that there are constant shifting sands on which to build, as governments seem to be finding new bad news as they go through this process. This has resulted in the need for altering budget decisions after they have been made.

What is amazing about this situation is that it is occurring at all government levels, in many North American governments regardless of political stripe. Certainly, the state of the world and North American economies contributes to these economic crises. But there is no question that the way government works tends to foster and create the kinds of budgeting crises that are being faced now.

The Self-Destructing System

Historically, governments sow the seeds of their own economic disaster during the good economic times. Much like a farmer who exploits the land during prosperous times, only to realize that he has stripped it naked for the future, governments tend to expand in size and budget when the economy is flourishing.

Martin Webber, a consultant for a prominent international consulting term out of Washington notes that governments will expand in all but the worst of times. They cycle up in size, only to have to downsize in tougher times, but tending not to downsize back to their original or optimal size. In other words, they get bigger and smaller, but always end up bigger. This wouldn't be a problem IF the increase in size was sustainable, and based on stable, predictable increases in tax base and revenue. It would not be a problem IF the allocation of resources during "good times" was done within an investment framework. In other words, during good times, a government that allocates its resources in ways that will expand the tax base and increase future revenue will be able to ameliorate the problems that result from tougher times. That hasn't been the case (or perhaps it just hasn't worked very well).

What we are facing now is the harvest, or lack thereof. During better times, government expanded its commitments and staff, and in turn became less productive. The problem being that this growth did not contribute to economic growth sufficient to sustain government growth.

Short Term Thinking

The other factor that underlies the current budget crises is the government focus on achievement of short term objectives rather than looking to the longer term. Once economic crisis hits, it is understandable that those charged with addressing the crisis, focus on achieving the immediate and urgent financial goals that arise from it. It is understandable but ultimately ineffective. What is worse, though is the emphasis, during "good times", on the achievement of short term political or economic goals.

The entire system of government is geared to short term functioning. Estimates and budgets are confined to single year spans. While departments may plan strategically for longer periods of time, there is no guarantee that these plans will be practical due to the uncertainty of budgeting processes. Money saved in any one fiscal year is gone forever, so there is no reward for increasing cost effectiveness over a span of years, while there is usually a reward for short term spending of surplus funds.

The short term focus also affects staffing, succession planning, and other human resource issues, creating a number of barriers to developing an efficient, skilled and stable talent base in the civil service.

In short, the entire system of government, by focusing on short term expediency, and not rewarding long range fiscal planning, creates crises. And financial crises push governments into further short sighted expedient decisions which can have devastating effects in the following years.

No Fault

Who's at fault? Nobody and everybody. It is a waste of time to figure out who drives this process, since it is inherent in the way most governments work. Everyone plays the game, because the rules tend to go unquestioned, from the top of the political hierarchy to the bottom of the civil service system, we tend to accept that this means of decision making is normal. It is part of our government culture. It is also part of our culture to blame someone else.