Efficiency, innovation and the battle of the sectors

The Nonprofiteer feels compelled to dip her nose, toe or other appropriate appendage (watch it, buster!) into the discussion swirling around Stephanie Strom’s recent New York Times piece about value received for tax breaks to philanthropy.  In his letter to the Times, Maxwell King of the Heinz Endowments (current chair of the Council on Foundations) decides to trot out the Right’s favorite straw man, inefficient government that squelches innovation, to support his argument that foundations accountable to no one and responsible for nothing in particular are entitled to exemption from the taxes paid by us mere mortals who work for a living.

Whatever the merits of the familiar role-of-government-vs.-role-of-philanthropy debate, that claim can’t be permitted to go unchallenged.  Governments, in fact, are quite efficient; that’s why Medicare and Medicaid have less than half the overhead expenses of private health insurers.   To manage significant responsibilities, government officials accept compensation significantly lower than their counterparts in the corporate sector–or in the philanthropic sector, for that matter.  So which group is providing greater return on investment?

More important, let’s be clear about what "efficient" means.  If government has a record of failure in grappling with our most intractable social problems–and it does, alongside its considerable successes–that’s not only because it’s bothering to grapple with the tough stuff. It’s also because government is being innovative in its grappling.

How do we know?  Because failure is the hallmark of innovation.  Any research scientist or inventor will tell you that the only way to find something that works is to eliminate the infinite number of things that don’t–in many cases, by trying them.

That’s something to remember the next time a foundation with a record of win after win after win claims it’s more innovative than the
government.  If a philanthropy experiences nothing but success, that’s not a recommendation–it’s a warning sign, one that should make us wonder whether it’s doing
anything creative at all.  It’s not hard to bat 1000 if
you’re funding Carnegie Hall and Harvard; what counts is whether, and
how, you’re funding efforts to correct real problems.

And by the way, which is it?  That governments fail to innovate because they’re stodgy, or that they innovate and fail because they’re inefficient?  It’s time we stopped letting the Right–and the philanthropic establishment–have it both ways.


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One Response to “Efficiency, innovation and the battle of the sectors”

  1. Sam Davis Says:

    Failure is indeed a hallmark of innovation, but failure can also be the hallmark of continuing to do something the wrong way.

    Unlike private business and nonprofits, which are rewarded with extinction for continuing failures, government programs which fail are rewarded with larger budgets.

    The Nonprofiteer’s comparsion smacks just a bit of sophistry.

    And, while “the right” may trot out the “strawman” of inefficiency as a reason for government not to engage in a particular activity, libertarians would trot out one or two different favorites.

    Those would be (a) the ethics of spending vast sums extracted from all taxpayers for the benefit of relatively few – and that most certainly includes corporate and agribusiness welfare; and (b) the ethics of violating the fundamental protection of individual rights envisaged by having a federal republic as opposed to a majoritarian democracy; under the latter, anything and everything is up for grabs depending solely on current official policy.

    And let’s be clear about another thing: the right, which is neoconservative in the US today, is not truly pro-free-market. They say they are, but their policies are just as interventionist as those of the left. That interventionism translates, as it has under Democrats and Republicans alike, to ever-increasing violation of constitutional civil liberties at home and imperialist warmongering abroad.

    Bemoaning, for instance, the current administration’s wholesale violation of civil liberties and the Iraq War, the same people would gleefully turn over health care, and further centralize education, etc., in the hands of the same group of politicians and bureaucrats.

    That goes beyond any question of efficiency or inefficiency into the realm of magical thinking, i.e., that everything will be magically okay if we simply change the set of elected politicans we have running things for another set. Never mind that the two sets have exactly the same self-interests and are barely distinquishable from each other. Never mind that, unless deprived of unlimited access through taxation to the incomes of individuals, they will continue to tax and incur enormous debt to pass on to future generations.

    And certainly never mind that, in the 5000 year recorded history of human beings, the same pattern has been repeated over and over again with precisely the same results: tyranny as the final chapter.

    That would be a “strawman” for us libertarians to trot out, wouldn’t it, when every good American liberal knows that, with progressive policy and progressive leaders, we can create utopia here and now.

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