Total Government Outsourcing
A drastic application of a tested business technique: Outsourcing
This site is for
those who want to solve the economic problems of the country and
improve the standard of living of the people; it is for people
looking for solutions.
IF: We could double the country’s GDP?
Here is How
1. Government budgets and services do not necessarily need to be cut (as a result of this particular idea), but ALL of the human resources in government should be outsourced. However, elected politicians would maintain their full decisional power, as representatives of the people.
2. The Total government budget amount for the year should be set as a percentage of the current GDP. Politicians will be able to only appropriate that amount for government programs. Incidentally, they should deal only in percentages of the budget for each program, not refer to explicit amounts.
3. Only elected positions should be paid a salary directly by taxpayers. Government bureaucrats would disappear (including personal secretaries of politicians): They would become employees and contractors of private companies. Appointed positions should also be treated as independent contractors. If a person can be appointed, it can also be "disappointed" (pun intended).
4. What politicians cannot do personally should be outsourced through a public bidding process and paid according to the agreed budget allocations. No political appointments should occur (nor positions created) outside the elected positions enumerated in the Constitution.
5. From the very top level, a management company should be hired though a public bid, to manage the outsourcing of government programs to other companies through similar public bids.
But let's go in order and see fist why we have a need of such a basic reform and how TGO can accomplish the three initial claims, and more...
THE ROLE OF GOVERNMENT
Government Responsibility: the power of the peoples' representatives to take decisions.
In any free country the people have the power to govern, through their representatives. For example, in the U.S., the "Powers of Congress" are explicitly enumerated in the U.S. Constitution (Art. I, Section 8).
This responsibility includes the power to make laws for carrying into execution those powers.
Government Competence: the ability and competence of the people who carry out government programs.
The question of competence has generally been handled "by default". Once the elected representatives had voted to initiate a new government program, they automatically assumed that they (usually one of the government offices) could competently carry it out. If interested in history, you can click on: A bit of History and Data.
The first example of government outsourcing is in the US Constitution itself (Art. III, S.2). The founders realized that not every judge might be impartial. To avoid the situation where a private citizen could be criminally condemned by a corrupted judge, they established that the verdict in all criminal cases would be delivered by a jury. These people would not be employed by government and presumably would have no ulterior motives.
Their decision indicates that they believed that "outsourcing" constituted a citizens' defense against the possible corruption of government officials.
While complete nationalization has been tried (and failed) many times in many countries, no country has tried the opposite: complete privatization. Even countries like the U.S., which are criticized by some for their "capitalism", allocate only part of their human resources to wealth creation.
For example, currently in the U.S. more people work in various levels of governments than work in the good-producing industry. Some industries have been nationalized, others have been regulated out of business and, at the same time, the "Obamacare" massive legislation is in the process of nationalizing a large percentage of the US economy.
On the brink of Economic Collapse
During the last 200 years
we have delegated more and more to government.
Government Size is measurable in the resources it uses: such as assets, expenses, currency, future wealth (debt) and human resources.
Government has a tendency to grow and historically it has continued to grow. It uses more and more human resources to create bureaucratic, non-productive, service-oriented jobs. It started two hundred years ago with about 550 people elected to the federal government.
Today the federal government uses (i.e.: removes from production) almost 5 Million people (Source: US Office of Personnel management). At all levels of government, over 20 Million people in the US (Source: US Census Bureau) are employed by governments and their contribution to wealth creation is limited.
Over 20 Million bureaucrats in a work force of 121 Million is a significant amount. It is more than the total amount of goods-producing employees (Source: U.S. Bureau of Labor Statistics).
These 20 Million people are using the existing infrastructure, products and services, but are not contributing to wealth creation, apart from their ability to spend their own salary. In a competitive environment (i.e. when creating profits for their bosses) they could be providing the same services and also directly contribute to wealth creation through their work. If they were, then the GDP would double, tax rates could be reduced and government revenue would greatly increase!
The human resources dedicated to wealth creation have been exploited by governments which are non-competitive in the services they offer and compete unfairly in the salaries they pay.
Public Service Unions have no real counterpart to deal with and have unreasonably increased the salary of bureaucrats, with respect to their counterparts in the private sectors.
Public service efficiency and motivation are low. We are not able to measure the efficiency of bureaucrats, far less increase it.
We can do much better
We measure the wealth of a nation not by the number of people employed, but by the wealth people create. That’s the GDP.
Wealth creation works both additionally and exponentially: Not only any new idea, product or service increases the nation’s wealth, but there is an exponential component: every new idea, product or service can be used by someone else to produce more wealth. This cycle repeats itself over and over.
Wealth Creation Exponential Growth:
A Classless society?
Many people have a dream of a "classless society" in which people are evaluated and respected for their ideas and the work they are doing. In many respects and in a large measure we have achieved a better society with respect to a century ago. However, because of the increasing compensation disparity between private and public sectors, we are creating a new class division between the people who produce wealth and the people who administer the "rules of the game" for them.
The gap between these new classes is becoming of Orwellian proportion.
At the same time, we are not using the full potential of our human resources. We even have more people out of work.
Finally, because we are operating far from the optimum in the STING curve, the economies of the industrialized nations are not growing at the rates they were growing in the 60's, even though we have incredibly superior technology, better tools for production, improved and cheaper communications and improved personal productivity.
Total Government Outsourcing aims at eliminating these problems. It also aims at reducing corruption, reducing waste and costs, improving quality of service and improving the efficiency and the motivation of the people currently working in government, by "outsourcing" them to the private sector.
Because of the exponential features of wealth creation, the addition of a large number of people to the private sector work force (for example, 18%) can double the wealth being created (GDP) with advantages for all, but especially for the poor, the jobless and the disadvantaged.
Private businesses are missing much of the potential of our national human resources, which currently work in government.
The cost of a non-competitive government
The public sector margins (Budgeted amounts in addition to prime materials, salaries, administration and marketing – if any) go into expansion of bureaucracy, duplication and often unwanted products and services (See Figure 6). Essentially, the Public Sector tends to grow itself. Bureaucracies tend to deduct from the GDP.
The private sector margins go into taxes and profit. The goal of the private sector is to maximise profits. Profits are re-introduced in the market, thus produce more wealth and add to the GDP.
WHAT IF: We could balance the Federal budget every year? Reduce inflation to zero? Stop the devaluation of the dollar?
WHAT IF: We could drastically reduce the opportunity for public service corruption?
WHAT IF: Government bureaucracy could be reduced to practically ZERO and its 22 Million workforce transformed into new, efficient, customer-friendly, wealth-producing businesses?
WHAT IF: Every Public Sector Union could become a Private Sector Union?
The TGO Model:
An example of privatization of one particular sector of the economy:
At this point there may still be some confusion:
Is Total Government Outsourcing (TGO) proposing a reduction of government?
TGO, by itself, is not a way to reduce
government. It is a way to separate the
decision power of government representatives (how to allocate
government revenues), from the
mechanism of offering
government services, using people motivated to carry out their
provision competently and efficiently.
Is TGO proposing that every product or service should be provided by a private corporation?
Although products and services would provided by private corporations, the two distinguished private and public path of decision making are maintained (see discussion and tables below).
The objective of TGO is an efficient use of government revenues and a competent and efficient delivery of government services.
This is achieved by using the business model of outsourcing.
Outsourcing implicitly creates fair competition, through the process of open bidding.
As a consequence of fair competition, outsourcing would improve efficiency of operation and would provide closer services to what we, the people, require. It would also improve end-user satisfaction.
A more detailed analysis:
We can divide working people in the
We can divide working people in the following categories:
A. People working for themselves
(consultants, professionals, etc.)
A. People working for themselves (consultants, professionals, etc.)
B. People working for a business or
organization (full time employees).
B. People working for a business or organization (full time employees).
C. Elected (or constitutionally
C. Elected (or constitutionally appointed) representatives.
Furthermore, businesses and
organizations (all of them strictly speaking pursuing the goals
of the owners, shareholders, founders
directors) could be further classified according to their
"vertical market" as:
Furthermore, businesses and organizations (all of them strictly speaking pursuing the goals of the owners, shareholders, founders and directors) could be further classified according to their "vertical market" as:
working for private projects,
A. Ultimately working for private projects,
working for government projects, or
B. Ultimately working for government projects, or
C. a mix of the
C. a mix of the two.
the end of the chain", any person working provides a product or
service utilized in some project, either for:
Eventually, "at the end of the chain", any person working provides a product or service utilized in some project, either for:
private goal (a product or service requested by other people for
their enjoyment and pursuit of happiness), or for
1- a private goal (a product or service requested by other people for their enjoyment and pursuit of happiness), or for
public goal (a product or service requested by people as a "return"
common investment in Government),
2- a public goal (a product or service requested by people as a "return" for their common investment in Government),
Notice that the
end user is always a person, one of us "people".
Notice that the end user is always a person, one of us "people".
between the private path and the public path is
who decides how the money
is allocated (i.e: profits given, or losses shared).
The difference between the private path and the public path is who decides how the money is allocated (i.e: profits given, or losses shared).
Lets follow the
money initially given by the end user as part of the transaction
(acquiring a product or a service):
Lets follow the money initially given by the end user as part of the transaction (acquiring a product or a service):
In the above paths, if intermediate corporations participate in adding value to the final product or service, they maintain their profits. As usual, in a competitive environment, such profits are limited. Profits guarantee both motivation and quality. However, in the public path, the decisions about the whole path (e.g. which companies to hire, what services to provide, what quality to require, etc.) are taken by elected people's representatives.
TGO makes a distinction between government responsibility and government competence: Our representatives are responsible for the appropriation and decision of how to spend government revenues. Competence (knowledge, experience, efficiency, affordability, quality, responsibility and service), is best developed and advanced in a competitive business environment and not in a bureaucratic environment.
TGO maintains the difference between private and public paths. It maintains government "size" chosen by the people, measured as the total amount of money we are willing to spend on public services. The discussion about what is the optimum amount of government, is tackled elsewhere (See "Economic Optimalism").
TGO maintains the same amount of government revenues (today measured in the Trillions of dollars) and expenditures - although expenditures will tend to drop and revenues will tend to increase.
Our elected government representatives (as it is currently the case) will continue to debate which share of government revenues is allocated to each government program and how these revenues are spent in order to provide public services.
TGO only changes the way in which such money is used to carry out these services: i.e: through the normal practice of outsourcing, applied to all government levels.
Where to go from here: