Schumpeter; Money and Power, Economist, 2nd October 2010

Again we find that this relatively new column in the Economist discusses a topical theme in a thought-provoking way. It makes the point that business people and business skills rarely transfer into the political and public service environment, whether it is the USA, UK or the rest of Europe.

The article starts by describing the most recent examples of business people going into politics, both female; Meg Whitman, founder of EBay and Carly Fiorina, former CEO of Hewlett Packard are both spending some of their fortunes on political ambition. Whitman is trying to displace Arnold Schwarzenegger as Governor of California and Fiorina to secure a Senate seat.

Schumpeter also quotes the UK’s new coalition government and their decision to bring in high profile figures like John Browne and Philip Green to work in government. However it is early days to evaluate these moves and it might have been more relevant to describe the failed transitions into politics of successful industrialists like Archie Norman and Digby Jones, who could not cope with - or tolerate - the very different pressures of political life.

The article confirms that, in general, the transfer of business skills to the public sector is not easy and should not be assumed. In the USA there have been a few honourable exceptions - Michael Bloomberg, Mayor of New York is mentioned - but many more failures, the most notable of whom were Paul O’Neill and Donald Rumsfeld from the Bush regime.

The reason for the majority of failures is that very different skills are required in the public sector environment; bosses tend to be more protected in the private sector and can make better use of their leadership charisma; also they are less constrained by regulation and employee resistance. Schumpeter argues that, rather than trying to make these difficult transfers, it would be better to make the public sector develop more choice and competition in its decision making. However, this begs the question - who else is likely to introduce these disciplines, apart from business managers?

As often happens with Economist articles, the reader is left wanting more and I would certainly have liked to explore the above question further. It would also have been interesting to explore whether, after the relative success in politics of Schwarzenegger, Heston and Reagan, could it be that the skills of a film actor are more transferable to politics than the skills of a business person?

Click here to read the article in full;
http://www.economist.com/node/17147638