Leadership in Politics and in Commerce

The effectiveness of business leaders is measured by the bottom line: whether their actions increase company profits.  Lots of people would like to hold management positions, all the way up to corporate CEO, and the way commercial leaders are selected is by their records at enhancing their companies’ bottom lines.

I would stop short of saying the purpose of a business is to earn a profit.  For example, the Ford Motor Company was created for the purpose of making automobiles, and Microsoft was created for the purpose of making computer software.  But the measure of their success in making automobiles and software is the profit those companies earn.

Commercial leaders are chosen based on their ability to produce profit for their companies.  People who enhance the bottom line are promoted into higher leadership positions.  The metric used to select commercial leaders is the same metric that measures their effectiveness.

The effectiveness of political leaders is their ability to implement policies that enhance the general welfare.  This is a difficult metric to evaluate, because different people will have different ideas, and there is not a common denominator like dollars in which it can be measured.  I am going to gloss over this detail, however (and, it may be a major detail!), to note that the political campaigning skills it takes to be elected are not the same skills it takes to design and implement welfare-enhancing policies.

A winning political campaign is always deliberately vague, because lots of people will support calls to improve the status quo, whereas fewer people will support any specific policy alternative to the status quo.  President Obama won his election by campaigning for a deliberately vague “hope and change.”  The slogan has no real content.  I am not criticizing him for this.  That’s the way to win an election.

I’m not thinking of particular policies here, although there is an obvious bias toward bigger government.  Winning campaigns promise voters lots of benefits, at no cost to themselves.  More than a century ago Alexis de Tocqueville noted that the art of winning democratic elections is bribing people with their own money.  But I’m thinking about the competence of political leadership here, not the specific policies they propose.

Pro golfers are great athletes, as are pro football players.  But football teams don’t select their players based on their golf scores, and the PGA doesn’t decide who plays in their tournaments based on their ability to play football.  We do something like that in government, though, because the skill sets for those who succeed in electoral contests are different from the skill sets of effective policy makers.

My point is, the skills required to win an election are not the same as those required to implement welfare-enhancing policies, so the whole electoral process is designed to select political leaders who are less-than-ideal for those positions.  This contrasts with leaders in commerce, who are chosen by the same metric that measures their commercial success.

Randall G. Holcombe is Research Fellow at the Independent Institute and DeVoe Moore Professor of Economics at Florida State University. His Independent books include Housing America: Building Out of a Crisis (edited with Benjamin Powell); and Writing Off Ideas: Taxation, Foundations, and Philanthropy in America .
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