As special interests drag down government, private entities move to public’s aid

If you’ve heard it once, you’ve heard it a thousand times: The biggest barrier to a prosperous American economy is the U.S. Congress.

Cynical, no doubt. But true in important ways not seen for generations.

The Economist, an internationally respected news magazine, recently ran a big piece on “the America that works”-- the ordinary Main Street economy, far from the hyperpartisan babble of Washington.

Among the findings: America’s politicians have been “feckless” about resolving the looming structural problems facing our economy. “The politicians in Washington have not inflicted any crippling damage yet,” but “the combination of dysfunctional politics and empty coffers is preventing Congress from dealing with the economy’s other obvious shortcomings.”

A case in point: America’s big businesses are sitting on a $2 trillion mountain of cash, afraid to invest because they can’t imagine Washington’s bickering, gridlocked politics ever fixing anything.

But The Economist also found that under the blaring headlines, the “real” economy is doing pretty well. Both the jobs and the housing markets are coming back. The stock market has returned to levels not seen since 2007.  Investment in research and development is back to record highs.

States act as policy laboratories

States and localities, pressed for cash, are innovating like crazy. Louisiana and Nebraska are talking about abolishing corporate and personal income taxes. Kansas has a “Repealer,” somebody charged with getting rid of red tape. Our own Gov. Rick Snyder has an ongoing program of eliminating obsolete state regulations.

Nationwide and in Michigan, schools are undergoing the biggest overhaul in memory. Michigan’s new, rigorous core curriculum is toughening up standards, while schools and teachers are being held accountable for results. Michigan has taken the cap off the number of charter schools, designed to fill gaps left by poor public schools, while the worst schools are being forced into the Educational Accountability Authority.


But more interesting and possibly more significant is the growing movement for business, individuals and nonprofits to move forward in vigorously creative ways while the public sector flounders.

Examples abound:

*The Kalamazoo Promise, funded by wealthy families in town, provides tuition to graduates of the public schools, thereby increasing school enrollment and stabilizing the local housing market.

*In Grand Rapids, ArtPrize offers big prizes (tops $200,000) to artists who exhibit their work downtown and are judged by public vote.  Now approaching its fifth year, the program is driving enormous crowds to the city.

A brainchild of city government? Nope. Social entrepreneur Rick DeVos dreamed up the idea, with the backing of his wealthy and civic-minded family.

*In Detroit, ground zero of municipal incompetence, multiple parts of city government in recent years have been off-loaded to a series of non-public bodies: Cobo Center, Eastern Market, Detroit Historical Museum, Riverwalk.

Bigger institutions – the Detroit Zoo and the Detroit Institute of Arts – are owned by the city but managed through nonprofits.

*And the philanthropic community, especially in Southeast Michigan, is pouring millions into restructuring and re-tasking lagging public institutions. Especially important are Michigan’s great foundations – Kellogg, Dow, Frey, Kresge, Hudson-Webber, Skillman, McGregor, Mott – and civic-minded corporations – DTE, PVS Chemicals, Masco.

All this suggests to me that something important is going on under the surface. For generations, we assumed the government and the public sector were responsible for, and competent to manage, tasks resulting in the general good of our people. Increasingly, not so.

What instead has grown up over the years are encrustations of single interests that tilt public institutions toward their parochial benefit. Public sector unions extract fat contracts from city councils and school boards whose members are elected by union votes. The fate of former Detroit Mayor Kwame Kilpatrick suggests a long-standing “pay to play” culture in Michigan’s biggest city.

With the economic pressure of the Great Recession compounding political polarization, we now see increasingly poor performance by government and other public institutions. It’s no surprise that business, philanthropy and civic-minded families are beginning to fill the gaps -- saving money, getting results.

All this raises fundamental questions about both the proper functions and governance of government. If public institutions are twisted by single interests and political considerations, isn’t it time to begin to question what exact role those institutions should have in our society?

Editor’s note: Former newspaper publisher and University of Michigan Regent Phil Power is a longtime observer of Michigan politics and economics. He is also the founder and chairman of the Center for Michigan, a nonprofit, bipartisan centrist think–and–do tank, designed to cure Michigan’s dysfunctional political culture; the Center also publishes Bridge Magazine. The opinions expressed here are Power’s own and do not represent the official views of the Center. He welcomes your comments via email.

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Bill Vajk
Tue, 04/09/2013 - 9:42am
The state of Michigan executive branch of government is just as "feckless" about requiring local governments to keep their place, that is, to observe the state constitution and statutes. Municipalities routinely ignore state law limiting their power and intrude on the state's federal constitutional authority to impose conditions unless some citizen or group is willing to take them before the judicial branch to enforce the laws. The executive branch at the state level has become complicit, a subsidiary of local government. The tail wags the dog. Is it any wonder that other states are preferred by investors? Bill Vajk
Paul T
Tue, 04/09/2013 - 11:08am
I think you might find interesting a blog entry titled "What Gives Rise to 'Crony Capitalism'?" at The Independent Institute. The author, Carl Close, mentions a recent article by an economics professor who attempts to clarify what is meant by the popular term "crony capitalism". The professor asserts that crony capitalism "is a by-product of big government.". It's plausible to claim that "'crony capitalism' grows as the profitability of businesses comes to depend on how well businesses can secure government subsidies, tax breaks, and regulations that work in their favor." But I'm not convinced that the by-product theory explains crony capitalism well enough to account for the causes of "big government". Take for example the activity of the federalists, who could talk a good game about liberty but whose behavior suggested a pre-existing interest in using government as an engine for rigging commerce, not to mention for empire building, as hinted in the first paragraph of Federalist No. 1. It seems to me that crony capitalism in the USA was not merely a by-product of big government but something which was envisioned before the establishment of big government. Crony capitalism was instituted on purpose to serve the interests of corrupt and insatiably greedy go-getters. And what about the practice of using government to sanction slavery and to serve slave holders, even before 1776? This behavior seems to fit the pattern of crony capitalism, but was it not true that greed was a motive for establishing government big enough and powerful enough to serve the slaveholders and slave traders? Here too it seems that crony capitalism wasn't a secondary product of government but a primary one that motivated establishment of a big, powerful government to rule in the British isles, in N. America, and elsewhere.
Tue, 04/09/2013 - 12:32pm
What an interesting subject. I think both parts of this analysis may be correct. The only question is which comes first. Is the first step a government sufficiently powerful and incline to act to "advance" a noble purpose that gets twisted; or is it private interests which influence governments (ie legislators) to undertake activities which can be "managed" to produce a particular, presumably profitable result. For me I am not sure it matters; if we can reduce the force of government in the private economy by reducing its economic reach and ambition, could we not let things take their course This is not to eliminate the power of certain safety net features of our society (not entitlements which counter individual effort); these safety net features should be focused on greater good ideas like education which enable people to raise themselves up.,
Michael Svendsen
Tue, 04/09/2013 - 8:05pm
Too many things here. 1st for education you can not push knowledgr into a rock. The interest and participation of educating childern first has to come from the parents, only then can teachers hope to fill those skulls of mush with knowledge. If Michigan instituted campaign fianance reform such as Vermont to eliminate large campaign donations it may help bring the power back to the voter at the ballot box, not to who has the most add money.
Wed, 04/10/2013 - 1:07pm
Mr. Power, I'm very disappointed that you use these words as a sign of progress in Michigan, especially in light of all the work done by the Center recently on education policy: "Nationwide and in Michigan, schools are undergoing the biggest overhaul in memory. Michigan’s new, rigorous core curriculum is toughening up standards, while schools and teachers are being held accountable for results. Michigan has taken the cap off the number of charter schools, designed to fill gaps left by poor public schools, while the worst schools are being forced into the Educational Accountability Authority." Because Michigan is doing these does not make those things good for our state or make them signs of progress. There are no studies that show charter schools fulfill the mission you say they were created to fulfill. There is plenty of evidence on the contrary that charters perform worse than public schools and that fraud in student counting might be a huge problem in charters. There is also no evidence that the measures the state is using to hold teachers and schools accountable are reliable measures. Using standardized test scores in the wake of increasing demands and less money to assess how schools are doing may be simple to understand, but they are not measuring anything useful about our teachers, students, or schools. Finally, forcing the EAA on underfunded schools cannot be called a positive thing yet. Perhaps someday the dismantling of public education as we know it under the guidance of the governor and his financial backers will prove to be a positive thing. But at this point there is no way you can claim this. Education is truly at a crossroads in this state, but it's not standing at the crossroads of two positive paths. We are, instead, hanging on the edge of a cliff wondering if diving off or hanging on until our fingers give out is the better option.
Wed, 04/10/2013 - 4:33pm
Mr. Power is quick to belittle people (politicians) and praise others (economists) without offering an description of why or how he comes to those pronouncements. He claims Congress can do nothing about the problems and yet he fails to describe what those problems are. Gridlock isn’t bad if it prevents new burdens. Businesses aren’t investing their money’s because they only see the cost going higher if not by new laws and associate regulations then by Executive order (something Mr. Power is willing to ignore). This especially true in the US where even local governments are trying to force employers to pay more for the same work they are getting today. Mr. Power taught the ‘economists’ claims that economy is coming back (but not by much). Unemployment is down, it went down last month because half a million people stopped looking for work. Somehow in my town fewer looking for work hasn’t raised the business activity and brought in more revenues for local governments. Mr. Power seems to claim local success simply because private money is being spent on social issues, not on results. What has Kalamazoo Promised changed, have they even describe what success will look like? Will it mean more college degrees or will it mean more scientists/engineers/welders/pipefitters/doctors, will it mean more employment? What will be the success of shifting more government programs/facilities/staff to private groups look like? Will it be about better care for the zoo animals, higher attendance, will it be about better maintenance of Cobo or will it be about more events? Mr. Power seems to claim success even before those groups prove any level of sustainability. Mr. Power is quick to deride, to praise, and to pronounce success without ever trying to explain what success looks like. He doesn’t seem to be interested in helping readers learn and become informed he seems only to be promoting what he likes. I keep hoping Mr. Power will someday try describe various facets of an issue to help reader think for themselves, have discussions, get engaged. The potential value Mr. Power has with the platform of Bridge is could enhance Michigan, create more effective solutions, facilitate change.
jean kozek
Sun, 04/14/2013 - 10:43am
I live in Rochester Hills and have benefitted immensely from the tax dollars I pay. Our library is fabulous and leads the way in new access methods for information. Our old rail line tracks now offer groomed trails for walking and biking away from the noise of traffic. Our Older Persons Commission offers everything from indoor physical activities to woodworking space. We are surrounded by county parks that offer a variety of spaces for picnicking, walking, fishing, etc. Our public schools have retained standards that prepare our children for whatever future schooling they might desire. Oakland University supports this community that values learning. And, the purpose of all of these public services, services paid for by our public tax dollars, is to provide a better community environment. When I read how some wealthy individuals and corporations sponsor political candidates and lying campaign ads, I become more distrustful as to who will benefit from the election of those candidates. Which campaign contributor will be awarded road contracts then provide poor quality for my tax dollars? Which private charter school businesses will receive my tax dollars then not be held accountable to any oversight or standards? If a management company replaces public workers who benefits - local community services or management's profit line? In Michigan businesses decided that receiving MAJOR tax cuts was more important to them than improving fairness in business taxes yet maintaining their tax contributions to improve infrastructure. In short, corporations and businesses fixate on profits and not the general good. Your article rambled from topic to topic. Your opinions were unsupported by facts and data. Yet, you seemed to argue that private businesses and their profit lines should take precedent with political decisions over the general good of the public. If so, I strongly disagree.
T Scott Galloway
Thu, 04/25/2013 - 1:47pm
I don't think any objective observer would say that the dysfunction in Washington and Lansing is symmetrical. One of the two great political parties has been hijacked by ideologues with no interest in governing through consensus building let alone hearing ideas that conflict with their pre-ordained policy initiatives. To use the dysfunction of the current Republican Party as support for questioning the very basis of our society - self government - is misguided and shocking. The corpratist plutocracy you seem to admire is but a different iteration of fascism.