Nine Unique Characteristics That Distinguish the Private Sector from the Public Sector

The American Dream vs. Government Bureaucracy: Take Your Pick

February 14, 2013

FOXBusiness - Last week I got a letter that nobody should ever have to read: a notice telling me that I failed to get the proper inspections and signatures for my new home construction, the building permit is void, and everything may have to be torn down.

I nearly had a heart attack.

Of course, none of that turned out to be true. We completed our home and moved in over five years ago. We jumped through all the hoops and did everything right. And I have a heart-stopping property tax assessment (and five years of canceled checks) to show for it.

The culprit? A bloated county planning department with nothing to do and a new bureaucrat in charge who’s keeping everyone busy by harassing good citizens for its own people’s mistakes. All that so it  doesn’t have to fire anyone and lose its fat budget.

But why should that surprise me -- or anybody, for that matter? It’s par for the course when it comes to government agencies.

My dad spent 40 long years working for the U.S. Postal Service. He was a supervisor at the registered mail headquarters in New York. He rarely complained, but I knew he was miserable. All the small-minded bureaucrats guarding their little fiefdoms, protecting their own butts, and stabbing each other in the back to get ahead.

Everything was about position, power, and politics.

And yet, look at us now. Stuck in a jobless recovery and the most sluggish economy in memory, and government workers have all the perks and benefits, courtesy of their unions: employee contracts, great pay, generous pensions, free healthcare -- no wonder all the states and municipalities are going broke.

I never thought I’d see the day when it would pay to be a government bureaucrat. Something is very, very wrong here.

To be fair, some private sector industries are known for their bureaucracy. Health care, telecom and power companies come to mind. And every company has people who, for whatever reason, behave like bureaucrats. But they’re generally in the minority, that’s for sure.

In any case, private companies have nine unique characteristics that distinguish them from the public sector. Not only that, they provide the building blocks for our entire way of life and the prosperity we’ve achieved over the past 200 plus years. And they’re still what make the American Dream possible for each and every one of us:

Innovation. Granted, the federal government has provided funding for all sorts of core research, but don’t forget where all that money ultimately comes from: taxes on income from the private sector. Moreover, it can’t take credit for much of the entrepreneurism and innovation that fuels our economy.

Products and services. This might come as an epiphany to some, but economics is entirely about buying and selling goods and services. Without them, there is no economy and no American way of life. Besides,  it’s really cool seeing people use something you played a role in developing, making, or marketing.

Employee ownership. Roughly half of the U.S. economy comes from small businesses that are primarily self-owned. Not only that, but entrepreneurs, executives, and regular employees are also part owners of most publicly traded companies. Intel (INTC) pioneered the practice of issuing stock options to all employees.

Engaged employees. When workers feel they’re a part of the business and are proud of what they produce, they’re engaged, empowered, and motivated.  They enjoy their work and feel good about themselves. In other words, they’re not bureaucratic zombies.

Risk taking. Entrepreneurs take risks. Venture capitalists take risks. Every day, executives, business leaders, and managers make big decisions that have the potential to grow their business, increase shareholder value, and provide income and job security to employees. If not, they fail. That’s how capitalism works.

Accountability. For the most part, executives and business owners can’t escape the accountability of their actions. If they fail, the business fails, shareholders lose their money, people lose their jobs, and sooner or later, they’re out of a job, as well. Public leaders, on the other hand, are good for life, as long as they play politics.

Competition. Free market capitalism is defined by competition. And competition brings consumers and businesses freedom of choice. Perhaps more importantly, competitive and high-stress environments are great breeding grounds for future executives and leaders. That’s why so many successful people grew up under adverse conditions or in tough, inner city neighborhoods.

Opportunity for personal and professional growth. It’s called climbing the corporate ladder for a reason. The private sector provides a career path and virtually limitless opportunity for anyone with the capability to take advantage of it and the drive to go for it. You’re never really stuck in a dead-end job. You’re always free to quit and try your luck somewhere else, or even do your own thing. It’s your choice.

Revenue growth and profits. Successful business is the one and only flywheel of the American economy. Entrepreneurs obtain capital, hire people, buy materials and tools, and design and build products and services they market to consumers and other companies. Their investors, employees, and vendors make money to buy things and invest in other businesses. And the wheel goes round and round. That’s where GDP comes from. That’s where our economy comes from. That’s where the American way of life comes from.

Don’t get me wrong. I know our government provides defense, infrastructure, and services to protect and facilitate our way of life. But let’s be very clear about what pays for all that. Taxes. Taxes on our personal income, taxes on our small business income, taxes on our corporate income, and taxes on what we build and buy with our hard-earned income. Period.

The cause and effect of that equation should be crystal clear. No private sector growth means no income, no taxes, no government, and no America. Plain and simple. The further afield we get from that simple equation, the more our nation begins to look and behave like a bureaucracy, the closer we get to the end of the American Dream.