Government can't fix everything

“The government should fix it” is a common refrain when people encounter a problem in society. Governments happily oblige because it means more votes for politicians and more work for bureaucrats. Governments themselves also undertake a number of things from encouraging Canadians to be more active, to propping up domestic industries, to trying to create jobs. But can government really deliver? Evidence suggests the answer is a resounding no.

This is plain to see for anyone who peruses the catalogue of reports from Canada’s Office of the Auditor General, an independent federal body charged with reporting to Parliament on the performance of various government programs and initiatives. We did just that—and it’s not a pretty picture.

In a recent study we examined Auditor General reports from 1988 to 2013 and found 614 cases of government failure including cost overruns, unnecessary spending, faulty benefit payments, inefficiencies, inaccurate reporting, and the list goes on. A conservative cost estimate of these failures is between $158 billion and $197 billion. That’s up to nearly one-third of the federal government’s debt in 2012/13.

Many themes emerged as we combed through the reports. For example, government economic development initiatives often fail to actually create jobs and improve economies. In one case, the Auditor General examined the federal government’s support of a $2.2 million fish plant in Quebec and found the more than 250 jobs created by the plant were completely offset by the resulting closure of a nearby established plant with as many employees that already received federal subsidies. Eight years later the new fish plant closed.

The government also has a spotty record when it comes to helping low income families. In an investigation of Ottawa’s $1.5 billion program to provide emergency heating expense relief in the winter of 2000, the Auditor General found only a quarter of that money actually went to low income families and 90,000 Canadians who were in need of immediate assistance did not receive it.

Another reoccurring theme relates to the government’s tendency to spend taxpayer money unnecessarily. A prime example is a $125 million project to modernize a major Canadian Coast Guard icebreaker. Not only did the project end up costing $74 million more than planned but the Auditor General concluded the entire modernization was a “major capital expenditure not based on a demonstrated need.”

It’s not just big stuff that government gets wrong; it also has a difficult time accomplishing basic tasks like paying credit cards on time.

Or take any employer’s essential task of finding affordable working space for employees. Here again the Auditor General has found multiple cases where the government failed to deliver. In one case, a federal agency insisted on office space that was twice the size of similar offices and that cost up to 30 per cent more than alternatives of superior quality. The space was ultimately never used for its original purpose and at most, only two federal employees worked there.

It’s hard to imagine a private company staying in business for long if it behaved this way. But therein lies the problem. Unlike a private company, a government can’t go out of business. And government typically operates in a monopoly environment protected from competition so the consequences of mistakes and inefficiencies tend to persist.

These are only a small sample of the 614 failures summarized in our study. Our review found failures in many other government initiatives including military procurement and operations, border control, and programs like Employment Insurance to name a few.

While there’s a tendency to blame the political party in power for such failures, we covered a 25-year period spanning five prime ministers and two political parties. The cause isn’t necessarily lazy bureaucrats either. Government failure is an institutional problem driven by voters, special interest groups, politicians, and bureaucrats operating together in a political marketplace with distorted incentives that usually work against the public interest.

Reducing government failure therefore takes fundamental reform. For starters, as taxpayers we can identify core activities for the government to be involved in and rationalize or eliminate all others. Another option is to more widely harness the strengths of the private sector for delivering public ends. This can be done through outright privatization, public-private partnerships, and the outsourcing of publicly-financed goods and services.

There are more effective ways to fix problems in society than the knee-jerk call for government. As the Auditor General’s reports show, the government is often not up to the task.