Should Government Be Run Like a Business?

I was thinking back on a lecture in grad school this morning and wanted to briefly share part of an article and pose the question, should government be run like a business? The New Public Service: Serving Rather than Steering, is an article by Robert Denhardt and Janet Denhardt that I read during graduate school. The article was written in response to the concept of New Public Management, or the theory that government should be run like a business. Commonly, New Public Management refers to public servants are as entreprenuers, citizens as customers and the idea of self promotion/advancement is a strong motivating factor. Efficiency and performance are emphasized, and the values of a business become those of the government. During grad school, this was one of the more heated debates we had among classmates. I’ve never been in a classroom with a debate that was handled so well by a professor. He was collected, neutral and made you think regardless of your beliefs. In any event, it was a fun exercise for a public administration student.

In the spirt of transparency, I fell into the government should not be run like a business camp. I have nothing against business or private sector, but I do think they way we approach the client – customer relationship is inherently different than government – citizen. There are certainly lessons the private sector can learn from the public sector and public sector from private sector. Part of the challenge I think we face is that we need to mend the relationships between public and private sector. We need to remove the stigmas of each sector and work to collectively address the problems. We also need to move away from a model that promotes self interest and start a dialogue that focus on shared values and interests.

The seven points below articulate New Public Service, Public Managers Should:

1. Serve, rather than steer

2. The public interest is the aim, not the by-product.

3. Think strategically, act democratically.

4. Serve citizens, not customers.

5. Accountability isn’t simple.

6. Value people, not just productivity.

7. Value citizenship and public service above entrepreneurship.

Citation:

Denhardt, R. B. and Denhardt, J. V. (2000), The New Public Service: Serving Rather than Steering. Public Administration Review, 60: 549–559.


I’d be interested to hear your thoughts, should government be run like a business?

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Profile Photo James Hammond

At the end of the day i believe it it should be operated similarly to a business due to fact that Government is performing a service that the people are paying for however, not all functions are should operate like business

Enterprise wise it should be be completely like a business due to the utilities must pay for themselves

But Government is not slow by accident..government is created so citizens can have control and have input as to how government should operate. The ethics of fiscal responsibility should be the same as business but not all functions should operate as a business.

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Profile Photo Patrick Fiorenza

I’d agree with your comments, thanks for sharing- I would just add that since some services are clearly not distributed equitably, some practices of running government like a business are not feasible. I just get concerned when we view government as a business, because the function of government is to serve, not sell. I am all for being efficient, maximizing productivity, performance measurement – but it just has to happen in a way that retains equity. Sounds like we would agree here too.

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Profile Photo Andreas Addison

I believe that government should be run like a business. I agree with James that by design, government is meant to have slowness as to not shock the system, however I do think that when you break down the basic fundamental business principles, their application to government is quite simple. I have had many discussions with officials at City Hall about the concept of citizens as customers. I am a firm believer that the quality and price of the services we provide our citizens and businesses create in them the ability to take it or leave. For example, business HQ’s move frequently for better benefits, quality of life, other services, and location to other resources. People move all the time for the same reasons. People have left the urban area of Richmond for the suburban landscape due to better education options, more land, and lower costs. All of these have some governmental impact.

This topic is particularly relevant in a customer service delivery concept. Consider the organization of service by NYC, Boston, DC, SF, etc. They are structured by consumers of the services provided. Its structured as a business designs their products and services in terms of being used and consumed. Which is why taxes are collected in the first place. I think there is a lot of validity to this concept and look forward to what others have to say.

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Profile Photo Patrick Fiorenza

Those reasons have enormous impacts on government – Syracuse has the exact same pattern as Richmond. It’s the classic sprawl without growth. I worked on the Near Westside of Syracuse which is one of the poorest neighborhoods in the country. Those people don’t have a choice to leave the area, there is no other option for them. Yes, people do leave for better surroundings – but for many people that is just not a choice or an option. To me, it’s more than markets and efficiency. There is something inherently wrong that a two school districts only 10 minutes away from each other can provide such different experiences. Your place of birth shouldn’t define your education. Business and government do have commonality, there are points of intersection – but the public sector is faced with very different challenges that do not exist in business.

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Profile Photo Ed Albetski

I could not agree with you more. I’ve spoken with so many folks who have bought into the business paradigm. Sometimes we can have a lively discussion, but often there is not much I can say to them as their view, while so entrenched, is not often based on any reasoning they did themselves. I can’t very well tell them to take a course in civics and one in macroeconomics. Government’s role is very different from that of a business. It needs to provide services with no profit motive. And in times of a national emergency, like a natural disaster or an attack, it runs deficits. Totally different mission statement.

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Profile Photo Joe Williams

There are aspects of running a business that are very appropriate for Government, centered around being disciplined: disciplined planning, disciplined use of resources, and disciplined governance. Most if not all the concepts have been introduced into Government through various initiatives on accountability and reporting.

However, I also see the role of Government is to do the things that the private sector won’t, primarily because of an uncertain value relationship (the benefit cannot be monetized and thus traded against cost), or because the risk is too high.

Therefore, my simple answer is no in the strict sense, yet the real answer is more complicated than that.

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Profile Photo Jim Mack

In most cases, I think the argument centers around the phase “be run like a business” and how people interpret that phrase.

One side of the argument seems to believe that the phrase “be run like a business” means that government should focus on making a profit and points out that business and government have different goals. The goal of a business is to maximize owner or shareholder value. The goal of government is to serve its citizens well and provide programs and activities that serve the greater good.

The other side of the argument (as pointed out nicely by @Joe Williams below) is that government should operate with the same discipline as the private sector and apply some of the same tools to gain efficiencies, maximize the use of revenues, reduce costs and reduce risk to the organization.

So I guess my answer to the question would be that government should use the tools and techniques of the private sector to serve its citizens well, maximize the utility of revenues, reduce costs and reduce risks to the organization.

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Profile Photo Jay Johnson

I’m in agreement with Jim. While government, business, and non-profits all have reasons for being, they all use processes to accomplish their goals. As such, those processes and be continuously improved to better meet the expectations of those who depend on them. Common tools and techniques, allowing for the different context of the organizations, could be used with success. But I think the best results could come from partnering all three types of organizations together so their differences complement each other to make a better community.

Thanks Patrick, good discussion on a relevant topic.

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Profile Photo Mark Hammer

What kind of business?

There are businesses that are very vertical, and some that are surprisingly horizontal. There are some businesses (like corner stores) that are content to earn a comfortable-but-not-excessive living and remain the same size forever. And there are businesses for whom remaining the same size for more than 6 months in a row is unthinkable. Somebusinesses provide the exact same product or service in stable fashion, while others change their business lines so often you can barely tell what they do.

It’s a bit like asking if government should be run like a “man” or a “woman”: what kind?

And when we say “run like”, I think what we are really asking is if there are specific context-relevant practices that could be fruitfully adopted. Not a package deal, where the whole kit and kaboodle has to be accepted in total or not at all.

One of the classic examples of where government can NOT be “run like a business” lies in the area of performance pay. It is exceedingly rare that any such initiatives end up working out well. It’s possible, but you don’t want to plan out your organization on them happening, any more than you want to plan out your life around solar eclipses.

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Profile Photo Dannielle Blumenthal

Run it like a business. Cut the clutter. Keep it simple. Be socially responsible. We make such a fuss about everything, this contributes to inefficiency and frustrated citizens who then turn to each other for help and answers rather than us.

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Profile Photo Brandon Jubar

It seems that everybody loves a good analogy… but every analogy eventually breaks down. A business should be run like a good business. It’s not a hobby or a charity — it’s a business. And one fundamental rule of business is that if it isn’t profitable, you either fix it, close it, or sell it.

Government shouldn’t be run like a business — not even a good business — because it’s not a business. Government should be run like a good government. At the most basic level, that means that if a service isn’t being effectively and efficiently provided to the citizens it is meant to serve, then it needs to be fixed. Closing isn’t an option. “Selling” (aka privatizing) may be an option… in which case it should most definitely be run like a business. But at a departmental/agency level, the only option is to fix it.

Now, when we look at how best to “fix” government, that’s when we can borrow from the business toolbox. But we should also borrow from the non-profit/charity toolbox. And the media toolbox. And the psychology toolbox. And the university/college toolbox. And any other toolbox that has something that will help us run government like a good government should be run.

We need to focus on the best way to meet our mission, using whatever tools are most appropriate.

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Profile Photo Darrell Hamilton

Having been on both sides, I don’t think anyone really wants the government to be run like a business. A business ultimately has the mission to make money. If a service or product is not making enough money, the company is free to stop providing it. For example, Microsoft will soon cut off support for their XP operating system. Do you think Microsoft really cares if 30% (number made up) or more of their user base is still on XP? Not very likely. Would anyone want the government to make decisions that way? Absolutely not.
There are all sorts of fundamental problems with even trying to run the government as a business. The government is in a high demand, limited resource environment and is often making decisions based on what can they afford to delay or not get done. A business can choose to be in whatever business they want to be in. If demand increases, they can expand to cover the increase because an increase in demand is a good thing and means that there is more of an opportunity to make money. To a business increasing demand is to be encouraged. In government it is to be avoided..
Depending on the level, the government is a monopoly or limited monopoly. A business is not allowed to be a limited monopoly except under tightly controlled circumstances. A government has the power to enforce its actions, even if the “customer” doesn’t like it. Can you imagine what a business would be like if you gave it monopoly control and the ability to force its customers to do what it wanted? We have to have different rules and procedures for the government just because it would be easy for the government to abuse its position.
There are processes that businesses use that will also work in the government. Not all of them are going to work because the underlying assumptions and rules are different. It takes creative people to get some of them to work in the government environment. For example, the scale of the decisions is vastly different. When I worked for a $3 Billion company, we made stepwise decisions of around a million dollars at a time at the executive council level. Can you imagine trying to get the federal government to chop up their decisions into million dollar decisions at the Cabinet level? The scale of the decisions is just not going to allow all business processes to translate into the government processes.
And the biggest one in my view is that the government is a Must-Spend institution and businesses are allowed to be cost conscious. If an administrator in the government is given a budget, the administrator is judged solely on how well she distributed or spent the money. In a business, if a director is given a budget, bonuses are handed out if money is turned back in. Until someone allows the government to be cost conscious, there are going to be limited business processes that will be directly applicable to the government.


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Profile Photo Mark Hammer

Brandon and Bill, here, here. Thank you.

I get so tired of hearing something touted as a best practice to follow because business X does it and they are in the Fortune 500 or 100. I am quickly reminded that Enron and Worldcom were in that category once too.

Governments are in it for the long run.

Although, I suppose that when we look at the state of assorted dictatorships around the world, one might give pause to think that these are sort of like businesses that neglected to track their changing client base and client needs, and have run, or will run, into trouble as a result. But that’s really more of a lens to look at government through than a set of methods to conduct government by.

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Profile Photo Sam Snead

The primary goal of a business is typically to make a profit regardless of what people might say in their mission statement. It is only logical so I do not begrudge them for it. Public service provided to citizens is usually done at a loss. For example, most transit agencies do not recover enough in fares to actually operate but they play a vital role in providing a necessary service. The most effective way to remedy this issue is further subsidation through indirect and direct taxation (essentially the redistribution of wealth).

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Profile Photo Mark Hultgren

Coming from the ‘Both Sides of the Fence’ P.O.V. I think that Government should be run as a “Not For Profit” venue. Complete with balanced budgets, and acknowledging that the consumer (read as Client, Customer or Voter) needs to be heard and respected. There have been so many times I have dealt with government ‘officials’ that are crass, belligerent, disrespectful and downright rude. These type of ’employees’ would never make it in the private sector and they think they are immune from any type of reprimands, simply because of the false sense of power they think they have.

Running the Gov as ‘Big Business’ would NOT solve our problems since the focus would turn from ‘Providing Service and Protection for the masses’ to attempting to turn a profit. Change the focus to Not-for-Profit where the focus still remains on Service without regard to Positive cash flow but maintaining a break-even stance as a bare minimum would help us all.

Just My Humble Opinion….

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Profile Photo John Westra

An organization’s success, whether Public or Private, will/should depend on how efficiently it serves the needs of its customers, works with its partners and defends its interests. Although there are significant statutory differences between a Citizen and a “free market” commercial consumer, organizations that want to effectively serve them should share many common Best Practices. These include:

  • Focuses on the customer.
  • Identifies and understands how the work gets done (the value stream) .
  • Manages, improves and smooths process flow.
  • Removes Non-Value-Added steps and waste.
  • Manages by fact and reduce variation.
  • Involves and equips the people in the process.
  • Undertakes improvement activity in a systematic way.

Sound familiar? These are actually the core principals of Lean Six Sigma and are being championed by Newt Gingrich promoted by Strong America Now and have won the endorsement of a majority of 2012 Presidential Primary candidates, as a way to lower our debt without raising taxes!

As a Lean Six Sigma IT Green Belt, Entrepreneur, Business Owner, Government Technology Consultant and Elected official, I have signed the Strong America Pledge and am convinced that Lean Six Sigma techniques (Running Government Like a Business) can play a significant positive role in making government more responsive, efficient and cost effective!

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Profile Photo Andy Oram

I think there is a happy medium, where Private and Public can learn from each other, and I just wanted to highlight a hidden point that might be lurking in some other posts: businesses have responsibilities to other people besides their stockholders and their customers. Enlightened businesses show that (although nearly everybody does things that social activists would disapprove of–but so do many individual people). And some business books teach it, too. When a business takes care of its communities, its ecological environment, etc., it’s thinking a little more like government.

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Profile Photo Dennis Snyder

I think the design of government.com should be a bottom-up approach. Are citizens customers or shareholders? I submit they are shareholders with proxy votes to their representatives. Further, citizens are not customers in the sense that government is “of the people, by the people and for the people”, not to the people. Someone commented, and I agree, that no company can tell customers what they will get whether they like it or not. In spite of the people these days. However, a company can certainly tell its shareholders what they will get; case in point is divident disbursements. Customers vote by boycotting products and services, shareholders vote for their representation in organizational control. Try boycotting the IRS.

Using citizen-stakeholders as a foundation, government can’t be run like a corporation, it must be run as a government. It provides services for order and self preservation, economic control, benefits, etc. Some agencies could be profitable like a business such as Postal Service. Others (DoD, HHS, TSA, etc.) could be more efficient and run as a business unit with no accounts receivable, such as engineering. But overall, the mission of government is to manage the country and be accountable to its shareholders.

Interesting discussion…

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Profile Photo Frank Monachello

Please do not overthink this or turn this into some kind of “label contest”. (It’s tiresome enough that our mainstream news media is still dividing us with “liberal, conservative, neo-, etc. etc.” labels.) The role of government is simply to serve the needs of its citizens and, because we live in a democracy, our government is accountable to its citizens through the power of the ballot AND our opinions as translated, always imperfectly, by our elected representatives in the White House and Congress. Can a democratic government literally “fail”? Of course it can. The less engaged that we citizens are in the above process the greater the chances that our government will “fail”. From a purely partisan perspective, it is clear that the modern Democratic Party is more committed than the Republican Party to engaging the largest number of American citizens in this process. In fact, it has always been a mystery to me how a voter can claim to love democracy and vote Republican; I’d like to see that human condition added to the dictionary definition of “insanity.”

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Profile Photo Mark Hultgren

Frank,

It seems that you have forgotten the Words of the Constitution itself. This country is NOT a Democracy, it is a “Republic, for which it stands”. Democracy does not enter into the picture of the foundation of the Constitution. Democracy is just short of Socialism where the largest part of the population is fully dependent upon the Government to provide for them. You will kill all opportunity and desire by implementing a socialist agenda. Just look back through history and you can see the results.

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Profile Photo Patrick Fiorenza

@Andy – I agree and thanks for your insights, I think the example you provided about business schools teaching ethics/civics/outreach as way to improve their business model, is a great example of a lesson learned from the public sector. There are certainly lessons both sectors can take from one another.

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Profile Photo James Deimer

Thanks for posting this Patrick. I’ve spent over 10 of my 13 years of Human Resources experience in the Private sector. Some of the lessons learned – is that we are all connectors of people and ideas. Also, as a former member of the Armed Forces – we become ambassadors and the conduit for the organmizational mission…

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Profile Photo Patrick Fiorenza

Thanks for your comments, James – I’m just starting up my career, so it is always fascinating to hear from others experiences and insights. I like the phrase you used, “conduit for the organizational mission,” this ties right into Brandon’s comment – “We need to focus on the best way to meet our mission, using whatever tools are most appropriate.”

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Profile Photo Brandon Jubar

I agree with virtually everything you’ve said, @John Westra, except your general assumption that using Lean Six Sigma techniques is synonymous with running a (good) buisness. First, there are thousands of good, strong, successful businesses out there that do not use Lean Six Sigma. Lean Six Sigma techniques are tools in the business toolbox… but they are not the only tools. And second, they are excellent process improvement tools, but many other tools are needed to run a successful business (e.g. financial analysis; strategy development; marketing; etc.).

That being said, if an agency could benefit from using LSS, then it should.

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Profile Photo Michael Pittelkow

This is really an intersting discussion. From my profile you might see that I am kind of an alien on this platform for several reasons: being European (German), former German Civil Servant and today working for an IT company (which is quite unusual in Europe as there is not a lot staff exchange between private and public sector).

Coming back to the initial question: we started the NPM-discussion in Europe in the early 90’s and have gone a long way with a lot of failures. One of them being treating administration (Central Government/Local Government) like a private business. From our understanding in Europe in most areas it definitly isn’t a business … or better: it is a special kind of business. It is not about making profit but better the lives of the citizens. Even in those areas that are very close to private business (eg Utilities) where in most of our countries private companies are active there is still an infrastructure aspect in it that makes this business different. After almost 20 years of New Public Management we are now at a stage where we have adopted some positive aspects and Lessons Learned from private business into Government. One of them being the “Service Attitude”. In this respect I tend to a statement that citizens are no customers but should be treated like those.

One comment I cannot stand to make: I know we have very different cultural and political backgrounds. I am also far away to have enough insight into NA inner policy. Nevertheless: from my point of view a caring Government and concepts of solidarity with those that cannot help themselves can be part of a free society and has nothing to do with Socialism. At least I wouldn’t see for example Sweden, Germany, The Netherlands or France being socialst countries but free western democracies and republics. My five cents :)

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Profile Photo Jeralyn

I really enjoyed this post. It is my opinion that while government can learn much from business in terms of efficiency, productivity etc. government cannot and should not be run like a business because the two have fundamentally different goals. Businesses provide rivalrous, excludable goods from which revenue can be derived. Government is essential because it provides public goods that the private sector has no incentive to provide. (i.e Clean Air, clean water, free parks). Where would we be if the government decided it would only engage in or provide products/services it could extract rent from? Additionally, many of the cost savings that have been achieved by the private sector have been due to technological advances. Unfortunately the government, which provides labor-intensive services does not have the option of substituting labor for technology. Who could imagine substituting teachers with computers? There are things both sectors can learn from each other and when we realize this and form a better relationship between the two, then we can create a culture of shared interest that helps everyone.

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Profile Photo Patrick Fiorenza

Thanks Jeralyn, great comments and insights. You brought up a lot of great points – I agree that we need to create a culture based on shared interests. Government can’t do it all alone, and neither can the private sector. Great point about how labor intensive services that government provides cannot simply be replaced with technology, services that government is obligated to perform. Thanks again for your comment!

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Profile Photo Alex Moll

Do we alienate people when we label them customers, instead of citizens in the context of public service? Does not the word ‘customer’ imply merely a transactional relationship, instead of a ongoing relationship based on shared responsibility, which is what civics is all about? True, citizens receive services to be consumed, even in the public sector context, but that is really a sub-role to the larger role of being a citizen, is it not? Therefore, I might suggest we move away from customer service to “citizen services.” GSA already has it as one of its departmental names. Anyone else want to weigh in?

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Profile Photo Mark Hammer

Correct, Alex.

One of the ideas inherent in terms like “customer” and “client” is that there are those outside the organization from whom one derives, and to whom one provides benefit, in contrast to those inside the organization.

But “government” consist of citizens, that are also taxpayers. Do we stop being citizens or taxpayers when we find ourselves on the service-provider side of the counter? I think not.

Running government “like a business” makes a false distinction between “us” and “them”. In reality, it’s ALL “us”.

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Profile Photo Judith Jordet

I recommend the book, Good to Great and the Social Sectors: why business thinking is NOT the answer by Jim Collins. You can read portions of it on his web site, http://www.jimcollins.com/books/g2g-ss.html

In my library of science graduate school we also debated running a library as a business and referring to “patrons” as “customers”. It was a bitter debate that boils down to a difference in core philosophical world view. Those who would run a library like a business tended to extol the world of Ann Rand. Those of us who objected to running a library like a bookstore were labeled “luddites”.

Customer service is not the same as Public service , I think Jeryln gave an excellent definition and explanation of the importance in definition and implication between the two. I will only add that a world in which every relationship involves a “commodity” is an emotionally impoverished and unsustainable world.

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Profile Photo Jim Mack

Nicely said, Judith! I might add, that I prefer to be treated as a person, not a “consumer.” I prefer to think of myself as something greater than my simple transactional capabilities and that my ability to contribute goes beyond my appetite for consumption. There is something to be said for treating like people, and not as consuming modules in the machine.

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Profile Photo Judith Jordet

People who believe in the model of “customer service” hold this relationship as the highest relationship of a “free” society. That is why the discussion can become so vitriolic and bitter. It is based on the principles of Adam Smith and Ann Rand who promise that “self-interest” is the strongest bond of humanity. They would follow Gladstone over the brink of annihilation sincerely believing that without a “social contract” written on paper and agreed to by self interested parties, the human race would pillage and murder each other.

In their minds to denigrate the customer service model is to not understand it and thereby display absolute ignorance, since the cornerstone of human evolution is “survival of the fittest”. The belief in the “customer service” model is not recognized as being based more on worldview assumptions rather than science. It is a worldview that makes no room for (as the theory of evolution labels it) “The problem of Altruism” in the human psyche. All choices and success are seen as strengthened by self interest and weakened by mutual or community or public interest. Some brands of religion are attracted to the model of human self interest because they hold to a negative assessment of the human species.

Do not underestimate the power of this worldview at work in our political debate and in the American culture. No political party or religion among us is free of these assumptions. It is an assumption that has the power to transform our watersheds into pipelines and our mountains into tailing piles either actively through “self interested” corporations or passively by redefining the role of government to change public service into customer service.

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