Effective Governments, Wealthy Nations: The Urgent Need for Pragmatic Reform

Every generation of humanity in every society experiences developments and disruptions that seem overwhelming and often threatening. We are living in a time of great technical advances and startling political changes, so much so that our circumstances seem more challenging and dangerous than the typical of other generations.

• The war in the Persian Gulf continues with no clear trajectory.
• Russia’s invasion of Ukraine is stretching into a fifth year with no apparent end in sight.
• The AI revolution confronts businesses, individuals, and governments with both promise and peril.
• Governments around the world are spending far more than they take in through taxes and other revenue sources, creating massive debt burdens for future generations.
• An energy transition to avoid serious climate consequences seems stalled as nations around the world race for secure energy resources.
• The international trading system seems fractured with new unilateral impulses and bureaucratic restrictions upending traditional patterns.
• Chaotic American politics seems to undermine America’s willingness to remain active as a constructive international leader.
• Nations everywhere seem to seek more autonomy and freedom with a diminished commitment to supporting international norms and institutions.
• Technology breakthroughs stretch uncomfortably the parameters of government supervision and regulation.

Yes, this time seems unique in its challenges. But I think it is important to step back from the daily headlines and look at fundamental conditions and dynamics.

First, we live in a time of remarkable progress in the fundamental human condition. Eighty years back, nearly 90% of all humans lived in abject poverty. Childhood mortality was high. People died in their 50s and 60s. Homes were cold in the winter and hot in the summer. Maladies like cancer and heart attacks were effective death sentences.

Today the global population is four times larger, but less than 10% of humanity suffers in extreme poverty. For large portions in every society, there are highly successful people, well educated with creative opportunities to succeed. Where excess capital was scarce and limited to a tiny percentage of people, today capital resources are abundant and remarkably open to international investment. Fifty years ago, eye surgery was rare and dangerous. Today it is conducted on an outpatient basis in many advanced countries.

This list of advancements could go on and on. I often tell the young professionals that work at CSIS that their quality of life is far superior to that of Queen Victoria, the richest person in the world only 126 years ago. They have far superior health care, better and safer food, warmer clothing, far superior transportation opportunities, and instant entertainment. These huge luxuries are not universally available to all humanity, of course. But generally, in every society, people live dramatically better lives than would have been possible for the richest people just 100 years ago.

Second, human talent is more widely spread across the planet than in previous decades and centuries. Superb universities were once the province of just Europe and the United States. Now you find excellent universities on every continent. A cadre of entrepreneurs is prospering on every continent. Every professional has access to information resources that were inconceivable only 30 years ago. Everything in the world that we see (aside from things of nature like rocks and trees) started off as an idea in just one person’s mind. And now we have dramatically more creative talent spread around the world with dramatically more tools to innovate. Our collective future will explode with innovation. Humanity’s future is incredibly bright.

Third, while we are living at a time of heightened tension between major global great powers, the basic plumbing of international cooperation continues with only minor impact. Russia’s illegal invasion of Ukraine has caused most airlines to avoid flying over Russian territory. But air traffic is up on a global basis. Global commerce has endured the shock of President Trump’s impetuous tariff policies with only minor impact. Yes, the war in Iran could trigger a global recession, but that just highlights how profoundly the global economy has optimized around comparative advantage. The fundamental economic forces of our day are adapting to the shocks in the system.

Fourth, the structures of international coordination—the UN, WTO, WHO, etc.—seem badly damaged in this era of great power competition. But the private sector is and will demand that governments stay engaged constructively. On a global basis we like the ease and efficiency of air transportation. No one wants to disband the International Civil Aviation Organization that establishes the rules for global air traffic. There are tensions between blocks of countries. But investors still want the predictability of investing in rule-of-law countries. Countries with dodgy legal systems suffer while those with good judicial systems benefit. While we in America disparage the work of the World Health Organization, we know we need an organization that will work to contain outbreaks of threatening pathogens. We don’t want to deal with Ebola only when it lands on US soil.

Fifth, energy availability is the foundation of human economic progress. I recognize the need for a transition to avoid the perils of carbon loading of the atmosphere with attendant climate distortions. But I see remarkable progress in the cost effectiveness of alternative sources of electricity. We are starting to see very encouraging technical developments in battery storage systems. Nuclear energy is making a comeback as a fundamental source for baseload power generation. Fusion nuclear energy is making surprising progress. Yes, there are serious problems of energy availability in the poorest regions of the planet. But there are countless innovative people seeking to find affordable solutions for reliable energy. And with greater energy reliability we get better hygiene, safer food, more efficient transportation, and better communication tools.

I am an optimist by nature. I believe in the enormous power of human ingenuity, especially when given a constructive social and economic environment in which to prosper. There are too many dark forces that warp and distort the potential progress for individuals in every country. I know that. But the fundamental trajectory of human life is very positive.

So, am I free of worry? No. And let me share my primary concern. It is this in a nutshell—the capabilities of the private sector are advancing at least three or four times more rapidly than are the capabilities of government. Here I can only speak about my understanding of the United States. I am far too limited in my experience base to comment on other countries. But I do try to understand America, and this is my great worry.

The quality of Government at the Federal level in America is deteriorating. There are several reasons for this. First, the civil service is static and sluggish. This is structural. Individual civil servants are highly motivated to serve honorably and effectively. But we give them obsolete systems to operate. More significantly, there is remarkably little movement back and forth between the private sector and government offices. Most civil servants will only work their professional lives within the Federal government. They will rarely work in the private sector until they retire. They don’t understand the nature of the private sector and the dynamics pulsing through the private sector. Government bureaucrats are struggling to adapt their regulatory systems and tools to a world that is changing dramatically, because of technology, changes in American society, innovation in business, etc. Large bureaucracies do not invent new ideas. They just make old ideas more complicated and old regulations more rigid. The lack of experience of the private sector in the ranks of government officers is a serious impediment to adapting to the rapidly changing world in which we live.

Second, the quality of political leaders in America is deteriorating. It is deteriorating in both the politicians and in the political appointees who lead government agencies and bureaus, but for different reasons. The quality of political appointees is badly eroding because of the ever-widening pay gap between leadership jobs in the private sector versus the public sector. Only a tiny number of government jobs are so attractive reputationally that an individual will give up 60-80% of their income to serve. Increasingly political appointees are filled with the ranks of ambitious political operatives who are rewarded for laboring in election campaign organizations. The most senior political appointees are wealthy individuals rewarded for making massive contributions to the winning candidate. Rarely do they have the professional experience base to competently lead the agencies to which they are posted.

We see a comparable erosion of talent in elected officials. A politician’s life today is onerous and unrewarding. Congress has diminished itself by alienating much of its independent authorities and giving them to the President. Members of Congress now come to Washington to maneuver, but not to lead. The daily calendar is shaped by politics, not governing. People of talent are repulsed by this life. Fortunately, we still do have a few excellent members of Congress who are drawn to public service in a noble way. But the system in which they must operate is increasingly corroded by politics and the relentless need to raise funds for re-election. The result is a diminished Congress that increasingly resembles a Westminster system. Republicans cheer wildly at anything President Trump says or proposes. Democrats boo as loudly as possible, even when the Administration has good ideas. And this behavior only discourages talented individuals from seeking public office.

Third, we have seen a serious erosion of the advisory structures that the Government in previous years established to interact with the private sector. There was once a time when the Government recruited the most excellent intellects and professionals in their respective fields to populate advisory committees to cabinet secretaries, heads of independent agencies, etc. Now these advisory committees are increasingly populated with people whose primary qualification is proven loyalty to the President. These advisory positions are given to people as a reward and are considered to be a trophy for display. Advisory committees, which in the past were a window into the dynamics of the private sector, have evolved into echo chambers reinforcing the biases of the political appointees to which they report.

All of this has caused a great foreshortening of perspective in the US Federal Government, just at a time when the world is becoming more complex, more dynamic, and more challenging. The world in which we live is moving very quickly in directions we don’t yet understand. That is always the challenge for government. But we are making the problem dramatically worse by the structural deteriorations within our government. Neither political party has a vision for America’s future. They are battling over matters of the past.

Let me give you an example. We don’t yet know what this revolution in Artificial Intelligence will bring. I personally think it will be far slower in coming and more evolutionary in impact than is popularly perceived. But there will be enormous changes over time. Who in the US Government is thinking about the future of work? One out of five blue collar workers in America makes a living by driving something—an ambulance, a taxi, a truck or bus, or a forklift. What happens if AI does make possible driverless vehicles? Globalization caused the shift of millions of American jobs to China, and it is now tearing America apart. What will we do if even 10% of blue-collar workers no longer have jobs? What are we creating to give them honorable employment?

AI has the potential to make many white-collar jobs redundant. We have not experienced this in wide scale before in America. What happens if millions of office workers are made unnecessary because of AI? How will organizations find qualified senior managers if they never have a chance to work up in a system gaining experience from increasingly more important positions? Senior managers are valuable because of a lifetime of work experience. Where will we get that if AI takes away the jobs of entry and mid-career employees? And how will we find these displaced workers meaningful new jobs?

This should be the thinking of Government, at every level. But there is none that I can see. Another example. The partisan and secular divisions in the Congress have blocked any legislation to regulate privacy in America. Absent coherent national policies, we are adopting on an ad hoc basis the privacy policies of the European Union on a state-by-state basis. AI will be a much more complicated problem than privacy legislation. This lack of intentional foresight will be a great challenge for our future, and I see far too little attention being devoted to it by either politicians or government agencies.

Here I come to the bottom line of this essay. The business world has an important interest in promoting a competent government. The business world is far more dynamic and innovative than is the government. But there are things that only the government can do—manage a stable currency, operate a fair and transparent judicial system, create a broad-based education system, protect both physical and intellectual property, and establish regulatory structures that balance individual freedoms with societal needs.

The private sector needs a competent government. Today in America, the private sector is largely working around the government, to keep it from undercutting a narrow corporate agenda. We (and I am in the private sector) are not doing enough to help improve the quality of government in America.

The great challenge before us is to restore a pragmatic and efficient structure of collaboration between the Government and the private sector. Healthy businesses create wealth, but only effective governments can create wealthy nations.