The Business of Public Governance

Michael Bloomberg, mayor of New York and founder of the financial data service provider Bloomberg, Inc., said candidly during his speech at Google, "The role of a government is to transfer resources from the most successful areas to the not so successful ones, but business is the other way round." After 6 days here at Barcelona, and 6 days of immersing myself in the culture and history of Spain, I began to doubt if Bloomberg is telling everything about public governance. I believe Bloomberg has gotten it right governing cities like New York and Barcelona. But when it comes to a country, I hesitate to agree with him.


However, Bloomberg's success in business goes beyond doubt. Armed with an electrical engineering degree from John Hopkins, Bloomberg ended his salary man career as a top executive at Salomon Brothers. After he was fired, he took his shares in the company, liquidated it, took his understanding of system engineering and finance and started a fledging database business for financial professionals. With a keen eye for exploiting successes and a healthy bottomline, Bloomberg turned his namesake company into one of the world's largest private companies and made himself a billionaire. Success in corporate strategies is clearly a trophy he has won for himself.

Moving beyond business, Bloomberg has a vision for the dilapidating city of New York. With a simple, clearcut view of governance, Bloomberg set out in 2001 to fight crimes, improve America's largest public school system and reverse its $6b budget deficit. To date, crime rates in New York are among the lowest among big cities, more students are enrolling into postsecondary education from public schools and New York state now enjoys a $2.4b budget surplus.

So clearly, detractors who said that Bloomberg's business approach for governance makes a recipe for disaster have been proven wrong. The reason why the business approach works for public governance is because it is not about the bottomline per se. This approach focuses on building sound systems and values that marshal and deploy resources and capabilities to support a vision. In business, the vision is clear and simple - to maximize profits for owners. In public governance, the vision is also clear and simple - to promote equality for all citizens. But I think equality should mean more at a local level than at state level.

The idea of equality is a confusing concept in public governance. Within a city or state, where citizens are united by a shared cultural or moral background, equality refers to equal chances to pursue the following three fundamental states of freedom:

1. Freedom from uncertainty and danger
2. Freedom from the scarcity of physiological needs
3. Freedom of choice, association and competition

As risk averse individuals, we want to know that there will be a tomorrow, and that tomorrow will be more alike today than otherwise: injury free and comfortable. To be comfortable, we will need all the basic items such as a shelter over our heads, food to eat, water to drink, electricity to power our machines and transportation to get to places. Also, no one likes being alone. So, after we get comfortable, we will need to associate with friends while necessarily competing with others to sharpen our skills and knowledge, and in so doing, attain a status among our peers. Therefore, a great state or city to live in will focus on creating equality for all its citizen to pursue their three fundamental states of freedom.

However, the same governance yardstick can be applied only sparingly at the national level. Thomas Friedman once said that the world is flat. I would think that cities and states, based upon a shared cultural and moral background of its citizens, ought to be flat or equal, but communities and regions larger than states will never be flat. Bloomberg succeeded in New York because he created equality in chances to pursue freedoms. But at a national or federal level, public governance takes another twist. Equality is not the top priority here. Unity among states and the pursuit of open policies and good relationships with trade partners are more important. States form a nation because when their cultural and historical backgrounds are taken together, they form an intangible asset greater than the sum of its parts; one that can benefit every citizen in the country. This intangible asset is a national identity. This national identity is like a consumer brand, such as Louis Vuitton for handbags or Ferrari for cars, that builds solidarity among citizens and attracts foreigners from outside the nation. Meanwhile, a focus on open trade policies allows states within the country to exchange their competitive advantages by exporting their best produces to each other and to other countries. This open exchange also allows ideas to flow freely and further reinforces a citizen's freedom of choice.

Therefore, if Bloomberg is elected the President of United States tomorrow, his reverse business approach to public governance will inevitably fail. Let's see why this is so in the context of the state of freedom from uncertainty and danger. A nation can protect an individual's pursuit of freedom from uncertainty and danger by providing a national army to guard against external aggression. However, if a nation is to ensure security at a local level, it runs into the risk of standardizing moral values, too much micromanagement and bureaucratic red tape. Therefore, Bloomberg would only allocate security elements to the extent that national security, not local security, is achieved, since it is relatively ineffective to go any further. Also, a nation's identity is based on the social values and cultural history that states share, and this goes beyond Bloomberg's business approach to create overnight. The only thing that a national leader can do is to let states run their own history, applying force only to gently mold each region's culture into the nation's identity.

Consequently, national governance should focus less on its allocative goal than on its pursuit of unity, open borders and trade relationships. This higher level focus will grant local government the fiscal space it needs to build equality within its jurisdictions, and to accentuate their competitive advantages and exchange them with other states and nations for mutual benefits.

If history is a beacon for the future, Spain's tumultuous history offers a lesson in public governance to be learned. Here in Barcelona I am constantly bombarded by the history of the Spanish Civil War, and I was truly astonished that the civil unrest really ended just 29 years ago with the Spanish Constitution of 1978, and the country's transition to democracy. The current economic success of this colorful nation masked the painful process of getting there. Walking (or biking really) on the streets of Barcelona I see high end retailers such as Massimo Dutti, Gaudi's magnificent architectural masterpieces and great transport networks. But who would have thought that Spain experienced a monarchy, a dictatorship, a socialist republic, an autarky, a democratic free market all in the space of the past 76 years. Spain's history is a story of a nation trying to find its national identity while coping with the various meanings of equality.

It all started when the Spanish working class grew conscious of aristocratic and bourgeoisie exploitation and demanded absolute equality from the Second Spanish Republic. As it turns out, revolution is not good for everyone when it is forced down the throat. Sweeping policy changes against the rich and powerful, such as taking away their land, closing down Catholic Schools etc are generally bad ideas. Equality, taken to extreme, hurts everyone. Spain eventually broke into factions which built coalitions only to pursue their selfish purposes. In the end, civilians in Madrid were bombed by the Germans (The Germans! Those bullies.), Barcelona was sacked by the nationalistic Spaniards and all works by Antoni Gaudi were burnt in Sagrada Familia.

And now, the country is a socialist republic pursuing free market under a monarch. If you wonder what that means, don't ask me, because I don't know either. Nevertheless, this system appears to be working because its 17 autonomous communities have equal chances of pursuing their own potentials, although unified by a shared history, currency, language, and central head of state (a rather powerless monarch - King Juan Carlos I). The ability to provide ample fiscal space for each community (kind of like the states in US) to make independent governing decisions is the cornerstone of success of the central government of Spain (and federal government of US) . This form of national governance grants rational governors, such as Bloomberg, the space needed to allocate resources in support of a regionally shared vision of equality at a gradual, socially acceptable pace.

Spain's rise to prominence can be attributed to its strong national identity and provision of equality at various governmental levels. The country is now the sixth largest economy and one of the most popular tourist destinations in the world. Its vibrancy is a direct reflection of the passion Spaniards put into their leisure and its economic prowess draws strength from the entrepreneurship of its people, who have now attained the three fundamental states of freedom. During the past seven days, I have met many well-traveled tourists who have been all over Europe, and everyone unanimously agreed that Barcelona and Spain are absolutely the finest in the world. That, to me, indicates successful public governance.