Government, along with public and social sector marketers, should serve citizens not customers.
Citizens Versus Customers
Private sector marketers think about customers. They aim to make a profit by providing the minimal viable product to a select segment of the market for the maximum acceptable price.
This isn’t a bad thing. It’s a formula that has powered amazing innovations and helped raise standards of living, life expectancy, computing, mobility. Indeed, according to the business solution to poverty, the profit-driven model is the only approach with the scale to address societal problems.
On the other hand, governments think about citizens. Government exists in part to provide universal access to social goods and services at a cost that can be borne by the entire group. We band together to provide all of us the goods and services that none of us can create independently.
Citizens have the opportunity to participate in the design, pricing and distribution of social goods and services. The large-scale finance mechanisms of taxes, bonds, and other government financing support social goods at scale.
The ‘business model‘ of public financing and public ownership is not a bad thing. It’s a formula that has powered great advances. Consider public health, the internet, rural electrification, interstate highways, national parks, and space exploration. Absent the profit motive and powered by collective will, it can provide. Plus public financing is cheaper than private.
Serving Citizens Not Customers
Increasingly, privatization is being promoted as a tool to provide social goods without public funds. When private entities bear the costs for creating and maintaining social goods, the thinking goes, then taxes and government shrink. Only those who need a social good pay for it, through fees to the private operator.
I see several problems with this approach.
- Less opportunity to participate. Unlike citizens, customers have no right or expectation of participating in the design, pricing, and distribution decisions of goods. The only way they can vote is with their dollars. This works when there is competition, but many privatized social goods operate as a monopoly.
- Less accountability. Unlike citizens, customers don’t elect the operators of private businesses and don’t have access to open records.
- Less service. Unlike citizens, customers can’t demand or expect universal service.
- More cost. Customers pay fees for services; citizens pay taxes. The difference is, private fees must account for profit as well as overhead. Citizens pay only overhead.
Treating Citizens as Consumers Can End Badly
Privatizing social goods can end badly. Here a just a few recent examples mentioned in a CityLab article:
- Indiana privatized the construction of a highway as a toll road. The private contractor created a financial mess. Indiana was forced to sell bonds to take over the road, which was built poorly and already falling apart.
- California sold a concession to for a private company to operate a toll road in Orange County. Later, California wanted to expand a highway near the toll road but found it couldn’t. A non-compete clause in the concession contract prevented the state from competing further with the concession holder.
- The city of Chicago leased its parking meters to a private consortium, including the country of Dubai, for $1.1 billion. The consortium will recoup their investment in just a few years, but the lease lasts for 60 years.
These are all examples of failing by applying customer-centered business models to citizen-centered social goods. These are transportation-related examples, but you can find similar examples for plenty of other social goods such as public health and education.
As social beings, we can and should invest in our society. Too often, turning social goods into private enterprises enriches the few while shortchanging the many. Our transactions with social goods should be as citizens not customers.
(Image courtesy of Jet Lowe [Public domain], via Wikimedia Commons)
