BIGGER ISN’T ALWAYS BETTER
There is an adage: In any organization, 20% of the people do 80% of the work, and 80% of the people do 20% of the work. Elon Musk is testing this out — in that he has been reported to have fired 80% of Twitter’s workforce.
Twitter is still fully functioning, and many users report that it works just fine, if not better. Not a great surprise because we now know that many staff members were engaged in counterproductive censoring of people with the “wrong” ideas or providing “inconvenient facts.” To the extent this is true, it was not only a waste of resources but also hit the rest of the economy by denying people information they could have used to make better decisions.
Most large organizations — whether they are government, private businesses, or various types of nonprofits — have employees who are negative value-add since they are disruptive, incompetent or just plain lazy, and the organization would be better off without them. Some companies suffer diminishing returns from too much advertising when it becomes more of an annoyance than new information. The My Pillow guy, who sometimes appears as much as every eight minutes on some shows, is an example, driving viewers to other channels or to tuning out.
Many organizations end up with more employees than they need because of the basic human tendency to “empire build,” where managers try to expand their activities and workers, whether it is needed or not. Governments are particularly prone to unjustified growth.
The Securities and Exchange Commission was originally established in 1934 to protect investors and maintain fair and orderly markets. The SEC has been guilty of “mission creep” for decades. Recently, the SEC has proposed that public companies determine and disclose their “carbon footprint.” At best, the science and techniques for determining a business’s carbon footprint are vague and uncertain.
The proposal could be hugely costly — causing prices to rise and the number of workers to fall — while providing virtually useless information. Worse yet, Congress never gave the SEC the authority for such a study — it is merely an attempt by the SEC staff and its chairman, Gary Gensler, to enlarge their empire and power. The SEC has been pursuing environmental, social and governance agendas (ESG) without explicit authority while ignoring core functions, such as protecting investors from fraud — most recently illustrated by the FTX and Theranos scandals, where the SEC had clear responsibilities but missed the boat.
One of the greatest examples of diminishing returns is the amount of money spent on public education. The Department of Education was created by President Jimmy Carter in 1979. The Biden administration has now budgeted $100 billion for the department for this fiscal year. Despite the huge increase in spending, along with substantial state and local increases, all greatly exceeding inflation on a per-student basis, test scores for 17-year-olds have not statistically increased.
In addition, there has been more than a 50% increase in the number of public school teachers, with only approximately a 10% increase in the number of students but a 150% increase in the non-teaching staff. In sum, there has been a huge increase in real spending, and in the number of teachers and administrators per pupil, with no change in education outcomes. A longtime public school teacher recently told me that she spends less and less time each year actually teaching and more and more time in meetings and doing largely useless paperwork. A thought experiment: If all the money spent in schools on diversity and other woke programs were reprogrammed to put the money and the administrators in the classrooms tutoring students who need extra help — would those students likely have better achievement levels and successful work and personal lives than being indoctrinated in white privilege as an excuse for nonperformance?
The U.S. Department of Agriculture was established in 1862. In 1900, there were about 11 million Americans employed on about 7 million farms and 2,900 employees in the USDA. A century later, there were about 3 million employed on 2.2 million farms, but the Department of Agriculture employed 105,000 people.
There is an old joke about the USDA employee seen sobbing at his desk. When a visitor inquired as to the problem, the reply was that his farmer had died. Several decades ago, a senator from the Midwest filed a bill stating that the USDA was not allowed to employ more people than there are farmers in the U.S. American agriculture has had about the highest productivity growth of any industry. The average farm family makes about 77% more money per year than the average American household, a big change from the time that, on average, farm families were poorer. Yet the USDA still spends money on problems that largely disappeared long ago or could more easily and less expensively be solved by the private sector. But like most government programs that spend money, a vested interest has grown up to continue to lobby for it.
And then, there is the (anti-) Department of Energy that was supposed to ensure energy production and security but now actively deliberately impedes it at the bequest of the “greens” — making Americans less prosperous and less free.
• Richard W. Rahn is chairman of the Institute for Global Economic Growth and MCon LLC.
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