Europe

Sorry, Czechs, Your Country Isn't a Business, Either

Market populism hasn't worked in the U.S., Italy or elsewhere. You just can't run governments like companies.
Photographer: Michal Cizek/AFP/Getty Images

They call billionaire Andrej Babis, whose party won the Czech election over the weekend, "the Czech Donald Trump." That's only partly a misnomer: While Babis is by no means part of the "nationalist international" that was emboldened by Trump's success in the U.S., he, like Trump, owes much of his popularity to the notion that government can be run like a business. The concept is attractive to many voters, though no one has ever quite managed it.

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Babis, an ethnic Slovak whose Czech sounds funny to locals, wouldn't be a convincing face for nationalists (even though some of them voted for the Freedom and Direct Democracy Party, headed by Tomio Okamura, son of a Japanese father and a Czech mother). Babis has objected to closer European Union integration, but not on nationalist grounds like Poland's Jaroslaw Kaczynski or Hungary's Viktor Orban.

Rather, he wants the freedom to run the Czech Republic as he ran his group of companies, Agrofert -- the biggest private employer in the Czech Republic, encompassing agriculture, construction, chemical products and media. "The state, and the government mainly, should be managed like a company," he said in a recent interview. "The biggest problem: There is nobody managing the government."

That's what a lot of Trump voters I talked to in 2016 thought, too. They said they liked Trump because he was a businessman, a negotiator, a straight talker and an experienced manager. Trump promised to drain the bureaucratic swamp, cut the red tape, reduce taxes and invest in infrastructure in a business-savvy way. Silvio Berlusconi made almost exactly the same promises when he won in Italy in 2001 and settled in for almost a decade of dominance.

Babis, who has also been likened to Berlusconi, is singing from the same songbook. He's promised to reduce the number of ministers, cut the cost of government and centralize government procurement. He's talked about lowering the value-added tax (a type of sales tax). His plan is to run a budget surplus before making infrastructure investments like finishing a ring road around Prague and expanding the highway network. But, he says, for an ambitious public investment program to succeed, all the infrastructure projects run by regional authorities should be cataloged and centralized. 

These ideas keep surfacing. "Running government like a business" was already a slogan in the 1980s as the U.S. experimented with "new public management" -- a way to run public services as though citizens were both the owners and the customers. But the concept goes back at least to the time of Woodrow Wilson, who declared in an 1887 paper: "The field of administration is a field of business. It is removed from the hurry and strife of politics."

It has invariably proved difficult for business managers and owners to run government functions and whole countries like companies. Berlusconi and Trump are just the best-known recent examples. Instead of streamlining government and achieving efficiencies, they became entangled in intrigues and conflicts of interest, found that civil servants weren't in the private sector because they were differently motivated and required different treatment, and were frustrated by political opponents' mobilization of large parts of the public against them and by the independent stance taken by courts.

Even in illiberal states such as Russia, where President Vladimir Putin's regime keeps trying to introduce business management practices to government, the approach meets with resistance from a tangle of local and corporate interests and gets bogged down in corruption. Babis, accused of EU subsidy fraud and cooperation with the Communist-era secret police, will see the attacks on him intensify as he struggles to impose discipline.

And yet, when a successful entrepreneur revives the old slogans about a well-run government being like a corporation, people are often inclined to listen -- especially when they are tired of fractious politics, scandals and a lack of convincing leadership, as Czechs are today, Italians were in 2001, and Americans were in 2016.

Most people's views of the "corporate governance" idea are malleable, as political scientist Amy Gangl showed in a 2000 experiment.  She asked 400 people in Minnesota framing questions: Half were asked whether they agreed that a slow and messy debate was a positive feature of democracy; the other half whether they liked the idea that "government should be run more like a successful business, making decisions in a more timely and efficient manner."

Those in the first group then leaned in favor of "fairness" in public administration, while those in the second favored "timeliness." In the same way, people will vote for market populists like Berlusconi, Trump or Babis if they're charismatic enough to frame the issue for them -- and if their rivals lack the necessary charisma. 

Babis is already facing a serious test. Nine parties -- more than ever in the Czech Republic's post-Communist history -- have entered parliament. He needs to build a coalition, but he has no obvious allies. He's alienated traditional center-left and center-right parties. Outliers like the Pirate Party (which won almost 11 percent of the vote) and the Communists (8 percent) have no common interests with Babis's leader-centric ANO party, and Babis would prefer not to deal with Okamura's far-right force because it might be more trouble than it's worth. If this were a competitive struggle in one of Agrofert's markets, Babis would stand as the proud winner. But with 78 seats in a 200-member parliament, he cannot manage the nation as he ran his business. Most Czechs don't want him to.

In recent political discussions, various strains of populism are often lumped together. That's a mistake. Unlike political victories born of profound public opinion shifts -- for example, toward deeper nationalism -- the personal triumphs of market populists are more likely to be temporary, until the realities of government clash with the instincts of a sole proprietor. That's a problem for Trump, who managed to combine market and nationalist populism: If he fails in the eyes of Americans as an efficient manager, the nationalism alone may not be enough for re-election. Babis, who, with a $4.1 billion fortune is wealthier than Trump, is probably a better manager, but his situation is even more precarious.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Leonid Bershidsky at lbershidsky@bloomberg.net

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