Government is Inefficient, and (Partly) for Good Reason
Governments are not businesses - balancing speed and accountability is key.
Government ‘inefficiency’ can be crucial to democracy, the protection of social interests and even the prevention of corruption. And slower processes can be essential safeguards, even if they are inconvenient.
Critics (especially populists) often label governments as slow, bureaucratic and inefficient, especially when compared to the private sector. But is this really something to cry about? What if this perceived inefficiency serves a vital purpose? Unlike businesses, governments don’t exist to maximise profits or move at breakneck speed. Their core purpose is to protect social stability, ensure fairness and uphold the social contract. I advise so many governments and ministries around the world, and I used to be the “startup guy who wants to get things done fast”, until I understood many things that may not seem obvious at first, but become obvious when you understand that there is a completely different set of “optimisation criteria”. So, in this article, I try to share some of the lessons I have learnt and why “inefficiency” (which is actually efficiency in a different way) in government is not only inevitable but also necessary to promote balance, accountability and trust in society. But first things first:
Index
Governments vs. Companies: Different Optimization Criteria
Businesses are optimised for speed, innovation and profit. For example, businesses thrive on rapid prototyping and high-risk experimentation, driven by market demand and a clear profit motive – if they go bust, it was a calculated risk.
Governments, on the other hand, are designed for long-term stability and risk management. They aim to minimise social harm, provide essential infrastructure and create the conditions for businesses and individuals to thrive. Unlike a business, a government cannot “fail fast” and start over by simply creating a new country. The stakes are far too high, with the costs of failure including widespread instability, harm to citizens and the social fabric, global challenges and more.
Put simply: Governments need to protect against the downside, businesses need to focus on the upside. Very different optimisation paths with different implications.
Downside Protection & Social Contract in Governance
But what does “downside protection” really mean when we talk about governments and public administration? As a society, we have created governments to perform certain functions that help us live together as a society. One of the most important functions of governments is to protect citizens from downside risks – economic crises, natural disasters or public health emergencies.
And there is good reason for this. Many studies have shown that people generally prefer security to the potential for upside opportunities, and governments reflect this preference through policies such as social safety nets, unemployment benefits and healthcare systems. By focusing on protecting the most vulnerable, governments act as guardians of the social contract, ensuring that the rules of society prioritise stability and fairness over unbridled ambition.
That is why we formed governments in the first place, to secure a social contract – a collective agreement about what is acceptable and unacceptable in society. This contract reflects shared values and priorities, such as environmental protection, public health and economic justice.
A simple example to illustrate this: Governments are putting regulations on industries may limit corporate profits to prevent pollution or exploitation, in line with the broader goal of societal well-being.
So we see that the role of government is to balance individual freedom with the collective good, ensuring that progress doesn’t come at the expense of fairness or security. Not always easy, not always perfect, but at least we have a mechanism for that.
Why Governments Are Slow and Bureaucratic for a Reason
Imagine you found out that someone got a big government contract, but you did not get it because they are friends. How would you feel? Unfairly treated?
The very processes that make governments seem inefficient are also what make them trustworthy and fair. Public institutions must adhere to strict procurement rules and public tendering processes to ensure transparency and prevent corruption (not always perfect and often rigged, but at least they try).
Take the example of NASA: it may not move as fast as SpaceX, but its rigorous decision-making processes ensure accountability and public transparency about where the money is going, which suppliers are getting it and why. In the absence of such processes, the scope for malfeasance and corruption is enormous. In the private sector, this may not matter so much, and faster production is more efficient, but the government still has to explain why it is spending the money and where. And there is a catch: The less corruption we want in government, the more administrative burden we have to accept as a trade-off for fairness and inclusiveness. Not the other way around – corruption does not end with greater efficiency.
This is why you see almost in every country in the world the same trade-off: Accountability Over Efficiency
As you know, governments have to answer to a wide range of stakeholders, including citizens, courts and international organisations. This demand for accountability often slows down decision-making, but ensures that policies are fairer and more inclusive. Unlike private companies, which answer primarily to shareholders, governments have a duty to represent and protect the interests of their entire population, so you need extra staff, extra bureaucracy, extra processes, and more forms and measures to prevent opacity. This may result in slower progress, but it builds trust and ensures that decisions are made with wider societal implications in mind.
But it also makes it rigid, big, complex and hard to understand. The more you track, the more security policies you implement, the heavier the system becomes – remember the trade-off – efficient is not transparent and transparent is not efficient.
Balancing Speed and Accountability
And I am not here to make the case that its good that Governments are only inefficient. Although governments cannot and should not operate like businesses, there is room to adopt certain efficiencies without compromising accountability. Innovations like e-governance, digital procurement platforms, and AI-driven decision-making can streamline administrative processes while maintaining transparency. However, prioritizing speed must be approached cautiously to avoid sacrificing inclusivity or opening the door to corruption. Striking the right balance between efficiency and fairness remains a complex but achievable goal.
Conclusion – The Strength of Deliberate Inefficiency
I am the first person to hate inefficiency and there is a reason why I have started so many companies and why I am so often the annoying person in governments, ministries and organisations around the world working on better and more efficient solutions. A lot of processes can be made faster and more efficient, especially services to citizens. But I have also learnt that inefficiency in government is often misunderstood as a general weakness, when in fact it is sometimes even a necessary feature of balanced governance, and to some extent expected and built in.
And as always in life, where moderation is the key, it is a difficult balance to strike. We as a society need to constantly rebalance and rethink how we prioritise transparency, fairness and accountability over speed and profitability, and how governments fulfil their role as guardians of the social contract and guarantors of societal stability.
And there are certain roles that each side must play. While businesses drive innovation and economic growth, governments ensure that progress is sustainable, inclusive and provides the underlying security for society, people and the economy. In an era of rapid change and increasing complexity, we need to recognise and support the deliberate trade-offs that make effective governance possible. Imagine a government that changes laws, regulations, processes and more on a daily basis. Or if a country suddenly goes bankrupt and your children cannot go to school, or there is no social security or health care. There are reasons why things can be slower and more inert/sluggish, especially if you do not want them to change too fast and too often and in areas where you need security and stability.
So let’s optimise where efficiency is needed, but let’s also differentiate from issues where transparency is key, and let’s also accept that this will create inefficiency and bureaucracy if we want accountability and trust.
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