By the Way, There Is Little Evidence That Business Experience Makes You Better at Governing

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Photo: H. Armstrong Roberts/ClassicStock/Getty Images

“We need people in Washington that know how to make a deal,” Donald Trump told supporters in the bygone days of last year, when he was considering a run for the presidency. Throughout this election, he has argued that his business experience has prepared him to return our country to greatness. But, notwithstanding his multiple bankruptcies, would it? Does winning in the private sector equip one for success inside the government? New evidence suggests that it does not.

Given the logjammed clusterfrack of Washington and the relative efficiency of a marketplace that’s produced more generations of the iPhone than there are current Supreme Court justices, one can see the appeal of someone from Wall Street in the White House. In a 2014 Gallup poll, four in five Americans said we’d be better off if more people with business experience held public office. (And half wanted more politicians with absolutely no government experience.)

But it’s unclear whether coming over from the corporate world would make someone better or worse at governing — or have any effect at all. So two economists — Brian Beach, at the College of William and Mary, and Daniel Jones, at the University of South Carolina — ran a study to find out. Their timely results are in the November issue of the Journal of Economic Behavior & Organization.

Rather than look at presidents or senators, they looked at candidates for California city council, a method with several advantages. First, there’s extensive data on both elections and city spending for all cities in California. Second, ballots don’t list candidates’ party affiliations; instead they list their professions. And third, a single council member (among five, typically) can often have more influence over a city’s governance than, say, a member of Congress can have over the direction of the country. For instance, Beach and Jones found in another study that increasing a council’s ethnic diversity by one person dramatically influenced its spending on public goods and services.

So they analyzed thousands of city council candidates and their performance in fiscal years 1999 to 2011. They looked at races between someone who was from the business world (an executive, entrepreneur, or investor) and someone who was not. And they focused on close elections, creating a “natural experiment” where, essentially, cities were randomly assigned a businessperson or not.

After controlling for city population, diversity, and average income and education, they found no effect of electing a businessperson on any budgetary or policy outcome. No effect on expenditures, revenues, debt ratios, liquidity, unemployment rates, or chance that revenues exceed expenditures. There was also no effect on the portion of services such as transit and garbage collection provided by the government versus private firms. To make sure they were not missing any measures that might matter to an electorate, they also looked at the probability of reelection, and again found no difference. Finally, they addressed the notion that business experience might matter only when a city has financial problems, and found that their results did not change whether they looked at cities with or without financial problems, cities with or without high unemployment, or big or small cities. “I was surprised that there was basically no impact whatsoever,” Jones says. “We looked at a pretty rich set of outcomes.”

Why did they find no impact? “It’s not clear that the skills you get from the business world will translate directly to being able to enact legislation or negotiate deals within a city council or any sort of legislature,” Jones says. “It’s just a very different skill set.”

Columnists have echoed that sentiment. Satyajit Das, a former banker, recently enumerated in the Independent several reasons business experience doesn’t translate to politics. For example, the required skills are different, in that politicians need to build coalitions, fund-raise, and appeal to voters. The tasks are different, in that politicians need to deal with not just budgets but public policy, party concerns, and meetings with people ranging from schoolchildren to foreign dignitaries. And the objectives are different, with politicians focusing not just on profit but on social impact.

Elaine Kamarck, a senior fellow at the Brookings Institution, argued last year for Fortune that a President Trump would not benefit from his experience as a CEO. “Not only is today’s federal government enormous,” she wrote, “it is constructed in a way that most CEOs would find simply unimaginable.” Money can’t be easily reallocated between programs. Outside of a few appointees, the president has no power to fire the vast majority of governmental employees. And civil servants must answer to both the president and Congress, which is like having two boards of directors at war with each other.

Given that Beach and Jones found no effect of business experience on the performance of city councillors, Jones says that finding an effect on a hamstrung presidency seems even less likely. Recently, a contributor to The Hill compared rankings of the 19 U.S. presidents elected since 1900 with their professional backgrounds, and, if anything, business experience predicted worse performance. Among the top ten presidents, none were known as businessmen. All except Ronald Reagan (an actor, union organizer, and governor) were career politicians. And of the bottom nine, six were businessmen: George H. W. Bush, Jimmy Carter, Calvin Coolidge, George W. Bush, Herbert Hoover, and Warren Harding. (Though of course this assay is more suggestive than scientific.)

We shouldn’t rush to generalize from Beach and Jones’s paper to all levels of government, however, according to Nicholas Carnes, a political scientist at Duke University and the author of White Collar Government. “Local politicians have a lot less discretion than state or federal leaders,” he says, countering Beach and Jones. “State laws often limit what cities can do.”

Carnes also notes that business experience might lead to policy decisions that don’t appear in Beach and Jones’s data set. “Electing businesspeople doesn’t affect city debt or spending,” he says, “but it might affect things like how much a city spends on social-welfare programs.” He’s found welfare policy differences between white-collar and blue-collar city councillors—though the differences might not arise when comparing a businessperson with another white-collar candidate.

Still, Carnes calls their research design “very clever” and emphasizes the significance of the topic. “Politicians are overwhelmingly drawn from occupations like law and business,” he says, “and understanding how that affects government and public policy should be a high priority.” Further, whether or not the results apply to national politics, we shouldn’t dismiss the impact of local governments. “They provide most of the public services that people encounter in their day-to-day lives,” Carnes says, “and collectively local governments nationwide spend over a trillion dollars every year.”

So while politicians will continue to stake their campaigns on whatever experience they have — be it in business or pediatric neurosurgery — as voters we might want to question the validity of these claims. Running a city or country differs hugely from running a company (or separating twins), and whatever acumen for numbers and markets allows one to build casinos or sell widgets means little when faced with terrorism, unemployment, property rezoning, and filibusters. We shouldn’t expect politicians to perform like CEOs. Nor should we want them to.