The business of government

by Reg Alcock

Every so often, I am asked why we teach courses on government at a business school. The answer is quite simple: “Because government is really important." Important to us as individuals, important to the functioning of the Canadian economy at all levels, and, as Jim Balsillie pointed out in his address at the IDEA dinner in early June, important to the world.

All major business schools teach courses on government, because understanding how to deal with government is useful to managers, whether they are selling something to a government, bidding on a service contract, navigating a regulatory requirement or working to change a bill, regulation or policy.

Old ideas of left/right politics, public sector/private sector are simply inadequate to describe the complex and varied interactions between governments and business. At the same time, the increasing competition between various media has reduced public debate about government to a series of hot images that have little to do with the realities of running the largest, most complex organizations in Canada.

In Canada, public sector spending accounts for nearly 50 per cent of all economic activity and one quarter of all employment in the employed labour force. It is not an exaggeration to suggest that our quality of life is built upon a foundation of law, regulation, investment and the hard work of more than two million public servants.

This point was driven home in a World Bank report titled Where is the Wealth of Nations, published in 2006. The report examines the components of wealth and provides a snapshot of the relative wealth of 120 countries around the world. In the report, the researchers defined three broad categories of wealth: Natural Capital (the total value of all natural resources within a country), Produced Capital (the total value of all manufacturing), and Intangible Capital.

Intangible Capital was identified as the residual between total national wealth and the sum of the first two categories. It was
defined as including “the skills and know-how embodied in the labour force…the trust among people in a society and their ability to work together for a common purpose…all of the governance elements that boost the productivity of labour…an efficient justice system, clear property rights and effective government.”

What is particularly interesting is the comparison of the components of national wealth between countries. In low-income countries, Natural Capital accounts for 26% of total wealth versus 2% in high-income countries (Organization for Economic Co-operation and Development). Conversely, Intangible Capital in low-income countries accounts for 59 per cent of total wealth versus 80 per cent in the OECD countries.

The importance of government to the economy is further underlined by the World Economic Forum, who, in their extensive research in support of their annual Global Competitiveness Report, identify 12 pillars of competitiveness: institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market sophistication, technological readiness, market size, business sophistication, and innovation. They start with Institutions and make the point that the 12 are interrelated and require high-quality institutions (government) to achieve maximum benefit.

This is not to say that government has achieved excellence and that business should become like government. Quite the opposite! What we want students to acquire is a deeper understanding of the very real differences between the two organizational forms and to debunk the various myths that persist about government.

Governments at all levels are struggling to adapt to the same challenges that have driven much of the changes in the structure of business over the past two decades. The new information and communication technologies, which have so dramatically increased the speed and connectivity of business and driven significant changes in organizational structures, have proved to be more difficult for government.

What we are trying to achieve in our courses on business government relations is a better understanding of the differences between business and government and their importance to each other.

To do this, we combine lectures with case studies and simulations. The lectures provide an intellectual framework for analyzing political economy and its relationship to business. Case studies allow students to get under the surface of complex public management issues, and simulations provide a connection between what is being taught and what is happening around them every day.

The simulations vary depending on the time of year. In the winter term, budgets are being finalized, debated and voted at city hall and in Ottawa; the provincial budget comes too late in the term. In the fall term, we select pieces of legislation that are being debated in Parliament or the legislature.

In our City of Winnipeg budget simulation, I assigned roles to each member of the class: mayor, councillors, city officials, journalists, outside interest groups, etc. I contacted the various individuals who occupy those roles in real life and asked them for their support should the assigned student contact them. To a person, everyone agreed. Mayor Katz gave us full access to the officials who were responsible for the current budget and participated in the exercise.

The students were then faced with creating a budget for the City of Winnipeg, using the same information and documents that council was using; they ended the simulation in the council chamber – thanks to the support of Speaker Lazarenko – to debate and vote on motions. Councillor Swandel joined the debate, giving the participants a taste of the heckling and interplay that takes place.

Along the way the students had the opportunity to discuss/debate their ideas with Mayor Katz, to have their news conference critiqued by Dan Lett, senior political correspondent
from the Winnipeg Free Press, and to discuss how business interacts with the city government with Chris Lorenc from the Manitoba Heavy Construction Association.

As every simulation does, this one ensured that we, at the Asper School of Business, are doing our very best to prepare our students to assume leadership roles in an increasingly complex business environment.

Reg Alcock is associate dean of the Asper School of Business. He can be reached by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it