It has been 20 years since President Reagan gave the policy pendulum a mighty push toward minimalist government. With bold strokes, he deregulated the airlines, privatized air traffic control, and set in motion cheaper, less centralized government. Later, as the Cold War waned, the stature of the private sector grew taller and business principles became preeminent. During the prosperous postrecession 1990s, government was urged to get out of the way or get with a pro-business program.
It was said that the new wars were economic-competing for capital and customers-and that the new frontier was “emerging markets” (the business-oriented name for less developed countries). The tilt was toward international business development-foreign trade, not foreign aid. Conventional wisdom was defined by faith in markets and in the private sector’s ability to provide just-in-time efficiency. America’s global brands-Disney, Coca-Cola-became its flag-carriers.
Then came Sept. 11. Terrible acts of terrorism revealed tragic problems of security, intelligence, and diplomacy-and turned conventional wisdom on its head.
Some problems-like our inability to conceive of people turning passenger jets into missiles-arose from either decency or naivete, or both. But numerous holes in our security can be traced to our erstwhile mania for cost cutting, privatization, and outsourcing. The U.S. embassy in Riyadh, Saudi Arabia, a possible source of visas for alleged terrorists, staffed the visa application process with foreign nationals because they were less expensive than U.S. citizens. Airlines trying to maximize shareholder value made little use of checked-baggage screening machines because they would have had to pay to operate and maintain them. Airport security within the United States was handed off by federal authorities to airlines that in turn outsourced security tasks to other firms employing minimum-wage workers with no career paths and high turnover-a chain characterized by fragmentation of responsibility and diminished motivation to ensure public safety.
The most glaring vulnerabilities caused by government on the cheap, however, were found in our government’s ability to absorb and process information. Since 1993 the federal civilian workforce has been reduced by 384,000 positions, causing a human capital crisis in government, according to Sen. George Voinovich’s report to the president last December. The government shrank, but its workload didn’t; government jobs disappeared faster than the government’s ability to find new ways to get the jobs done. The nation was left with a shortage of speakers of languages of known adversaries; archaic Immigration and Naturalization Service computer systems that cannot share data with other government computers; visa granters in consulates without access to information from intelligence sources. Lack of coordination and even clashes between federal agencies and local authorities delayed criminal investigations and health tests in the anthrax scare, as the New York Times reported.
And what good was Coca-Cola and Disney diplomacy in stemming the growth of terrorist cells? Foreign policy focused on installing favorable regimes (once including the Taliban) or relying on neighboring countries (Pakistan for relations with Afghanistan) more than on economic or social development. There was too little American aid in terrorist-supporting regions to win hearts and minds. Nor were there sufficient diplomatic and intelligence assets to warn us of the threat. Yet our products were everywhere and were used against us. Terrorists embraced American technology-including cell phones, the Web, and commercial aircraft-to destroy American lives.
It could be years before we recognize all the ways the world has changed. But it is clear that when the twin towers fell on September 11, the era of downsized government was over.
This column originally appeared in the December 2001 issue of Business 2.0 magazine. Rosabeth Moss Kanter is the Ernest L. Arbuckle Professor of Business Administration at Harvard Business School.