Serving the Servants: Ending ‘Stakeholder’ Government

Earlier this month, over 1,400 “Hands Off!” mass-action rallies, organized by a nationwide coalition of left-leaning activist groups, were held around the country to protest President Donald Trump and Elon Musk. Prominent among the organizers’ list of demands was “an end to the billionaire takeover and rampant corruption of the Trump administration,” including layoffs of federal workers and the closure of several governmental agencies. (RELATED: The ‘Hands Off’ Ignorance)

In his first term, President Trump did little more than pay lip service to reimagining the federal government. But such efforts have long been with us: from ending “waste, fraud and abuse” with President Reagan’s Grace Commission, to “reinventing government” under President Clinton, the notion that an increasingly sprawling, complex government is in desperate need of reform and renewal isn’t a new one, nor has it been seen as a particularly partisan issue.  While such past attempts at restructuring the federal bureaucracy have enjoyed a mixed record of success, who could stand against the concept of a more efficient government, delivering better outcomes at a lower cost?

“Stakeholders,” that’s who.

Washington’s inexorable growth and ever-expanding reach into our daily lives deftly illustrate that the dream of taxpayer dollars being spent wisely has historically been more talk than action. What the “Resistance 2.0” in Trump’s second term is responding to is this administration’s sustained efforts to eliminate entire governmental departments and significantly reduce federal employee headcount.  Prominent in the narratives advanced by anti-Trump activists (those protesting at the “Hands Off!” rallies and elsewhere) is sympathy for federal employees laid off in connection with the Department of Government Efficiency’s (DOGE) audit of various governmental agencies, departments, and programs.

The hysteria directed at efforts to downsize and restructure government has been a surprise to many of those who view such initiatives as an undisputed good — to spend fewer tax dollars to achieve the same outcome, or apply the same amount of money to achieve a better one, are concepts so ingrained among the practically-minded that it jars to consider what might animate those opposed to them. (RELATED: DOGE Exposes Waste and Constitutional Drift)

Considering who the government is designed to serve provides a clue. As a standalone statement, asserting that the government serves the taxpayers who fund its operations is uncontroversial. To whom else might it conceivably also be responsible?

That a government’s primary duty might not be to those who sustain it financially is a concept imported directly from “stakeholder capitalism,” a business philosophy averring that companies should prioritize the interests of all “stakeholders,” including customers, vendors, employees, and the wider community, not solely those of shareholders. Stakeholder capitalism contravenes the more traditional fiduciary concept of companies (and those who control and manage them), giving primacy to shareholder value maximization. (RELATED: The High-Water Mark of Woke Corporate Activism)

Stakeholder capitalism had been in the ascendant across the West over the last 15 years, partly in reaction to the purported “short-termism” associated with shareholder primacy. While not a new concept, the emergence of the Environmental, Social, and Governance (ESG) and Sustainability movements, along with widespread revulsion at the lack of accountability associated with the Great Financial Crisis of 2008-9, renewed interest in a private sector organizing principle not focused only on optimizing the “bottom line.” (RELATED: The Forces Behind ESG’s Blacklisting Effect)

Stakeholder capitalism arguably achieved its apogee in 2019 when the Business Roundtable, a lobbying association comprised of the CEOs of major American companies, reversed its prior positions favoring shareholder primacy and endorsed its tenets. (RELATED: Let Them Eat Cake: America’s Woke Elites and the Ancien Régime)

While stakeholder capitalism, along with other ideologies deemed overly “woke,” began to lose purchase in the private sector during the later years of the Biden administration, it has found an enduring and comfortable home within the public sphere. As public sector employee job security at all levels (partly through the strength of public employees’ unions) has increased over time, popular sentiment regarding the size and power of the federal government has moved in the opposite direction: Gallup reports that 65 percent of those polled count themselves as “somewhat” or “very” dissatisfied currently, as compared to 39 percent in 2002.

Notwithstanding widespread discontent with the government, federal employees and their advocates have been successful in generating considerable pathos for those downsized, exploiting the public’s natural sympathy for fellow Americans put out of work by job cuts.

Thus, we have the protestors’ purposeful invocation of “billionaires” and “corruption” — and by averting citizens’ gaze from government’s failings, activists can obscure DOGE’s objectives and exploit class envy in service of those having long extracted the unearned economic rents of above-market pay, job security, and generous benefits in exchange for limited accountability and subpar employment performance. (RELATED: Bernie Sanders and AOC Are Not the Answer to the Democrats’ Weaknesses)

Particularly insidious in the application of stakeholder principles to the public sector is that, without the discipline of private-sector outcome maximization, governments can “fail” yet still remain in business.  Shifting governmental departments’ purpose from achieving their commonly conceived desired outcomes — or “bottom line” — to directly benefiting stakeholders results in the government absorbing yet additional resources. Which, in the government’s case, are not revenues generated through the sale of products and services in an exchange for value in a competitive marketplace, but rather citizens’ tax receipts — the flow of which is unremittingly increased as value leaks away from its proper purposes in favor of parasitic stakeholders.

There are, of course, innumerable federal employees who provide significant value for the services they provide in competently dispatching their job responsibilities. And perhaps the best argument in opposition to federal reductions in force is that eliminating talented human capital undermines such agencies’ mission. But by deploying classic interest group tactics — seeking special treatment for a favored group, with the costs of that dispensation spread so widely (in this case, among all taxpayers) as to blunt concerted opposition — federal employees are achieving some success in eliciting public support for their retention of what are in too many cases make-work jobs of little value.

DOGE and the Trump administration broadly would do well to remind voters at every opportunity that our government is, as President Lincoln expressed in the Gettysburg Address, “of the people, by the people, (and) for the people,” not primarily for those manning it.

READ MORE from Richard J. Shinder:

Breaking News: Insurers Aren’t the Problem, Government Is

Historical Determinism and Human Nature in the Age of Trump

Richard J. Shinder is the founder of Theatine Partners, a financial consultancy.

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