The shutdown of a government

Citation

Shankar, S.S.Y.a.R. (2014), "The shutdown of a government", Journal of Advances in Management Research, Vol. 11 No. 1. https://doi.org/10.1108/JAMR-01-2014-0007

The shutdown of a government

Article Type: Editorial From: Journal of Advances in Management Research, Volume 11, Issue 1

In the corporate world, one is familiar with the terms like strikes, lockouts and shutdowns, etc. In business companies, there are different categories of employees, broadly referred to as workers, junior management, middle management and senior management. These different groups form unions or associations in order to collectively bargain for some advantages, facilities and, in general, to advance their causes. Negotiations between union of workers and different levels of management are a common practice to solve problems or to resolve conflicts. Sometimes, it so happens that negotiation may not be successful and workers may resort to the tactics like showdown or refusal to work. The management, in turn, may sometimes, declare a lockout or shutdown. Needless to say, this situation should at the best be avoided because it leads to a great deal of hardship/inconvenience to all concerned.

This is as far as corporate world goes. Perhaps, many of us may not be knowing that even a government – that too in one of the most advanced democracy of the world, namely, USA – can face a shutdown. Surprisingly, this has been happening off and on for last several years but did not get so much attention as it did in October 2013.

There is a provision in the Constitution of USA that all the expenditure of federal government is to be authorized by the parliament (Congress). The spending budget is prepared on yearly basis and normally approved before 30 September so that expenses can be made in a legitimate manner between 1 October and that next 30 September. If the Congress does not do so, certain functions of the government may be forced to stop due to lack of authorized funding. That is what known as “government shutdown”. Amongst other things the approval of parliament is required to raise the upper limit of government debt.

The background of the shutdown lies in a legislation relating to the health care, known as the Affordable Care Act (more popular by the name of Obama Care). This legislation, seeking to reform the US health care, had already been passed by the parliament, signed by the president and even upheld to be legitimate by the Supreme Court. The members of the Republican Party, opposed to this bill, wanted to use this ground for not passing the budget for the fiscal year beginning 1 October 2013. The shutdown affected many federal activities. Some examples are: social security offices, medicare administration, toxic waste clean-up work, public safety and law enforcement, veterans’ services, passport processing, national parks, etc.

Some of these services may appear to be non-essential but a prolonged shutdown could have had adverse impact on services like border petrol, national defence, justice system, air traffic control, revenue collection and so on. An alert administration, learning from the past history, may have contingency plan in place. Yet, a situation like this is fraught with danger.

Though there is no immediate link between the shutdown and private businesses, there were reports of adverse impact on private activities such as events planned to be organized in national parks. To everyone's relief, the dead lock was finally broken with both sides (democrats and republicans) coming to an agreement.

Ancient wisdom was that the king (government in the modern sense) would take enough from the surplus generated by productive resources and use it for common good. The kings getting indebted was unheard of. But nowadays, many governments the world over are under heavy debt, generally referred to as public debt. In case of US government, it is already very high. This refusal, albeit in form of a posturing, by the opposition party to increase the debt burden further and delaying the authorization of national budget may seem to be a right step. This may force the government to look for ways to reduce the public debt in future.

So, what are the lessons from this episode of the government shutdown? There are two lessons. One, the US government has to sit up and manage its public finances well. Two, conflict management is going to be a big challenge in future! And, development of negotiation skills to resolve conflicts even a bigger challenge!!

We have highlighted this issue to inform our authors/readers that we are open to papers that may address similar issues, which can bring out lessons to the management world.

Surendra S. Yadav and Ravi Shankar