Big Government

One James C. Roumell argues that government should be big.

The closest thing he comes to a precise claim is this: government should be big because the richest countries have large government: the OECD average is 46%, with the U.S. at 40%. This is his closest thing to a precise claim: the size of government ought to be somewhere around where it is now in rich countries, since these countries must be doing something right. But trying to emulate rich countries leaves us with a wide range of spending levels to choose from. (See here for each country’s numbers.) On the low end, Australia is at 35%, Switzerland 34%, South Korea at 30%, Hong Kong is at 18%, Singapore 17%. At the high end, France, Finland, Luxemborg and Denmark are around 53-57%.

Poor countries show similar variance: at the low end, El Salvador (21%) Sierra Leone (22%) Congo (26%), while at the high end Lesotho is at 63%, Cuba and Libya at 67%, and some countries somewhere in between.

So what can we conclude- that government spending should be at least 17% of GDP if you want to be rich? At least 30% if you aren’t a city-state (but then maybe we should all break into city-states?) Even that is unwarranted: if no rich country happens to have a spending level below x%, it doesn’t follow that x% is a minimum threshhold for being a rich country, only that we don’t happen to have any counterexamples.

Besides, why should we care what levels of spending rich countries have now? We ought to care about their levels during the time periods when they became rich. A country that is rich today is generally a country that was rich ten years ago; there’s a strong correlation. It’s not anything that they’re doing now; in fact, most rich countries are rather stagnant right now. So the question to consider is countries’ performances during periods of economic growth. In the U.S., a lot of growth happens between 1850 and the roaring 20s, with very little government spending. Then in the 50s and early 60s, you have growth with spending levels at a little under 30%. Then you had relatively slow growth at higher spending levels. (Remember, I’m not the one arguing for causation here- I’m countering Roumell’s causal claims.)

Countries that are growing today include China (Gov’t spending as %GDP: 24%), India (27.2%), Chile (23%; economy growing at 5% plus since the late 80s), Indonesia (Gov spending 18.5% GDP; annual growth over 5% in recent years and decades) and Cambodia (Gov. spending 20% GDP, 6% annual growth in recent decades and years. Brazil (39%) and Argentina (41%), on the other hand, have grown with higher levels of government spending.

In any case, growth is certainly achievable with spending levels well under 30% GDP, or in the case of pre-1930s America, 10% of GDP. The reason no rich countries today have spending under 10% GDP is the reason no countries anywhere, or almost none, have such low spending levels today. People studying the growth of the state usually come up with explanations relating to industrialization, vast improvements in transportation and communication technology, and nationalist ideology. These are trends that have swept the world (where they haven’t penetrated, as in Afghanistan, foreign aid makes up the difference), so naturally all countries are going to have big states, therefore it follows that rich countries will have big states.

And to some extent, Roumell just has cause and effect backward. Once a country reaches a certain level of wealth, it becomes possible for people to make and government to fulfill demands for a safety net. That at least is what happened in the U.S., Britain and Germany: industrialization and wealth came, and then large safety nets.

(In Germany it happened around the turn of the century; in the U.S. it came in the 30s, in response to growing poverty and, at the same time, a GDP at a high enough level to make it happen; then it grew in the 50s and 60s, in response to growing wealth.) France had political centralization and a big state earlier than anyone, but saw weaker growth and industrialization than the U.S., Britain and Germany in the nineteenth century if I remember my history correctly.)

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Another approach to the question of big government is to debate the role of government, rather than looking at how many units of government, as though all units of government spending are the same.

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Rather than really delve into the relationship between government size and national wealth, though, or systematically examine the role of government, Rournell blips the former issue, then quickly abandons analysis altogether, moving on to the sorts of intellectual short cuts that are, of course, the only real reason people read articles such as his in the first place. He says “government foes should identify what they believe should be the proper mix between the private and public sector as a percentage of GDP,” and goes on to not do this himself.

Some intellectual shortcuts may even be legitimate, appeals to an a priori principle, ideology or political philosophy that takes precedence over case-specific analysis. Other times, they consist of reasoning from the particular to the general and back to the particular (WWII is good, therefore government is good, therefore this thing government wants to do is good; or else the Holocaust was bad, therefore government is bad, therefore this government program is bad,) or other similar arguments by association or mood affiliation, as Tyler Cowen calls it http://marginalrevolution.com/marginalrevolution/2011/03/the-fallacy-of-mood-affiliation.html.

Roumell’s appeal to his implied a priori view of government consists mostly of this: “Government haters remind me of adolescents pumping their chests to proclaim that they don’t need mom and dad.” But this self-assertion by adolescents is a necessary process on the way to eventually really becoming an independent adult. With government as parent, on the other hand, the citizen is forever a child, never independent. Why does Roumell want it to be this way? We need food, but the farmer isn’t our Mom and Dad. He’s someone we trade with.

Similarly, we need a binding legal system and national defense, and even some other things, but why anthropomorphize this system into something apart from us, to which we should be grateful and that we should allow to decide what is good for us? Why not regard ourselves as self-governing, creating government for our convenience, to serve us? Or as something to represent us, like a lawyer?

I need my microwave, but I don’t want it to turn into HAL 9000. And I want it to cost as little as possible.

Roumell’s arguments by association are the usual sort of thing: World War II, polio vaccines, etc., therefore government good. And he asks us whether we’d rather be increase government spending by 15% or decrease it by 15%, arbitrarily selecting Mexico and France (rather than Singapore and Libya) as the nations we would end up like. Well, I wouldn’t want to be Mexico, but I wouldn’t want to be France, either. Even if I would reluctantly choose France, I would hate to have to make the choice. And fortunately, I don’t have to! I can engage in marginal, situation-specific analysis of actual policy proposals.

But about World War II. Now, you need government to fight wars; for one, you have to coercively tax to overcome the free rider problem. But once we’ve used government to solve the technical problem of raising money and perhaps conscripting troops, we still use a hierarchical system to coordinate troops’ actions. We don’t leave it to individuals to decide where to march, as there’s no price system or “invisible hand” mechanism to insure that they end up going to the right places in the right numbers, or that will cause them to act in coordinated fashion once they are there. And an individual will be reluctant to launch an attack unless he has reason to believe others will also do so, as there’s really no point otherwise. So there’s a number of collective action problems, and these require a commander.

On the other hand, central planning of war and battles faces the same problems central planning does anywhere. “No battle plan survives contact with the enemy,” it is said. And the aforementioned Eisenhower, due to his lack of local knowledge, once ordered that every American soldier in Europe be given a turkey dinner for Thanksgiving, no matter the conditions, to boost morale. As a result, Americans relying on cover of darkness had to set a fire, making them targets for enormous German cannons. Local knowledge is important!

And the reason we have commanders isn’t because they’re particularly likely to make the right decision, but because there must be a coordinated decision. It’s better that we all act according to one plan, even if it’s the wrong plan. And yet everyone being in on the wrong plan often leads to disaster. For every government that’s won a war, one has lost a war. The government that wins hasn’t overcome the difficulties with central planning, it’s just gone against an enemy that faces those same difficulties.

And knowledgeable people seem to consider individual initiative in war a great advantage to the side that has more of it- see for instance Greece versus Persia.

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