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March 20, 2011
David Warsh, Proprietor


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A Big But

I’m as susceptible as the next guy to lashing out at the nanny state.  The jigging around of Daylight Savings Time over the last twenty-five years is my latest peeve. For a quarter-century after 1962, DST (what the British call Summer Time) began the last Sunday in April and ended the last Sunday in October. For the next fifteen years, it began the first Sunday in April.  Now we move our clocks ahead the second Sunday in March and don’t set them back until the first Sunday in November. Europe waits until the end of March.

Dependable time and stable money are among government’s most fundamental responsibilities. Changing the calendar periodically to suit lobbying interests and bureaucratic enthusiasms is a bad idea.

Meanwhile, outrage at the government’s determination to favor the new fluorescent light bulbs by imposing efficiency standards on the old incandescent ones is one of the few concerns I share with the Tea Party. “It makes me want to explode,” says my friend, the critic Katherine A. Powers. Washington should repeal George W. Bush’s mandate and let the price system do its work.

But – and it is a big but – despite the fact that government occasionally steps on my toes, I am pretty certain that the mixed economy is here to stay, and that effective government is therefore as important to modern life as is a proper appreciation of the superiority of markets to other forms of organization for the provision of most goods and services.

That’s why the latest issue of The Economist leaves me shaking my head.

On the cover is Japan, and in the main leader a plea for national governments to continue working on nuclear power, acknowledging tacitly, at least, the growing problem of greenhouse gases. “[Nuclear energy] still has the advantages of offering reliable power, a degree of energy security, and no carbon dioxide emissions beyond those incurred in building and supplying the plants.”

In a sidebar article there’s a sensible prescription for running a safe nuclear power industry – “trustworthy and transparent regulation, a clear distinction between operators and regulators, and well-enforced building codes,” coupled with the observation that the Japanese industry lacked some of those safeguards and its Chinese counterpart (where 13 reactors are up and running and another 27 are being built) has none of them.

But then, there, smack in the middle of the magazine is a twenty-page special report, “Taming Leviathan: How to slim the state will become the great political issue of our times.” It turns out that The Economist thinks that the growth of government is the central problem of our time – not suboptimal industrial organization (think military/health-care/financial/agricultural-industrial complexes) and regulatory capture, of the sort that produced the crisis in Japan and the near meltdown in financial markets three years ago. That the report’s author is John Micklethwait, the magazine’s editor in chief, lends force to the opinion.

The report rests mainly on a table showing government spending pressing onwards, ever upwards, from around 10 percent in 1870 to more than 50 percent today in most industrial democracies. Various authorities are invoked:  Pierre Paul Leroy-Beaulieu, who in 1888 calculated that 12-13 percent was the limit for a Western state; Adolph Wagner, the German authority who predicted that government spending would continue to increase; Friedrich von Hayek, who predicted (repeatedly) that “the deliberately organized forces of society” might, through government regulation, “destroy the spontaneous forces which have made advance possible.”

That was Hayek in 1960, when government spending in the welfare states had reached a punishing 28 percent. The figure nearly doubled in the next fifty years – yet the world grew steadily richer, its spontaneous forces benefiting greatly from fifty years of government-sponsored spending on education and R&D.

Micklethwait lets Lawrence Summers take the other side of the argument, briefly. The former economic adviser to President Obama notes that the goods that government buys, education, health care and defense, don’t exhibit the same tendency to fall in price as nearly everything else that we make. But The Economist’s chartmakers make no attempt to tease out of those menacing aggregate numbers (“an ever fatter state, ever less freedom and ever higher taxes”) the impact of the industrial democracies having added, over the course of a century, the costs of financing education, employment and retirement security safety nets and health care to the tasks of government. Soon Micklethwait is off to California, where he finds a state very nearly out of control, and to Singapore, where he is charmed to sit in with a civil service planning council composed of well-educated, well-paid young boffins.

No doubt that California has serious problems: its political mechanisms are seriously out of kilter.  And in fact Singapore has done pretty well. But public unions are not the enemies of progress. Various powerful industrial coalitions – not to mention colossal subsidies to farmers – pose much more serious threats.  And for all the interesting nuggets tucked away in this energetic tour d’horizon, its account sags under the weight of its slogans: “A state that takes up more than half the economy begins to deliver an ever worse deal to ever more people in the middle:  the extra benefits become harder to detect, the extra costs harder to hide.”

The weight of this posturing is Micklethwait’s fault. The trend towards collaborative government is real enough; see, for instance, this space last week. But in choosing “the state” as his target, he is simply burnishing formulae and repeating shibboleths that he learned when he went to university, in 1980, when Margaret Thatcher was prime minister and Ronald Reagan was president, and the West was courageously turning away from a gloomy prognosis that had been written for it forty years before by the likes of Karl Mannheim and Joseph Schumpeter. The future editor was right then. He is wrong now.

Times change.  The bureaucratic big-governmental impulse was a serious problem in the 1970s, but it is not today. Indeed, competent government is on the verge of being overwhelmed by zealous budget-slashers and taxcutters.  We can’t have it both ways.  Either we need nuclear power, in which case we must have capable governments, writing and enforcing those building codes, measuring climate change, funding seismological research and pursuing all the other tasks that are required of thoughtful guardians of the public interest.  Or we want the Tea Party world that Micklethwait imagines, with far fewer rules and regulations, individual savings accounts instead of social safety nets, and “a small central state buying in services from a variety of different providers.”  In that case, though, we would be much safer without nukes.

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4 Comments

  1. lark wrote:

    Discredited ideology dominating the point of view is why I stopped reading “The Economist.”
    It’s rubbish, whenever ideology intervenes – which is often.

    Monday, March 21, 2011 at 8:02 am | Permalink

  2. “Times change. The bureaucratic big-governmental impulse was a serious problem in the 1970s, but it is not today.”

    You’re smarter and better-red than I am, so I assume you have some evidence to back up this claim. What is it?

    The 1970s saw a lot of reverse-LBO/restructuring on the Federal level(e.g., “founding” the EPA–that is, creating a separate administrative structure while allocating no money for the department itself–a move that RWR repeated in 1980s with HEW => HHS & Ed separately), but I don’t remember “bureaucratic expansion” as such in the Nixon or Carter administrations. The growth in government labor force is rather parallel to the growth in civilian LF over the period from 1960-1990.)

    Monday, March 21, 2011 at 7:02 pm | Permalink

  3. Richard wrote:

    My term for the Economist has always been “middlebrow horses**t”. Conventional and without probity, concise without being incisive, it does not bring much intelligence to bear on the topics it reports on. Read it as Time or Life but with a longer and more impressive name.

    Tuesday, March 22, 2011 at 8:55 pm | Permalink

  4. admin wrote:

    In due course.

    Tuesday, March 22, 2011 at 9:45 pm | Permalink

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