An "Old Friend" Returns

Leviathan is Back, But It Never Went Away

Big Government is back, The Economist tells us in a recent article. Actually, it never really went away--it just hibernated for a few years. Now, however, it is out of the cave bigger, hungrier, and more rapacious than ever.

Fifteen years ago it seemed that the great debate about the proper size and role of the state had been resolved. In Britain and America alike, Tony Blair and Bill Clinton pronounced the last rites of “the era of big government”. Privatising state-run companies was all the rage. The Washington consensus reigned supreme: persuade governments to put on “the golden straitjacket”, in Tom Friedman’s phrase, and prosperity would follow.

Today big government is back with a vengeance: not just as a brute fact, but as a vigorous ideology. Britain’s public spending is set to exceed 50% of GDP (see chart 1). America’s financial capital has shifted from New York to Washington, DC, and the government has been trying to extend its control over the health-care industry. Huge state-run companies such as Gazprom and PetroChina are on the march. Nicolas Sarkozy, having run for office as a French Margaret Thatcher, now argues that the main feature of the credit crisis is “the return of the state, the end of the ideology of public powerlessness”.

Notice that vast expansions of government size and power occurred at the hand of "conservative" political administrations just as much as left-wing governments, and alike, it happened during the times of economic boom (artificially stimulated though it were through loose monetary policies and debt).

Yet even before Lehman Brothers collapsed the state was on the march—even in Britain and America, which had supposedly done most to end the era of big government. Gordon Brown, Britain’s chancellor and later its prime minister, began his ministerial career as “Mr Prudent”. During Labour’s first three years in office public spending fell from 40.6% of GDP to 36.6%. But then he embarked on an Old Labour spending binge. He increased spending on the National Health Service by 6% a year in real terms and boosted spending on education. During Labour’s 13 years in power two-thirds of all the new jobs created were driven by the public sector, and pay has grown faster there than in the private sector (see chart 2).



In America, George Bush did not even go through a prudent phase. He ran for office believing that “when somebody hurts, government has got to move”. And he responded to the terrorist attacks of September 11th 2001 with a broad-ranging “war on terror”. The result of his guns-and-butter strategy was the biggest expansion in the American state since Lyndon Johnson’s in the mid-1960s. He added a huge new drug entitlement to Medicare. He created the biggest new bureaucracy since the second world war, the Department of Homeland Security. He expanded the federal government’s control over education and over the states. The gap between American public spending and Canada’s has tumbled from 15 percentage points in 1992 to just two percentage points today.

All the while the people clapped and cheered. Their governments were "doing things" for them. In New Zealand, when the previous (Labour) administration deliberately planned and executed an expansion of entitlements to ensure that most of the middle class became recipients of entitlements, known as Working for Families, there was no resistance--only thankful, outstretched hands. By the time the government changed to a "conservative" administration, Working for Families had become one of the vitally important entitlements that had to be conserved. (Actually, the name of this new entitlement is a perverse irony. "Working for Families" was supposed to refer to the kind paternalistic government "working" for families. This of course is a sleight of hand. Everyone receiving "Working for Family" entitlements has other people working for them--like slaves. They work, government takes, and a subset of society receives.)

The Economist article goes on to point out some of the intrinsically bad things about Leviathan's return. It then rather lamely concludes by suggesting we had all better have a serious think about the role of government ought to have in our society, and work out what governments do well and what they do not. But having recourse to a "common-sense pragmatism" to answer this question is ostrich-head-in-sand type stuff. Western governments will not be rolled back: they will merely hibernate for a time, only to re-emerge bigger than ever. It is politically impossible.

New Zealand is a classic example of this truth. Facing imminent national economic bankruptcy--that is, a genuine crisis--Muldoon's eastern-bloc command economy was reformed by Roger Douglas in the eighties. But it was a pragmatic reformation: Douglas's slogan was "There's got to be a better way." It was a change led by an academic elite which had been influenced by Milton Friedman and pro-free market economists, largely in the US. It represented a pendulum swing. Parts of the economy were reformed, and the government was stripped of some powers. But what remained untouched were two impossible-to-change foundations of Big Government: welfare entitlements and government redistribution. So, within thirty years, despite the Douglas reforms, Big Government is now back in New Zealand, bigger than ever before. Hello, darkness, my old friend.

We cannot be sure whence the following quotation came, but it definitely hits the nail:

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always then followed by a dictatorship.

Arguments amongst pragmatists about where the line ought to be drawn between the government and the private sectors are irrelevant. Wherever that line might be drawn by academics and theorists, it will ever be nothing more than a worthless Maginot Line rapidly outflanked by panzer-like electoral realities driven by the lust, greed, covetousness, and envy of the voter. All Western democracies rest upon immoral foundations that finally will cause them to self-destruct, at least as democracies. It it only a matter of time.

The commandments, "Thou shalt not steal", and "Thou shalt not covet" prohibit voters from demanding, or political parties from offering, state entitlements and the expropriation via taxation from one citizen and distribution to another. These evils are just as immoral as murder. It is only our modern social conditioning which pans the former as acceptable and continues to reject the latter (except in cases like abortion).

But these convictions will not hold sway in Western democracies until the vast majority of people also embrace the first table of the Law, particularly, "Thou shalt have no other gods in My presence." We believe this will indeed happen in time. In the meantime, we work with our own hands and raise our children to fear God and be free of, independent of, the State and maintain at all times a clear, generous eye toward the weak and the needy. Nowadays, to live this way is to lead a truly revolutionary life.