Our fortnightly series continues.
Reducing the demand for government
The argument that ‘real communism has never been tried’ is laughable. After so many disastrous attempts to make it work, how many more can humanity take? When a political system fails each and every time that it is tried, the most logical explanation is that there’s something fundamentally wrong with its ideas.
In this respect, conservatives have less to worry about. Core conservative principles like democracy, free enterprise and the rule of law have been vindicated by history. Compared to eras past, we enjoy extraordinary liberty, prosperity and security.
And yet there’s one aspect of conservatism that clearly hasn’t succeeded. Wherever you go in the western world, including America, the state is always big – and usually getting bigger. So does that mean that there’s something fundamentally wrong with small-state conservatism?
Absolutely not. Given the demographic forces heading our way we need to overhaul our public finances to stave off national bankruptcy. You don’t even have to be on the Right to see the need for long-term financial stability – after all, the survival of the welfare state depends on it.
The last hope for a smaller state
However, we do have to doubt the methods that small-state conservatives have employed thus far. Whether it’s making direct cuts to public spending or trying to grow the economy faster than the state, the standard approaches obviously haven’t worked.
So do we just give up and wait for national bankruptcy? No, because there’s one tool left unused in the tool box. In fact, it isn’t just unused, but unrecognised – because it’s so different from the others.
All the approaches that haven’t worked have one thing in common – which is that they try to reduce the supply of government (either absolutely or proportionately). But what if we tried to reduce the demand for government instead?
Millions of people – and all sorts of organisations large and small – do not depend on the state for their day-to-day needs. So what if there were more of them?
What if all capable adults were expected and empowered to look after themselves and their dependents by their own efforts — and in voluntary co-operation with their fellow citizens? Furthermore, what if this didn’t just mean getting by, but flourishing — to the enrichment of their own lives and the common good?
The advantages of demand-led approach
This is the foundation of the approach that we call reducing the demand for government. To understand why it could be so much more effective than the various supply-side approaches, we need to consider the key differences.
Unlike austerity, Reducing Demand isn’t temporary. Compared to, say, freezing unemployment benefits – which would eventually lead to an unsustainable gap in living standards – getting more people into decent jobs provides the potential for permanent welfare savings.
Unlike the abandonment of public services, reducing demand doesn’t leave behind an unmet need. For instance, while cut-backs to the probation service means dumping the cost of repeat offending somewhere else, early interventions that get young people on the right path generate savings by ensuring that there are no unmet needs, because they don’t arise in the first place.
Unlike efficiency drives, reducing demand isn’t about looking for superficial waste, but tackling the root causes of pointless demand on the resources of the state. For instance, instead of using technology to streamline reporting procedures, we could ask why the information is needed in the first place and what we’d need to do to live without it. As Danny Kruger puts it, the aim shouldn’t just be to do more with less (conventional efficiency), but, wherever possible, less with less.
Starving the beast
Unlike the starve-the-beast strategy – which is about cutting taxes first and leaving bureaucrats to work out how to cope with smaller budgets, an approach based on reducing demand requires small-state reformers to understand how taxpayers’ money is used and why it’s needed. This is preferable to a status quo in which everyone with an interest in containing the state is outside the system, while those with greatest incentive not to economise are on the inside.
Going for growth
Finally, unlike the going-for-growth strategy, reducing the demand for government does not rely on boosting the rate at which the economy grows. By definition, the former can only succeed by generating extra GDP (which could be used to fuel demand for more government), while the latter can only succeed by reducing that demand. It seems clear which approach is more likely to constrain the state.
The obstacles to a demand-led approach
But if reducing demand is so obviously the way forward, then why hasn’t it been tried before? The overarching reason is that it would require a fundamental alteration in the way government works. That’s not an impossible ask – because, from time-to-time, the system of government is reinvented. Examples include centralisation and decentralisation; nationalisation and privatisation; joining the EU and leaving the EU. However, such transformations do not happen on their own. A reforming government has to have the ability and determination to make it happen.
That means overcoming the biggest obstacles to change, which fall under three main headings: investment, incentives and ideology.
Reducing demand for the state is not a quick fix – making the interventions to help people stand on their own feet requires an upfront commitment of time and money. For governments that want results fast, that’s an obvious problem. A prime example was the long war between George Osborne’s Treasury and Iain Duncan Smith’s Department of Work and Pensions (DWP), which raged from 2010 to 2016. The Treasury wanted to squeeze the welfare budget to make immediate savings, the DWP needed the resources required for long-term improvements like the introduction of Universal Credit. The quick fix was prioritised over the deep reform — with the latter only surviving due to the tenacity of its champions.
Reducing the demand for government, will require a sea-change in our culture of politics. This means the tail needs to stop wagging the dog – the tail being the government’s communications and electoral strategy and the dog being the development and implementation of policy.
Above all, government needs the discipline to allocate surplus resources to long-term structural reform and not to short-term political objectives.
Away from top-level politics, and into the nitty-gritty of the decision-making process, there’s the problem of vested interests. Reducing the demand for government by investing in lasting cures rather than sticking plaster solutions is obviously good for the country. However, it is not so good for those with a financial or professional interest in the sticking plasters. As Mancur Olson noted, the greater good is diffused throughout society, while vested interests are concentrated – meaning that the latter will lobby harder.
Even when there’s no overt lobbying involved, incentives can misalign in other ways – for instance if a reform programme in one department (for instance, improved social housing) produces rewards for another department (for instance, better mental health outcomes).
So as well as facilitating long-term decision making, we need to align incentives so that vested interests and department structures don’t get in the way. Just how will be explored in the last two instalments of this series.
The final and perhaps most formidable obstacle to reducing the demand for government is ideology. There is no technical or organisational fix to this problem. Rather it is a political battle that has to be fought and won.
On the Left, there’s no mistaking the enemy. While the idea of a centrally-managed economy went out with the Berlin Wall, state expansionism has taken on new forms. Indeed, contemporary Left-wingers have been busy thinking up new ways of increasing the demand for government – for instance, the related notions of Universal Basic Income (i.e. free money from government) and Universal Basic Services (i.e. more free stuff from government).
Meanwhile on the Right, there is no in principle objection to reducing the demand for government. However, there’s no doubt that attempting to reduce its supply has been the preferred approach.
That because of the tendency of small-state conservatives to see government only as a problem — and indeed as the problem. As Grover Norquist, founder of Americans for Tax Reform, put it, “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” Or to quote Ronald Reagan: “the nine most terrifying words in the English language are: I’m from the government and I’m here to help.”
But, of course, that’s a very American – or perhaps Anglo-American – perspective. Elsewhere in the world, especially the Far East, conservatives see a rightly-ordered government as a source of solutions – not least to challenge of strengthening the institutions that provide an alternative to the state.