Big Government, Little Government: Blah, Blah, Blah

In debates about government at least, size, it seems, does matter. In Canada, the issue of size has not spawned the equivalent of the Tea Partyers, but it’s impossible to believe that we aren’t influenced by what’s going on with our neighbours. The Tea Party is only the latest expression of an ideology that has been regaining strength for a few decades, and not simply among self-styled conservatives. Over a decade ago, Clinton, in a State of the Union Address, declared that the age of big government was over. Milton Friedman never failed to remind the many who listened to his every word of the extraordinary damage that government “interference” in the economy causes, supposedly blotting out creativity, innovation and “big ideas”. And centrist and centre-left politicians seem increasingly cowed by those who pile on with accusations that government destroys freedom, deprives the private sector of capital it would use much better, inhibits investment and is wasteful and corrupt. In Canada, too, all one has to do is read the angry comments in on-line media when anybody has the temerity to defend government to see that the ideology is spreading.

The proponents of small government, especially in the U.S, often compare the present unfavourably to a pastoral age when Americans and their markets were truly free, though historians will never find such an era. Even the limited-government U.S. Constitution fully recognizes the importance of government for realizing and guaranteeing freedom and even Jefferson supported strong government regulation, for example, to prevent excessive land speculation. And the Friedman economists know perfectly well that Adam Smith understood that capitalism couldn’t survive without government, that lawlessness was the greater threat. Once that door is opened – that government is necessary to create the market, at minimum to enforce the rule of law and property rights – then it cannot be arbitrarily closed to all those other interventions that have arisen to prevent a race to the bottom or correct market failures or manage so-called externalities.

All this to say that the arguments about the size of government are infused with ideology and are remarkably free of evidence or even clarity. Few absolute libertarians who believe in no state at all can still be found given how completely divorced from history and reality that view is. In fact, most of those who argue for small government are quite content to build up the military and the prison system and the border police. The argument, it would seem, is less about size than about purpose. So the state must exist, government matters, and perhaps size is not the crucial variable. In fact, many who argue for strong government intervention focus on regulation and redistribution, neither of which requires large bureaucracy. And I can find nobody who would disagree that we should make government work ever more efficiently and that we should have zero tolerance for corruption (a word rarely appropriate to Canada) or breach of law or ethical values.

What is most troubling about this issue of size is that it has become de-linked from evidence and, even more important, from what it is we collectively want to achieve and how government can help make this happen. On the issue of evidence, several books have recently come out challenging the conventional wisdom that government spending inhibits growth. I will be blogging on some of them soon, but suffice it to say that they make the case that government spending can contribute significantly to prosperity, that weak government can have profound economic, social and environmental costs, and that taxes are not necessarily the primary factor in investment decisions. There is also evidence that out-sourcing can sometimes end up being more expensive than government-provided services. Joining these voices, not surprisingly, is Paul Krugman, again, who makes the case that regulations work better than tort law and, even more telling, that regulations work best when supported by a professional bureaucracy treated with respect.

None of this is meant as an argument for bigger government and certainly not as an end in itself. But we should be very wary of the ideologically driven libertarians who seem to be on the rise. We should demand to see the evidence for their assertions. Instead of this phony and destructive ideological battle about size divorced from purpose, we should be asking how we can make government work for us to help us achieve our shared goals and overcome our shared challenges, how we can close the growing gap between us and our government, and how government can become relevant again.

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