There's something we've not heard very much of recently - the government's hopes to cut "wasteful" public spending. There's a reason for this. The Tories don't want to cut waste. Nor, for that matter, does Labour. I mean this in (at least) four different senses:
- The war on drugs costs a fortune in police time and in incarcerating drug dealers, but its benefits are elusive.
- The war in Afghanistan cost billions and might not have achieved proportionate benefits.
- It cost £1.6bn to police our borders last year - more than was lost to benefit fraud (pdf) - and given diminshing returns, it would probably cost much more to police them effectively. But there are no big economic benefits from restricting immigration.
- The DWP spent (pdf) £7.4bn on administration last year, and lost another £2.1bn in fraud and error. In the long-run, a large chunk of this cost could be saved by the simplification involved in a citizens basic income.
However, neither party seems keen on acknowledging this waste nor - aside from surrendering in Afghanistan - doing anything about it.
You might object that this is because these aren't forms of waste at all, but rather simply the costs of giving voters what they want. This would be true if these voters wanted these policies for their intrinsic qualities. But do they?
Take, for example, immigration controls. If people want these because they simply have a taste for exluding migrants, then fine. (Well, not at all fine but that's another story.) But what if they want them because they believe immigration is bad for the economy? If this is the case, then we could relax border controls and "save the tax-payer money" with no ill effect.
I suspect that if voters were asked: "do you think we should spend more on border controls than we do on benefit fraud without getting any macroeconomic benefit?" support for them might diminish.
Or take the admin costs of the DWP. These aren't waste if you think a complex benefits system is a good thing in itself, but they are waste if you think the purpose of the benefits system is to provide a basic minimum income for all.
My point here is a simple one. Governments cannot reduce "waste" merely by increasing efficiency. Even in the private sector, remember, efficiency increases not so much by individual firms becoming more efficient, but by firms entering (pdf) and exiting (pdf) the market. If governmental efficiency is to increase, it will have to be through a similar mechanism - the government exiting from some functions and rethinking how it provides others.
Oh yes: From a Keynesian point of view, of course, even "wasteful" public spending has a role in boosting aggregate demand. I'm ignoring this, and assuming that productive public spending is better than unproductive.