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October 06, 2006

Comments

tom s.

"you've got to cut government functions."

- the usual follow up to this is that government functions should be contracted out to private industry, because private firms are more efficient. But contracts are vulnerable to exactly the same kind of problem that internal bureaucracies are, except that the private industries who take the contracts are more efficient and conscience-free about doing the ripping off.

I think I saw Stiglitz write that the Pentagon put out a 30-page spec for a regular white T-shirt. There is a lesson there for those who would outsource to private companies.

dearieme

So what do you recommend , Tom? An annual decimation of the Civil Service?

tom s.

What, you want me to be constructive?? It's so much easier to say what's wrong.

OK (takes deep breath). First, I remain to be convinced that waste and graft in government bureaucracies is significantly worse than waste and graft in the private sector, so maybe we differ on the diagnosis here.

Second, issues of waste are issues of accountability. The failure of large-scale state enterprises did tell us that we can't just assume away issues of accountability - I grant you that. But the last twenty years tells us that we can't just say that the market will handle it either. So the problem is how to introduce accountability?

In many cases, the best tools are (i) mandated openness and a strong opposition. An independent auditor and, yes, even the Daily Mail serves its purpose by keeping government institutions on their feet. (ii) well-informed and organized groups among those who are receive government services. A model is the student campaigns against sweatshops, which have managed to bring accountability into the supply chain of those who supply campus clothes. The best thing that a government could do to bring about accountability of the health system would be to fund activist patient groups. Like other groups outside the traditional structure they operate on a shoestring compared to getting in Ernst and Young or whoever, and they get the job done.

TStockmann

How about this as a simple start:

1) Set performance standards at least equal to those currently met, prioritized.

2) Identify long-term investment requirements.

3) Cut administrative and personnel budgets by some reasonable amount (say, 6%).

4) Fire those whose units don't make (1) while preserving (2).

Now, of course it's not nearly this simple - you have to identify and sequence the levels you're firing, for one. But the only way to begin to deal with rent seeking is to withhold a portion of the rent.

Bob B

"This, though, merely means Tim is even more right on the fundamental point - that if you want to cut government spending, you've got to cut government functions."

The good sense of that prescription largely depends on which functions and how widely or narrowly the "functions" for scrifice are defined. How about Adam Smith's third and last duty of the sovereign in government?

Namely: "that of erecting and maintaining those public institutions and those public works, which, though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain."
[Wealth of Nations (1776) Bk 5, Ch. 1, Pt 3]

A necessary element in the art of good governance is in deciding whether micromanaging interventions by central government are likely to prove remotely beneficial at ground level through ten layers of management. Many policy issues are really better left to local or personal decisions.

Sadly, some present and past ministers have been consistently over-optimistic about the effectiveness of micromangement by central government. As David Blunkett as minister once put it: "A day without a new initiative is a day wasted." The Lib-Dems kept track when he was education minister. Between May 1997 and May 2000, the education ministry in the course of just three years under his guidance issued:

315 Consultation Papers
387 Regulation documents
437 Guidance documents
143 Data collection documents
9 Ministerial letters

The usual caveat should apply about the perennial triumph of hope over experience. After all, the government might proclaim its benign intentions by a policy to promote the Virtue of all citizens, not just the few. Billions could be earmarked to spend on promoting Virtue programmes. However popular such a cause might be - which could well depend on who would pocket the billions spent - I doubt much would come of any official Virtue Index for all that was spent and the spin and however much the civil service was berated for incompetence in failing to achieve universal virtue.

On all this, I think Matthew Parris makes much sense:

"My own reading of the public mood is that the Cameroons are at least partly correct: Britain is not seething with barely suppressed rage about the level of taxation. But there is a swelling anger about how the tax we do pay is being wasted."
http://www.timesonline.co.uk/article/0,,6-2381790,00.html

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