Anecdote is not proof

It's almost a given that government spending is inefficient. But it is not sufficient to show high absolute and relative government expenditures coexist with social and environmental problems, as they do in the rich countries. The facts are, though, suggestive.

• Government spending in the rich countries typically amounts to at least a third of national income.
• Many social indicators have shown negligible improvements in recent years. Life expectancy, infant mortality, hospital outputs, literacy, violent crime, suicide, poverty and income inequality have barely changed despite a massive increase in social spending.
• Around the world there is little relationship between higher public spending and better social outcomes.

At first sight, the conclusion that government is inefficient seems unarguable, but in fact there are counter-arguments: sure the indicators listed above haven’t improved much, but there are others that have. Or: there are mitigating circumstances, such oil price rises, larger numbers of people on welfare, aging populations, etc. So while there is widespread perception that we are not getting value for money from the taxpayer dollar, there’s little in the way of proof.

More convincing than anecdote, to me anyway, is the persistence of perverse subsidies: those policies, like agricultural support programmes, that transfer funds from the poor to the rich, that environmental depredation, and that are financially disastrous. They were set up with good intentions, but they have helped finance the creation of lobby groups whose raison d'etre is resistance to their withdrawal. Their persistence, in the face of decades of evidence as to their failure, points to a more dangerous truth: that mechanisms that correct disastrous programmes can fail. Indeed, one result of poor policymaking is that it widens the gap between policymakers and ordinary people - a problem in itself and one that is likely to generate more problems further down the road.