Maybe it helps to look at some figures. Here’s the 2009 Heritage Index of Economic Freedom top 10:
Pay special attention to Denmark at 8th, which is closer to the U.S. at 6th than the U.S. is to Ireland at 4th. According to the OECD, Denmark’s government spending as a percentage of GDP is 50.8 pecent. In the U.S. it is 36.6 percent. Now, note that size of government is an input to the formula that determines the ranking. Denmark takes a HUGE HIT for that in the index. No country in the top ten has that low a score on any dimension. In fact, they take a big hit twice, because tax rates are in the formula as well. Drop the size of government from the index, but keep the tax rates (i.e. “fiscal freedom”) and Denmark would score higher than the U.S. in economic freedom. Of course, Denmark, like the U.S., gets high marks in other rankings focused on political and civil liberties, like Freedom House’s. Denmark may be culturally weird, but I think it counts as a possibility proof of very big but quite limited government. Like the Economic Freeedom rankings, you might think that such high tax rates and big government count heavily against them, but it remains that they do nearly as well or better than every other country in the world in every other aspect of economic freedom. Tax rates and government size are in fact dissociable from regulation, barriers to trade, and so forth.
Now, I’m just trying to reinforce a conceptual distinction. I’m not for one second arguing that the U.S. should have a bigger government. I think we’d be much better off in the extremely lean neighborhood of Singapore (about 15% I think). But I also think that the size of government in the U.S. is less important than some other aspects of economic freedom, and less important than the composition of spending, some of which is both immoral and wealth destroying.
Consider that Denmark’s size of government is similar to that of France, which scores 64th in Economic Freedom, between Uganda and Romania. The implication is that France could become immensely more economically free without doing much by way of cutting the size of its government. The way to do this would be to severely limit, as Denmark has done, the ways in which the government may intervene in the economy. Likewise, holding size of government constant, the U.S. could be doing much better, though I’m afraid we’re rapidly moving in the other direction.
More fun facts! Hong Kong is part of communist China, and so is lacking much assurance of liberty. Singapore is more or less an authoritarian technocracy. We don’t hit a liberal state until number 3. Australia, at 34.9 percent of GDP, has a smaller government that the U.S., as does Ireland, at 34.2 percent, while New Zealand is a bit bigger at 39.9. Switzerland is also smaller (35.4%) but the rest of the list is bigger. Canada is in the neighborhood of New Zealand, Denmark is WILDLY larger than the rest of the list, and the U.K is very big at 44.6 percent. The only countries in the OECD with bigger governments than Denmark is are France (52.4%) Sweden (52.6%), and both do have fairly dismal economic freedom scores. However, Sweden seems to have the right idea, as it has refused to bail out SAAB.
Hong Kong is part of communist* China, but the political systems are distinct, under the one-country-two-systems principle. While China can decide to abolish that any time it wants, HKers don't take things lying down. Take 2003, for instance, when HKers took to the streets to protest Article 23 of the Basic Law. Not only was the article shelved, it led to the sacking of the Chief Executive.
While, HK does not have a constitutional guarantee of freedom, some might say HK takes freedom more seriously than a “liberal state” like Australia, which recently implemented a pilot program to filter the Internet: http://tech.slashdot.org/article.pl?sid=09/02/1…
Of course, this is nitpicking and your point stands: freedom and the size of government aren't necessarily inversely proportional. I would like to see, though, a chart which plots government spending against a ranking of freedom for all countries in the Heritage index. The Top 10 is a rather small sample.
I think these are all extremely good points and points to the extent to which constitutional limits don't have teeth without underlying cultural buy-in, and so pro-freedom cultural norms are doing most of the work.
I think one of the most important variables in this ranking is the “freedom from corruption” category. Notice, Denmark (94.0), New Zealand (94.0), and to a lesser extent Canada (87.0) and the U.K. (84.0) all have larger governments but are very “honest” governments compared to the U.S. (a lowly 72.0). Switzerland (90.0) and Australia (86.0) have governments of approx. the same size as the U.S., but their governments are also much more honest.
I think, as this chart suggests, big government (or non-limited gov't.) works better when that government is relatively free from corruption. The U.S. is not relatively free from corruption, and barring that change, I have think any likely expansion of government there will lead to a corresponding loss of liberty and/or utility. When the U.S. abandoned federalism for the New Deal, that was the end of any prospect for a relatively honest government from then on. The U.S. is too large, both geographically and population-wise, to have a federal government in charge of almost everything. Add to that stunning ethnic and racial diversity, and pols in DC find it easy to sell some stranger from a weird part of the country down the river. Compare the U.S. with small and homogeneous Denmark that does not seem to suffer much from a national system of governance. The most realistic prospect for expanding freedom and stopping wasteful government expansion in the U.S. is IMO a return to federalism.
An alternative would be convincing the general population to take on some sort of classical liberal/libertarian ideology and demand limited government. The argument for such policy preferences is too subtle for most to grasp though, and I fear we'll never be able to get a majority of the country to advocate for libertarian policy, even if they have libertarian moral sympathies. So, in the meantime we need federalism back.
“Singapore is more or less an authoritarian technocracy.”
Why don't you consider Singapore to be a democracy, simply because the PAP has been in power so long? Remember, Singapore is a city just like San Francisco or Chicago (both of which have had Democrats in power longer than Singapore has been an independent nation).
I remember the first time I tried using these statistics in an argument, and my professor looked at me and said, “And how do you measure freedom?” I tried to go back and look at how the scores are weighted, but I became increasingly unconvinced as I delved into them. Is a tariff on commodities really as economically unfree as a law regulating the merger of investment and commercial banks? Is it the same as a progressive income tax? I also don't know how they measure year to year changes. Luxemborg used to be above us. Australia has risen above New Zealand and is now in third place. The hell? Are they even watching Australia at ALL this past year?
The list might be good for large differences, but it's mostly just *** waving by the WSJ and Heritage to make a point that we could be better capitalists, and that even some places are better for business then we are. It is propaganda to take the list as a holy and its credentials are little more then entertainment.
BUT, this and your last post has gotten me thinking about the subject a lot more. Is it limitations on government action that matter, and does it matter how we're defining government size? To me, when I think of government spending as a percentage of GDP I think of G, the sum of government expenditures on final goods and services, but it does not include any transfer payments. Is my thinking the correct way, or is yours (total government spending)? Because Denmark isn't spending 58% of its production capacity on government services. It's half that number. They also include the cost of free public education and health care, both of which could be supplied by private alternatives as they are in the US. Does this matter? Because the fact that Denmark controls education and health seems like the nation has the potential to be very unliberal with privacy, quality, or gating access, even if their government chooses not to at this time.
Honestly, I'm not too sure how or if these factors should be considered. When we only look at the percentage of the workforce that works for government in Denmark, it's 30%. Higher then us, and that's maintained by some of the world's highest taxes. I don't know how it is that Denmark's population can put up with such high taxes. I don't think it could be done here. Almost half the people in Denmark are hit by marginal tax rates at almost 70%. We'd have to roll back the Johnson taxcuts to reach those levels.
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Kind of an aside, while looking into this I think I found out something else. Denmark finances their lifestyle on the back of expensive home mortgages. It would not take much deflation to cause a significant amount of pain. Should their housing sector collapse I think we could be looking at the next Iceland. Further examination into it reveals that part of the reason that so much emphasis is placed on housing in Denmark is because of massive regulations dealing with rent.
Which brings us back to the measurement problem again.
These are some good posts, as they are making me challenge underlying anti-state assumptions. Will, I know you've been having trouble naming yourself in the past, as a liberal or a libertarian, and it's occurred to me that you're post-modern. And, by this, I mean you are not bound by the tactile, the real, the virtual or symbols. You have no artificial borders. You break things down to their meanings and try to get to what matters. I think with these posts is you're trying to be the Yoda to libertarians that hug the old slogans. “Size (of government) matters not.” Which at first came off as weak to me, but the more I think about it the more I really have no answer to some of the questions you raised. Mainly, to what extent does welfare and taxation matter as issues of liberty.
All that said, I have narrowed it down to this question for you that I'd love to see answered. What does it now mean that “Size matters not?” As in, what does this mean in terms of political actions? Does this mean that minarcho-capitalism and anarcho-capitalism are wrong or bad? What should we be getting from this?
There's a lot of evidence (Google Scholar search: federalism political corruption) that federalism and decentralization increase corruption. Anecdotally, I don't think we can explain corruption in Illinois or Louisiana without considering the effects of federalism.
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Yes, Will:
“Big and Free” is technically possible. You are correct. However, it all comes with a caveat.
Countries like Denmark who fit the “big and free” label tend to be small and somewhat homogeneous….much like its Scandinavian siblings.
I cannot recall where I read about this but I did read an article once that pointed to the oft-overlooked dynamic of demographic composition when looking at nations like Denmark, Norway, Sweden and Finland in these matters.
The article analyzed this from psychological and social standpoint and found that “Big and Free” can work well when the country is truly behind the ideals that go into what you are talking about here with liberaltarianism. Of course, that statement I just made is rather tautological. The key is:
what makes a group of people willing to do this?
They found that when taxpayers know that the people drawing from the welfare dole are “like them”, they tend to be more tolerant and not rebel against the system. IOW, people tend to believe in and be less suspicious and wary of the work-n-pay-into-welfare game when they can truly empathize with the collectors socially, culturally, tribally and ethnically.
The article went on to show that once populations become more diverse and mixed, subconscious divisions, patterns and stereotypes begin to form and larger and larger amounts of “the native people” start to lose patience with the system and feel it's “unfair” and that they are being profited from.
Wow: They more easily tolerate more welfare when it's “for the group” but more difficultly tolerate welfare…even if it's less in total…when it's for “those other people”.
Mind you, there's no moral judgments being made here. It's simply observations with respect to human nature.
I believe the backdrop of this article was the issue of immigration and the size of the welfare state in Denmark and Sweden. If I recall, Denmark was more stringent in terms of immigration and foreign labor entry and this kept animosity about the dole in check. Sweden, OTOH, had been having more loose on immigration and that influence began to erode more and more of the public's support for the welfare state.
Maybe Friedman had a point all along when he said you either have to have open borders and no welfare state or closed borders and a welfare state. (I hope I'm not misrepresenting what he said)
Granted, I find this distressing. I'm with you, Will, on the idea of liberalized open borders and good safety net (with not too much of anything else). But according to this study…if it's to be trusted…you can't have it both ways.
So big-government libertarianism it is? Ask the conservatives how well that approach worked out for them.
Good points. Yet it's true that the media in Singapore is very controlled, unlike in SF, and opposition views are chilled by a threat of punishment. That said, I think you're also pointing to the importance of the distinction between the de facto and the de jure scheme. Singapore is a de jure democracy, but a de facto authoritarian regime, in part due to the PAP's strangehold over public opinion formation. China is a de jure communist but is de facto is in some ways freer than some more officially free countries.
Patrick, Basically all indices are bullshit because small changes in the included variables and small changes in the weight given to the variables can radically re-order the lists. But as long as you know that, they can be useful for seeing patterns.
John, Yes. There is a lot of evidence that ethnic heterogeneity reduces support for welfare transfers. See Alesina, Glaeser, and Sacerdote.
Friedman was actually confused on that point, as I've blogged about before. What he's right about is that you have to separate benefits of citizenship, such as access to the welfare state, and the right to live and work in a place. Singapore and a number of other places does this well. If the U.S. can't handle guest workers with fewer benefits than citizens, then 2nd best case is lots of illegal immigration, which is basically what Friedman was implying.
You'll see I said I think we'd be better off with a Singapore-sized government. What I'm arguing for is limited-government liberalism.
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When I say federalism, I mean shrinking the size and scope of the federal government and letting individual states (i.e. the people residing in individual states) decide to pick up the slack (or live under less government). Federalism in this country has been reeling since the New Deal, so I'm not sure what you mean about federalism causing the corruption of Illinois & Louisiana. The evisceration of the Commerce Clause as a limit on Congressional power (only recently reigned and even that didn't stop decisions like Raich), plus the interpretation of the Spending Clause as a tool to regulate anything (see South Dakota v. Dole) both show that federalism in the U.S. is now more rhetoric than fact. Bastardized federalism, like we have now, does suck, I agree.
Switzerland is a very decentralized federalist state, but corruption is quite rare. It manages this feat despite the fact that there is a lot of ethnic diversity (the three major native ethnic groups are German, French, Italian), religious diversity (Catholic & Protestant mostly), and that immigrants and resident foreign workers make up approx. 22% of Switzerland's population. Why isn't Switzerland corrupt?
Patric, Denmark has very peculiar mortgage market. No fancy staff, no leverage. Some may say, that highly regulated, but its basics are extremely simple. And it has been very stable. Really intresting system, I would say. You can read here:
http://en.wikipedia.org/wiki/Danish_mortgage_ma…
In Denmark more than 60% of youth between 13-17 are working regularly(!) after school.
At the end Denmark has high taxes, high unemployment benefits, strong unions, no minimum wage and lax labor market regulations – it is easy to fire and easy to hire. I read some time ago research (I think it was Spanish or French research), what asked is it possible to implement Danish system? The answer was “No”. The reasoning was that they dont have that special Danish culture. If you loose job in Denmark, it is not “nice” to stay unemployed and exploit all these benefits. It may be rational, but just not “nice” culturally. So danes are much more ready to accept new jobs even if it is not so good or pays less than older one. Working is valued in Danish culture from very young age.
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When you say federalism, you mean federalism, apparently…. And Boss Tweed must have lived after the New Deal, too…? Anecdote for anecdote is fine, but do the search and read the articles and see if you buy the findings. As for Illinois and Louisiana, I would suggest that their state governments (closer to the people, smaller, supposedly sovereign, etc.) are relatively more corrupt than the national government in DC. Is the gov't in DC more wasteful? Maybe. Less constitutionally justifiable? Probably. Pervasively corrupt? Not really. Just not doing its work as you have it do, I would wager.
I read that article, but I can't remember where either. Seems it was specifically a response to the UN's ranking of Iceland as the best place to live. (Not sure that ranking is still valid given Iceland's current woes.)
The research also delved into Iceland's religious homogeneity, which was postulated to have a large effect on the country's social welfare practices. Icelanders' religious beliefs value a strong work ethic and some other things I can't remember which made it less likely that the citizenry would see complete reliance on the safety net as a career path. It's interesting to think about, especially against the backdrop of ideas proposed by those like Max Weber.
Patric, Denmark has very peculiar mortgage market. No fancy staff, no leverage. Some may say, that highly regulated, but its basics are extremely simple. And it has been very stable. Really intresting system, I would say. You can read here:
http://en.wikipedia.org/wiki/Danish_mortgage_ma…
In Denmark more than 60% of youth between 13-17 are working regularly(!) after school.
At the end Denmark has high taxes, high unemployment benefits, strong unions, no minimum wage and lax labor market regulations – it is easy to fire and easy to hire. I read some time ago research (I think it was Spanish or French research), what asked is it possible to implement Danish system? The answer was “No”. The reasoning was that they dont have that special Danish culture. If you loose job in Denmark, it is not “nice” to stay unemployed and exploit all these benefits. It may be rational, but just not “nice” culturally. So danes are much more ready to accept new jobs even if it is not so good or pays less than older one. Working is valued in Danish culture from very young age.
When you say federalism, you mean federalism, apparently…. And Boss Tweed must have lived after the New Deal, too…? Anecdote for anecdote is fine, but do the search and read the articles and see if you buy the findings. As for Illinois and Louisiana, I would suggest that their state governments (closer to the people, smaller, supposedly sovereign, etc.) are relatively more corrupt than the national government in DC. Is the gov't in DC more wasteful? Maybe. Less constitutionally justifiable? Probably. Pervasively corrupt? Not really. Just not doing its work as you have it do, I would wager.
I read that article, but I can't remember where either. Seems it was specifically a response to the UN's ranking of Iceland as the best place to live. (Not sure that ranking is still valid given Iceland's current woes.)
The research also delved into Iceland's religious homogeneity, which was postulated to have a large effect on the country's social welfare practices. Icelanders' religious beliefs value a strong work ethic and some other things I can't remember which made it less likely that the citizenry would see complete reliance on the safety net as a career path. It's interesting to think about, especially against the backdrop of ideas proposed by those like Max Weber.
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