Wednesday, August 11, 2010

Democracy: Predator and Protector

recently put out a piece on why it is so hard to cut government spending. It really boils down to benefits being concentrated while costs are widely dispersed. Thus far I have no objection. He makes a few other claims, though, that I will question publicly and one other I will let someone else discuss:

"State officials in a democracy are mere caretakers who cannot privately enrich themselves from ownership or sale of government property" and hence have no incentive compared to a monarchy to "preserve the realm's present value for heirs." The real source of corrupt rents is not ownership of property but control of the rules and their administration. Corrupt bureaucrats (not all of them) thrive regardless of how the sovereign is elected. The sovereign no less so. Corrupt people will find a way, though democracy is a fair sight better than many systems because of the checks that have been and can be put on leaders to prevent the worst forms of kleptocracy.

He also argues that government output cannot be measured by the market in profit and loss, and hence cannot be measured. This is patently not so. While there is much yet to be done to improve measurement, the basic question of government effectiveness and efficiency was not invented yesterday. This program is intended to reduce poverty. Well, how much did it and at what cost? Is another method more effective or cost-effective? We've been working on these questions for decades. The market is not the only institution for determining these questions, though it is an excellent one.

A third, very brief, addendum to that point is that government employees must be grossly overpaid. In the breakroom today, I found the March 29 edition of Time, which has a handy graph showing the number of people applying for a job by industry. There are, for instance, 35 people applying for each construction job and more than 10 people for every job in transportation, mining, and manufacturing. At the other end of the spectrum, there are only 3.5 applicants per opening for professional and business services and less than 2.5 applicants per opening for jobs in education, health, and ... government. If government were grossly overpaying, we would see far more applications. But while governments are not markets, they hire workers from markets and so market forces (and occasional political forces) keep their payroll within reason.

The bulk of the piece argues that democracy is about a contest to see who will have the privilege of picking whose pocket. In giant comparison to this piece, Martin Wolf extends the basic argument that "the core purpose of the state is protection" to show that "protection" is a remarkably broad term. Protection against negative externalities (e.g. pollution), against extreme poverty (e.g. welfare, full employment policies), protection against "the carelessness or malevolence of others or (more controversially) themselves" through safety standards.

On Libertarianism, he says:
There exists a strand in ... libertarian thought which believes the answer is to define the role of the state so narrowly and the rights of individuals so broadly that many political choices ... would be ruled out a priori. ... The values people hold are many and divergent and some of these values do not merely allow, but demand, government protection of weak, vulnerable or unfortunate people. Moreover, such values are not 'wrong.' The reality is that people hold many, often incompatible, core values. ... Trying to rule out a vast range of values from the political spehre by constitutional means will fail. Under enough pressure, the constitution itself will be changed, via amendment or reinterpretation. ...

So what ought the protective role of the state to include? ... Classical liberals would argue for the "night-watchman" role. The government's responsibilities are limited to protecting individuals from coercion, fraud and theft and to defend the country from foreign aggression.  Yet once one has accepted the legitimacy of using coercion (taxation) to provide the goods listed above, there is no reason in principle why one should not accept it for the provision of other goods that cannot be provided as well, or at all, by non-political means.

One answer is that in Libertarianism (so unfairly caricatured on the right) the role of the state is not "protection" but "protection of freedom." That's all well and good, someone like Amartya Sen, might argue, but I can be just as free in defining "freedom" as Wolf is with defining "protection." A person who is hungry is not free. Should someone's freedom and opportunities be not merely dependent on but determined by their parents' choices and abilities? How is that freedom?

But back to Wolf, who says that neither the market nor democracy are perfect, but they are far better than their alternatives and concludes:
The ancient Athenians called someone who had a purely private life "idiotes." This is, of course, the origin of our word "idiot." Individual liberty does indeed matter. But it is not the only thing that matters.
Ramsay, in the comments, contends differently and briefly that the role of the state is less about protection as it is "provision of a basic framework which allows ... *equals* [to] resolve their differences - and that creates the context in which 'protection' has meaning."

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