The growth of government in the 20th century and the importance of debating ideas

While putting my papers in order recently, I found the text of a speech I gave in December 2005, just a few days after resigning as vice-president of the Montreal Economic Institute to run as a candidate in the federal election that took place in the weeks thereafter. The event was a debating contest among students organized by the Canadian University Society for Intercollegiate Debate at Bishop’s University in Sherbrooke, Quebec. I spoke about the importance of defending the right ideas and discussed one idea in particular: the threat to individual freedom arising from the growth of government. — 31 July 2009

The growth of government in the 20th century and the importance of debating ideas

By Maxime Bernier
Bishop’s University

December 3, 2005

In public debates, it is easier to be on the side of conventional wisdom than to defend controversial ideas. I will try the difficult road. I will defend an idea that is not very popular among mainstream intellectuals, students, and academics.

When something is wrong, we need political leadership, we need a government program. Right?

In fact, this is not the sort of idea I will defend. It is too consistent with the general assumption that the government should do something whenever somebody sees a problem somewhere.

Tonight, I will defend the opposite idea. As a lawyer by profession, and somebody who worked until recently with economists at the Montreal Economic Institute, an independent think tank, I am too aware of the problems that government intervention creates in social relations.

Public debates are at the heart of what the Montreal Economic Institute does. They often start debates on topics on which the politicians don’t want to talk.

Recently for example, the Montreal Economic Institute published a study showing how a government monopoly on alcohol distribution – like the Société des alcohols du Québec or the Liquor Control Board of Ontario – is inefficient from whatever point of view one looks at it. Except, of course, from the point of view of the busybodies, and of those who have an interest in the status quo.

Public debates are important because they are one crucial means to find the truth. I say “one” important means because talking is not sufficient. It is also important that individuals be free to live in accordance with their ideas and their values. The status quo, the old ideas, need to be challenged. Especially today, with political correctness all around us.

One thing that public debates can shed light on is not the difference between the mixed bags called “the left” and “the right,” but between people who, whether in the social or the economic field, argue for more or less government.

The century of the state

Benito Mussolini was the author of the article on “Fascism” in the Italian Encyclopaedia of 1932. He wrote:

For if the nineteenth century was a century of individualism, it may be expected that this will be the century of collectivism and hence the century of the State.” (Reproduced in Internet Modern History Sourcebook, Fordham University,http://www.fordham.edu/halsall/mod/mussolini-fascism.html.)

The problem is that Mussolini’s hopes have been realized. The 20th century was the century of the state. In all countries of the world, the government’s role and power increased dramatically. If we use the admittedly imperfect measure of public expenditures, their average ratio to gross domestic product in the main countries of the free world doubled from 1913 to 1960 (from about 13% to 28%), and went up again to 46% in 1996. Public expenditures in Canada have followed the same trajectory. (Vito Tanzy and Ludger Schuknecht, Public Spending in the 20th Century: A Global Perspective, Cambridge: Cambridge University Press, 2000, pp. 6-7.)

If we look at public expenditures per capita in constant dollars since 1961 in Canada, we get a clearer view of what has been happening lately. Real public expenditures per capital (all levels of government) have tripled from less than $4,000 in the early sixties to about $13,000 in the mid-1990s. After declining to $12,000 in the late 1990s, they are on the rise again.

Thus, there has been no reduction in the size of government, but only a levelling, apparently, temporary, of its growth.

Now, public expenditures, and the taxes that go with them, only provide one aspect of the growth of the state. Another aspect is the evolution of regulation. On this front, the picture is the same, or perhaps slightly bleaker.

The Montreal Economic Institute has calculated that the Quebec government now adopts some 8,000 pages of new laws and regulations every year, while the federal government tops this with another 2,000 pages. In Canada, like in other countries, the creation of new laws and regulations slowed down a bit in the 1980s, but this was only temporary. In fact, very few regulations have been abolished, while a host of new ones have been imposed. We are a more regulated society than at any time in our history.

Why has government grown so much?

Why did our democratic governments grow so much? Why was the 20th century the century of the state? Did everybody really want such monstrous governments, probably more powerful than any monarchical government in western history?

These questions have been addressed by Public Choice economists during the past few decades. Those of you who are studying economics or political science know that Public Choice is a school of economic analysis, developed by thinkers like Anthony Downs, James Buchanan (the 1986 Nobel laureate), and many others. Public Choice has now become part of mainstream economic analysis.

The starting point of Public Choice theory is the rather realistic assumption that politicians and bureaucrats are not less selfish than ordinary people like you and me. This is why we have “government failures,” the failure of the political and bureaucratic system to satisfy the preferences of voters and deliver efficiently what they want.

There are many reasons for this. Let me try to summarize them by referring to what Milton Friedman, the 1976 Nobel economics prize winner, called the “iron triangle” of politicians, special interest groups and bureaucrats.

Politics is often driven by small concentrated interests who win the support of politicians against more important but dispersed and unorganized interests. Thus, the special concentrated interests win against the larger but dispersed interests of the taxpayers. We observe this in the case of government subsidies and all forms of protection that are granted to commercial enterprises.

This is why so many people obtain privileges from the government, and we all end up paying for this, whether we want it or not. If you add all similar instances, you get governments that take and spend 45% of what people earn.

One reason is that, as Public Choice economists say, the voter remains largely ignorant of politics. The typical voter spends less time researching political and economic issues than inquiring about the car he buys. Consequently, the politicians will respond to the demands of special interests more than to the general voters’ preferences.

Finally, consider the last side of the iron triangle: the government bureaucrat. Have you ever seen a government bureaucrat begging to make sacrifices to serve the public – for example, by requesting a lower salary? Not exactly. The government bureaucrat is neither bad nor good. He is just like you and me, that is, he is mainly interested in his own welfare.

The typical government bureaucrat will try to get more income and perks. If he has some influence on the political decision process, he will try to expand the programs he administers. And, in fact, bureaucrats, except at the lowest levels, do have much impact on the political decision process because they control the information and the agenda of the politicians.

If both special interests and bureaucrats want more government and politicians respond positively to them, voters get more government whatever they want. This is the real life, the state as it is, and not as it should be in some people’s dreams.

Out of control government is a systemic problem. Every year, the Fraser Institute calculates when Tax Freedom Day falls, that is, when the average Canadian stops working for all levels of government (federal, provincial and municipal) and starts keeping for himself what he earns. This year, that day was June 26. In a sense, we are slaves of the governments for six months and free the other six months: we are forced to pay taxes, and these taxes are used to control us and to solve the problems that were created by too much government.

The practical consequences

The practical consequences of governments taxing and subsidizing, monitoring and controlling virtually everything are less individual liberty and less economic prosperity. It should be quite obvious that wild government intervention does not produce prosperity. If it did, Quebec would be the wealthiest region in North America. In fact, in terms of gross domestic product per capita, Quebec occupies the 55th rank among the 60 states and provinces.

Alberta is the wealthiest province, and this is not because of oil. There is no oil in Switzerland, and a lot of it in Nigeria. In fact, Alberta’s gross domestic product per capita is higher than Texas’s. Lower government intervention in Alberta quite certainly has something to do with this.

There are many economic studies showing that less government intervention means more prosperity. One of them in particular analyzed 23 OECD countries over a period of 36 years and found that larger government spending reduces economic growth. For every 10 percentage point increase in the size of government relative to gross domestic product, there is a permanent reduction in economic growth of 1 percentage point per annum.

Government cannot control the economy without controlling people. Big, fat, interventionist government affects individuals – you and me – not only through its impact on economic prosperity but, more directly, through the loss of control of individuals over their own lives.

Individual sovereignty is undermined when adults must, like children, ask the government for myriads of authorizations and permits, often for activities that used to be completely free until a few decades ago.

What will come next? Should the government dictate what people will eat and when they will exercise? Should the government impose a special authorization to people who want to have children as some philosophers and public health specialists have been proposing? Why not? Adoption is already regulated, isn’t it? All this, for our own good, of course. If we believe Public Choice theorists, it seems that we are going right into George Orwell’s novel, 1984.

As I said at the beginning of this address, the real division is not between left and right, but between statists and defenders of individual liberty.

There is hope

I still think that there is hope. We are not condemned to have more and more powerful government and less individual liberty.

There is hope, if you believe in yourself. If you believe in your right to control your own destiny and plan your own life. If you act as a citizen, not as a beneficiary. As a citizen, not as a spectator. As a citizen, not as a subject. As a responsible citizen.

Our fellow citizens need to be persuaded that their individual liberties are being threatened by government tyranny. It will not be easy, but it can be done.

The fact that the growth of government has slowed in the 1990s supports my hope. One reason why I am optimistic is that I believe in the individual. Individuals will start again demanding the respect of their sovereignty. Individual sovereignty is what is important – not sovereignty of the state. Indeed, the sovereign state is, by its very nature, a steam-roller of the individual.

Thus the intellectual and moral battle of the 21st century is between those who favour liberty versus those who favour government control of peaceful activities.

I will end by quoting two economists who were, in many ways, at opposite ends of the political spectrum. One was John Maynard Keynes, the economist whose 1936 book, The General Theory of Employment, Interest and Money provided, for many decades, a powerful justification for government intervention in the economy. The other one is Friedrich Hayek, who opposed Keynes’s theories from the very beginning.

Both Keynes and Hayek thought that debates and the exploration of ideas were important, which is the point to which I wish to come back for my conclusion. Keynes wrote, at the end of his General Theory:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else.

Hayek wrote:

We must make the building of a free society once more an intellectual adventure, a deed of courage. (…) If we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost. (“The Intellectuals and Socialism”, 1949)

Everything that happens in our society is the result of the people’s actions guided by their ideas. We must fight wrong ideas and replace them with better ideas. People’s ideas and only people’s ideas can bring light where there is darkness. That’s why debating is important!

I am confident that better ideas will be spread by your generation. In the last resort, it is you who will decide if we will have a more prosper and free society.

Ladies and gentlemen, dear friends, congratulations on this event, and long live individual liberty!