The ever-growing state

Taming Leviathan


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Readers' comments



Regarding this: "This ...would also push up pensionable ages much more quickly than most Western governments are currently doing—and index them to longevity."

Who wants to work longer than they have to? Not many, and not all are able to, for all sorts of reasons. Older disgruntled workers already facing age discrimination would not be very productive. Women, who live longer, would love to care for ageing parents and dying husbands and work till they dropped - not.

I thought economics was supposed to be a social science.


T%he Economist has done it again! It endorses Obama (the most socialistic President ever, and complains about big wasteful government! How stupid can you be? Pretty stupid obviously.

Not mentioned also are that the biggest problems are with welfare, education and health care. Three areas almost the exclusive domain in most western governments. Private sector operation of these is blatantly needed to counteract the effect of unionization of all, needlessly in my opinion. Why were government employees ever allowed to form unions? An oppressive greedy employer? NOT!

The solution is rather simple and not really put forth in the article. The problem with government is that politicians and bureaucrats lie. If they had to tell the truth, they could NOT promote disastrous laws, policies, and regulations. Therefore, just have them subject to similar laws as officers of publicly listed corporations; full true and plain disclosure in all communications or be subject to heavy fines, long jail times and prohibition from ever holding public office or receiving public funds. It would also be good to have media subject to the same laws so as to prevent spreading untruths and such knowingly.

How about it Economist; willing to take up the cause?


The reason for so much public expansion (same in the US) is the economic rape that is globalisation. The only reason the change in policy, is that globalisation has ended, or gound to a "dead slow" (chr eck the BDI)!!!

I predicted the designed financial collapse in 01/02 on the BBC Radio 4 Today message boards. Other poster scoffed, including my BIL, he now lives knowing I was right.

We are far from the economic abyss. Many of won`t understand natural event modification. The Japanses quake has taken a huge swath of prodection out of the equation..that means Europe and the US can take up the slack.

The intervention in Libya (and creation) has two objectives: keep the price of oil high. Don`t go believing that rubbish about Libya`s 2% of gobal oil production...its a much bigger number when you look at it in terms of exports. If the price of oil falls too far, Middle East states will go bust. Then you end up with these ME states having to sell their $$$$$$ holdings...which are worthless if the truth be told. The next reason, is their attempt to cover up the Lockerbie bombing and who really did it!!! WEstern intelligence is running scared.

And yes, this is connected to public spending growth. The naughties were a period of no real growth and massive designed debt so that Bush, Blair and the NWO could roll out their sham war on terror and illegal wars. Imagine that, the action against Libya is military quantative easing...blood added!!

Paul Marks

To those pepple making ritual attacks on "corporations".

The Supreme Court did not create the idea of limited liability a hundred years ago - nor did various 19th century statutes in United States or Britain. However, important these may be for the specific form of limited liability.

The idea of limited liability is ancient - it is the basis of clubs, socieites, even churches, they are all corporate bodies and one sues them for their property (not individual members for their property). No one should be forced to trade with a limited liablity entity - and no one should be prevented from trading with (or setting up) a limited liablity entity if they want to.

Trade with Lloyds "names" if you do not want to trade with a limited libility insurance company (an "Ltd" in Britain or a "Inc" in the United States - although the specific form is not the main point), but understand they will charge you a HIGHER PRICE - and so they should (the shirt on their backs is at stake - it is not with the shareholders of an insurance company).

The idea of the "trading pot", of a group of people getting to together in a trading venture and only risking the "money in the pot" (not the shirts on their backs) is an ancient one - and, again, you do not have to trade with such ventures if you do not want to. But you will have to pay a HIGHER PRICE if you want to trade only with people who are prepared to risk everything if the trading venture fails (say the ship sinks - or whatever).

It is true that in manufacturing corporations did not tend to be the norm - but it was not the Supreme Court that made them the norm. It was the INCOME TAX.

If you have to pay a higher rate of tax if an enterprise is directly owned by you (if say it is just Paul Marks trading) than if it is a corporation owned by you (say "Paul Marks Inc") then you would be unwise not to "incorporate" (unless the regulations are very bad - in recent years a lot of enterprises in the U.S. have chosen not to incorporate, to carry on as single owned operations, for that reason). In this way the enterprise can reinvest profits - whereas (if it was just a person trading) the income tax would take those profits away.

"Then the tax on corporations should be as high as it is on individuals" - then every major business enterprise in the United States would have gone bankrupt in the 1930s (when the income tax reached absurd levels under Herbert "The Forgotten Progressive" Hoover and FDR - and stayed there right to the 1960s). Sometimes the "corporation" was a bit odd (for example in the 1930s Henry Ford owned 100% of the Ford Motor Company - there were no other shareholders, court judgements in the early 1920s had made Ford deeply hostile to having minority shareholders), but corps they had to be (for tax reasons).

The "corporate America" of the 1950s was the creation of the INCOME TAX - because there was just no other way to do business on a large scale (high rates of income tax would have destroyed most big "one man bands").

As for those people who doubt the benefits of economies of scale (although after a certain point "diseconomies of scale" are very real also) and think that America (or Britain - or anywhere) could prosper with just small scale business enterprises (important as these are). Three words.


By the way - if anyone wants to attack the "Robber Barons" first refute (for Henry Ford) "The Wild Wheel" (by G.G.), and for John D. Rockefeller (not his waste-of-space descendants) and others - "The Myth of the Robber Barons" by Burton W. Folsom.

Not prepared to do any refuting? Then do not bother me.

Paul Marks

People trying to do business in Guatemala would be bitterly amused to hear that government is "too small" there. The endless regulations push most people into the "informal" (illegal) economy, and the demands for unoffical payments by all levels of the state (not every official - but officials at every level), make the "tax as a percentage of G.D.P." stats a nonsense.

As for the longer life expectancy of Sweden - the demographics of Sweden (due to the immigration policy of recent years) are changing so soon the Economist magazine will not be able to trot out the "healthy Sweden" line.

It reminds me of your habit of comparing eduction in various States of the United States - "the average ..... in this State is higher than in this State and ...." as if comparisons that do not take account of demographics had any meaning. For example, whites, blacks and hispanics (on average) do better in schools in Texas than they do in schools in Wisconsin - yet the "average student" does worse in Texas than than the "average student" does in Wisconsin. How can that be so? You work it out - it is not difficult.

By the way I do NOT believe in any special biological theory of "race" - but I do believe ethnic CULTURES are important, as did almost everyone - before the 1960s. Which is why when people reject "old fashioned" civil society (as the drug abusers and so on did and do) their health (and so on) collapses also - regardless of biolgical "race".

By the way for the effects of culture - see "Ethnic America" by Thomas Sowell (culture does matter).

As for the ever growing state - in the American context at least the 1960s are the key. Even under Franklin Roosevelt (whatever he may have come to believe in his last years - when very ill with the brain tumor that eventually killed him) health, and income benefits were NOT considered "a right" - if you wanted money from the government (or health cover) you mostly had to work for the government (at least in a make work job - either under the corrupt WPA or the fairly straight PWA). Even Social Security (old age pensions) started off as a fairly limited program in 1935.

But from the 1960s with President Johnson's "Great Society" people were taught that the government (i.e. the taxpayers) "owed them" - it owned them food, housing, medical benefits, income (everything).

Now, in the words that Barack Obama's paster and close adviser for 20 years Rev. J. "Audacity of Hope" (hope for other people's money) might use, - "the chickens are comming home to roost"

There is also CORPORATE WELFARE - the Federal Reserve has subsdized (via sweetheart loans and so) favoured business enterprises since it was created in 1913 - but the activities under Alan Greenspan (and B.B.) have been vastly beyond any previous experience.

President Bush is partly to blame (he can not be defended - at least not honestly defended) - but at the heart of this (even more than Bush) are politicians like Congressman Barney Frank and Senators Chris Dodd and Barack Obama.

They supported the policy of credit money expansion and pushing the money into the housing market - ever step of the way.

For this policy see "Meltdown" by Thomas Woods and "The Housing Boom and Bust" by Thomas Sowell.

Nor did it stop there - the reason that the financial industy has mostly gone along with such massive interventions as the "Financial Reform Act" (which takes the already vast control by the Federal government, the "deregulation" of Bush being a myth, to a whole new level) is the fact that the policy of massive de facto subidies for banks and other such have continued.

The Wall Street people predicted this and supported Barack Obama because of this - see the book "Bought and Paid For", but they have played a dangerious game.

In return for vast subsidies (supported by the "free market" Economist magazine) the Wall Street bankers and so on have handed over virtually unlimited power to Leviathan.

They may come to bitterly regret that choice.

Jai Prakash Sharma

Notwithstanding many an onslaught and questioning of state, mainly on ideological grounds, the state, with its stoic presence and relevance, has continued to exist as the core institution of social preeminence from the times immemorial, nevertheless if the same debate involving the shape and size of the state appears to have been revived now, its genesis could be found in the combined failure of the twin-institutions namely, state and market, particularly in the context of the western countries, when having gone crazy to realise the dream of a globalised economy, without preparing its sustaining level-playing field, both the state and the market had abdicated their expected role and authority respectively- the former by refusing to be an impartial social arbiter while allowing a free run to the market manipulators, and the latter through financial recklessness- resulting into the global financial/economic crisis, which has given rise to this unending but futile debate on the nature and scope of state.


A thought-provoking article, especially with this week's Special Report.

The UK Gov't spending in 2009 was 47.2%, about the average of the 13 countries reviewed, 47.7%, and the largest three items are welfare £226bn, health £122bn and education £89bn - the next largest item is less than half the education bill.

Any reduction in Gov't spending just has to focus on welfare and various things spring to mind:

Two-thirds of pensioners are women: hardly surprising when a woman retires at 60 and lives, on average, to 81 so 21 years, 26% of life, while the equivalent figures for a man are 65 to 77, 12 years, 16%.

Even worse is the problem of poor womens' pensions, so that many are forced on to means-tested benefits.

At least the first problem is being sorted out (with, surprise, surprise, lots of complaints from women!), but the second one needs sorting out: perhaps a couple's pension contributions need to be split EQUALLY between them. ( I expect that won't happen: too many divorce lawyers will be out of business!)

A separate problem is the inflexibility of many employers.

I wanted to retire gradually, moving progressively to a four day week, then a three day week, etc - reducing my employer's wage bill, so that my employers had access to my expertise, allowing someone to be trained to take over (an additional employee, reducing unemployment), and allowing me to gradually becoming less work-oriented, but no!

In fact, with a system like that, I, and many others, would probably have like to continue for several years, health allowing.

Realistically, the Government needs to give employers a push...

Welfare: here the plain fact is that if society doesn't pay poor people benefits, some, at least, will turn to crime, and that will cost us more. There is a strong correlation between crime (£41k a year to keep someone in jail) and the number of 16-25 year olds out of work.
People have to eat and live somewhere, and recent figures show a quarter of the workforce on minimum wage.
Poor education seems to be the heart of the problem, leading to minimum wage jobs, unemployment and crime.

It seems absolutely crazy that society seems happy to spend that £41k a year to keep someone in jail when a fraction of that amount spent on youth in the 9-16 age range would improve their education and their cost to society.

patrick veale

I didn't see you mention the state as the creator of business opportunities. The military budget alone points to this fact. In my county all local business depends on county and state spending. What do I get out of "seafood day", but a neighbor who has a tourist type shop downtown told me he made more money that day than ever before. Only he and his wife work in the shop. How much did that day cost the taxpayers, yet your article seems to ignore this kind of " big government".



"The US corporation is bankrupt, and has been for years. As have all the members of the UN; bankruptcy is a prerequisite for admission".

WOW! So that means that all nations are bankrupt? To whom?

The only non-UN members are Kosovo, Taiwan, Palestine, Cook Island and Niue.... so that means that they must be the richest places on the planet to have bankrupted every other country.

And if it isn't them, it must the banks perhaps? So if all the countries on Earth invade the non-UN member and nationalise their banking system, then the debts can be written off and no one will be bankrupt!

Sounds quite fanciful. About as fanciful as most of your comment.


The dislocations caused by tax policy designed to create certain behaviors is at best a misguided and presumptuous effort that leads to critical imbalances. A reset is in order and I believe this is in the works as the end game of the current set of politicians. Unfortunately, the current administration has seen fit to basically let all the big dogs run off with everything in sight, all the while knowing producers in the society are about to be burdened with all the responsibilities, and none of the resources.
Should we however, decide to elect statesman, we could possibly squeeze through this. If it takes a sincere effort of those in charge as to the best interests of this country, at present we are in sad shape. The last actions of a government on the way out is to loot the treasury. I think we can safely say ours has been looted and then some.


Burocracy is a cancer and will go on growing untill it kills the patient.
Examples; The USSR. You want more: wait a few more years and Italy, Spain and Greece will go bankrupt.
How to sove the problem: jast limit goverment spending to a fixed number. Something like 30% and finish.
It is not a scientific determined number, but ther is enough evidence around that above that limits burocrats think that father goverment has unlimited funds.
And send to jail politicians in charge that overspend.
In the social thinking nobody ever asked the question: who pays the bill.
It all started with the declaraction of human rights at the UN.
Obviuosly written by politicians.

Stephen Morris

Improving the efficiency of the state will need more thinking outside the square than this unimaginative article. To say that the state is too big is as inane as saying that companies are too big.

It is possible to analyse government efficiency by:

a) recognising its monopolistic nature (politicians use the Greek "monos" to refer to other industries but they always reserve the Latin "unis" for themselves); and

b) considering the various species of efficiency that might apply to it as a monopoly.

For example:

- “internal efficiency”, describes the internal functioning of an organisation, the efficiency with which it produces a particular bundle of goods and services; and

- “allocative efficiency”, describes the organisation’s interaction with the rest of the world, the efficiency with which it allocates resources to their highest value use.

Typically, a private monopoly is internally efficient because the owners gain nothing from waste in the production of a given bundle of goods or services. However, as taught in any first year economics class, typically it will be allocatively inefficient because it prices at the profit-maximising level rather than setting price equal to marginal cost, thereby over-pricing and under-producing.

Attempts to regulate monopolies tend to displace one type of inefficiency with the other. Restricting the profit of a private monopoly may prevent allocatively inefficient over-pricing, but it also eliminates the incentive to optimise internal efficiency. It may cause over-investment (the Averch-Johnson effect).

There is a trade-off, and - as long as the monopoly stays intact - no way to avoid it entirely.

If, however, the monopoly may be broken up to create competition then internal and allocative efficiency may be promoted simultaneously. The desire to maximise profit promotes internal efficiency while the pressure from competing firms prevents over-pricing.

The same principles may be applied to government. The “efficiency” of any government (the archetypal monopoly) may be considered in terms of:

- internal efficiency, the efficiency with which the institutions of government decide upon and implement a particular distribution of rights; and

- allocative efficiency, the degree to which (for any initial-state distribution of rights) the final distribution approximates an ideal pareto-optimal distribution which would arise through voluntary negotiation of all parties in the absence of transaction costs.

Those who place greater emphasis on internal efficiency will tend to be in favour of streamlined legislatures (the exemplar being the mythical “benevolent dictator”).

In contrast, the conditions of pareto-optimality (that none are left worse off) can be guaranteed only with consent. Accordingly, those who place greater emphasis on allocative efficiency will tend to be in favour of decision-making systems which require something approaching unanimity (the exemplar being the “Wicksellian parliament”).

There is a trade-off.

At this point, those with a keen intelligence will be asking the obvious question: “But what if we think outside the square? What if we attack the problem at its root and eliminate the monopoly?” That way we might promote internal and allocative efficiency simultaneously.

So, what might a “competitive market in government” look like?

One aspect is the voluntary pooling of power, as seen in the proposals for “multi-speed” or “variable geometry” Europe. The various “Lands” of Europe (Euroland, Schengenland, Dublinland and Bolognaland) represent a slow drift in that direction.

In a more radical form (a Coasian "polity market"), variable geometry would combine with secession to allow citizens to incorporate their own like-minded states - of optimal scale and scope - and pool sovereignty on a voluntary basis. Standardised “sovereignty contracts” would reduce the transaction costs of negotiating pooling.

The two work together: just as contracting out allows for smaller firms, pooling allows for smaller states.

The central government, or “meta-state” – Washington or Brussels - would be charged with overseeing the orderly incorporation of states, liquidation of defunct states, mergers and demergers, and the rules under which such states contracted into the voluntary pooling of responsibilities.

The meta-state would be responsible for deciding the minimum requirements for incorporating a state and for maintaining its incorporation (such requirements to be applied equally to all states . . . . subject to meta-state judicial review).

That just leaves the logical problem of how to choose the meta-state's aggregation device (its decision-making and judicial institutions) – a problem that may be solved using an eigenfunction which avoids logically indefensible a priori privileging.


I'm a 26 year old Reagan Baby and any talk of cutting SS and MC is music to my ears but... but... but...

Let's not fall into the cliche that Uncle Sam is the only Leviathan. A hundred years ago the Supreme Court gave birth to corporate personhood which has annihilated American Civics, created Randolph Hearst News & Fox News, gave us too big to fail (the Anti-Magna Carta in my book) and made it impossible to sit in Abraham Lincoln's chair or Speaker Henry Clay's chair or even Chief Justice Marshall's Chair with being beholden to corporate interests.

snorri godhi

An article like this does not even mention Parkinson's Law?
(And, to look more intellectual and multicultural, you could have quoted extensively, and appropriately, from Ibn Khaldun.)


I propose reducing government by staring at the top. Why do we need two Senators from each State. N anow that we have 50 states, one per state would be a much more efficient body, and eliminate 50 senators expensive offices and staffs.


The Economist is a classically liberal publication. Not liberal in the crazy left wing U.S. sense of the word where an every growing state, and every growing costs are the makings of liberal dreams! Obama wants an every bigger state and is fighting hard to block any cuts or slowdown in its massive growth and cost. He should read the article because he is taking us dangerously close to where we may come to a hard stop.


Government ought to assume those functions where political considerations are important enough to outweigh the economic inefficiencies introduced by political interference in purely economic considerations. Also, operations that require a high level of centralization, or involve risks too great for private companies, are likely candidates.

The boundary will change, and ought to be a practical matter, not an ideological battleground.


In recent years, The Economist has endorsed politicians (Obama) and initiatives (ObamaCare, cap 'n trade) committed to expanding the State and strengthening its grip. And NOW you're upset about it?


You say:

"In the 1990s much was made of the idea that capitalism had got so footloose that states were bound to get slimmer to compete for corporate favours. In fact companies proved more loyal than expected—and the state went on one last splurge."

I fail to identify this "last splurge" on your graph, the curve looks more or less flat from 1980 until recently.



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