April 28, 2013

Re-Imagining the Size and Function of the State

This blog was written after the Newsnight episode broadcast on Friday 7 December 2012 and presented by Emily Maitlis which featured a debate on the size of the state which included author of the Black Swan, Nassim Taleb.

These are fiscally challenging times. Public debt is on such a scale that it’s not just a short term challenge but a multi-generational one. And so with our public finances out of control is there a case to rethink and even reconstruct the purpose, role, size and function of our state? To reconsider what we need from Whitehall and what state provisions we can reasonably do without.
Such rethinking is what management consultants call zero based budgeting – essentially a streamlining exercise. And this is exactly what an illustrious Newsnight panel did on Friday 7 December 2012.Rethinking the size and role of the state is certainly a little risqué. No politician or political party could ever openly discuss shrinking the size of the state or its functions. Plainly, it’s an emotive issue for the electorate.

However with public finances the way they are today it’s a topic that must be confronted. We cannot shirk such macro-legacy issues.In any case a crisis is a time for change, for rebirth and as the Obama aide Rahm Emanuel said: “you never want a serious crisis to go to waste.” Just in this instance we shouldn’t let our fiscal crisis go to waste.
“You never want a serious crisis to go to waste”
Rahm Emanuel
And so before a panel featuring George Taylor (former adviser to Tony Blair), Pippa Malgrem (former economic adviser to George Bush) and Nassim Taleb (author of Black Swan and Antifragile) the Newsnight presenter Emily Maitlis asked: if you could start again what way would you design the state, what should be the core and auxiliary functions?
Pippa Malgrem opened up the discussion and started by saying that a basic social contract exists between citizens and the state. This social contract is one that ensures that citizens pay taxes and the state provides certain services. She added that the extent to which services are provided by the state varies from country to country. The French answer to where you draw the line between government and the private sector is very much different from the answer given by decision makers in the UK and different again from the one made in the US.

Pippa then said that history has shown that state provisions can run out of control and threaten the running of the state. And history has shown that states can indeed run out of money and cease to exist; namely the Soviet Union.

So with the balance of payments way off kilter in the United Kingdom Pippa said that some things just don’t stack up. She said that you simply can’t run a system where the money going out far outstrips the amount of money coming in.

To quote Dickens’ famous character from David Copperfield Mr. Micawber:
“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Therefore Pippa says we need to rebalance and recalibrate the role of the state because we don’t have enough cash to pay for everything that has been paid to the citizen. For Pippa there is no choice but to cut the function, role and purpose of the state.
Nassim Taleb took the blank sheet question and took the debate in a diametrically different direction. For Nassim it is not a question of what the state does but what size the state it. Mr Taleb said that the most successful model of society in history has not been the nation state but the bottom up city state model. He then said that the optimum model for international affairs is a coalition of city states.

He rightly added that governance is better at the local level, it is more accountable etc. He then reiterated that people obsess with the nature of the political system as opposed to the size of the state, which for Nassim Taleb is what really matters.

Former Blair aide Matthew Taylor pretty much back up what Taleb had to say and took note of the upcoming book, “If Mayors Ruled the World,” which has been written by Benjamin Barber.

Taylor built on what Taleb had to say and said that majors are more popular than prime ministers and presidents. He added that nation states are too far removed from the individual and rolled off a quote: “in the modern world the nation world is too big for the small things in life and too small for the big things in life.”
In concluding the debate Pippa Malgrem rightly said that reducing the size of the state is not easily done. Once the government has started to provide a service it is near on impossible to take it away. It would be political suicide for any government overtly taking away that which it had before promised.Pippa quoted Milton Friedman which pretty much encapsulated this issue: “there is nothing so permanent than a temporary government programme.” Yes it’s a pretty well understood truth of central government that once you’ve created something it’s very difficult to deconstruct it and take it away.
So whilst this debate is timely, needed and to be welcomed it’s pretty hard to see how any meaningful redesigning of the size, function and role of the state could be done without collapsing governments. It will be done however; the Cameron government are doing so as you read this. But it is being done slowly, inconspicuously and in a way that only the passing of time will show.

An Afterthought:

It was only 100 years ago that the British state was far smaller. Certainly the state back then was far smaller and provided far less in terms of services back then.

In the words of historian AJP Taylor:

“Until August 1914 a sensible law-abiding Englishman could pass through life and hardly notice the existence of the state, beyond the post office and the policeman. He could live where he liked and as he liked… broadly speaking the state only acted to help those who could not help themselves. It left the adult citizen alone.”

- English History 1914-1945

So how has the state gotten to the size it is today? The short answer as given by the BBC’s political correspondent David Grossman: war. The state established a grip over its citizens during the war and has since never let go.
[This blog was orginally published for my business blog, Twitter for Law Firms on December 11 2013]

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