This is the fifth installment of my weekly column for Mint, Thinking it Through.
There is nothing in the world as dangerous as blind faith. No, no, this is not yet another rant against organised religion: there is enough damnation already scheduled upon me. There is another beast that benefits from blind faith quite as much as religion, and that causes as much harm from our lack of questioning: a beast called government.
Don’t get me wrong, we need government. We need it to take care of law and order, of defense, and for a handful of other things. (I don’t have a very large hand.) But the governments we have, not just in India but virtually everywhere, are vast, monstrous behemoths that are many multiples of the size they need to be. The cost of this, of course, is borne by us: we pay far more tax than we should need to in order to keep government going, and to justify its size the government clamps down on private enterprise and individual freedoms.
Part of our blind faith in government comes from the way we view it. Governments are not supercomputers programmed to work tirelessly for the public interest, nor are they benevolent, supernatural beings constantly striving to give us what we require. On the contrary, governments are collections of people, individuals like you and me, motivated by self-interest. The actions of government are the actions of these men and women, and the best way to understand how they are likely to behave—and therefore, how governments are likely to behave—is to consider their incentives.
Outside of government, we get ahead, whether in our jobs or doing business, by giving other people goods or services that they require. There is a direct correlation between what we give and what we get, and clear accountability: if I overstep my deadline for this column one more time, for example, Mint will surely find another columnist to fill this space!
But the incentives in government are different, and they do not drive a bureaucrat to work in the public interest. This is superbly illustrated in C Northcote Parkinson’s delightful classic, Parkinson’s Law: The Pursuit of Progress. Parkinson, examining the British civil service, found that it tended to expand by a predictable percentage every year, “irrespective of any variation in the amount of work (if any) to be done.” He explained this with “two almost axiomatic sentences”: “(1) “An official wants to multiply subordinates, not rivals” and (2) “Officials make work for each other.”
In other words, it is in bureaucrats’ interest to expand their departments and get greater budgets allocated to them so as to increase their sphere of power. Indeed, mandarins who solve problems and increase efficiency actually risk making themselves, or their departments, redundant. Do we really expect them to be like the proverbial fool on the tree, who cuts the branch he sits on?
If bureaucrats want to increase the power they have, politicians want to build vote banks. That is how they rise in the political system, and it is silly to expect them to stop when they get to power. This means giving sops to interest groups that have supported them when they come to power, and reaching out to others. One illustration that speaks for itself is the Haj subsidy. Indeed, it would be irrational for a politician to focus on anything else but what will get him elected.
But we’re a democracy, so why don’t we just vote such politicians out? Well, to begin with, our system of government has what public choice theorists would call “concentrated benefits and diffused costs.” In other words, what is hundreds of crores of subsidy for a troubled industry or a free TV to a Tamil Nadu voter is just a few paise a year for you. Who do you think is more likely to lobby a politician or bother to go out and vote?
Of course, a few paise a year for thousands of pointless causes each add up to the majority of your tax money, but now we come to another reason for why people don’t vote against government wastage: what economists call ‘rational ignorance’. Besides earning a living, there are many good uses of your time, and finding out a break-up of where your tax money goes would simply take too much of your time. This is exacerbated by the fact that many taxes are indirect and hidden away – indeed, inflation often functions as a form of taxation – and that the politicians you have to choose from, all driven by the same impulses and catering to different interest groups, really aren’t too different from each other.
I had promised last week to elaborate on how a lot of well-intentioned and seemingly sensible government spending actually harms us all, and I shall do so in the weeks to come. I wanted to first highlight how wastage in government is not an aberration, but is written in the DNA of our system, and is integral to its nature. Thomas Jefferson once wrote: “The natural progress of things is for liberty to yield and government to gain ground.” Understanding that process is the first step to turning it around.