Ideas@TheCentre
Technology and big government
By historical standards, governments in every Western country are big. Most are at least five or six times as large as they were in the 19th century as a proportion of GDP. In absolute terms the increase is of course much greater, due to economic growth over that same time period.
While changing ideas about the role of government partly explain its increasing size, in a paper given to a meeting of the Mont Pelerin Society this week Tyler Cowen, an economist from George Mason University, argued the changes in technology help explain both why both economies and governments grow.
Cowen noted that large corporations and large governments emerge at around the same time, and this is because both rely on improved transport, communications, and organization. Earlier technologies limited the economy’s productive capacity and central government’s ability to control their people’s day-to-day lives. In large countries, it could take days travelling on a horse, in a sailing ship or by foot to send or receive information from outlying areas. Only when electronic communication and mechanised transport were developed could information and people be moved quickly and control asserted from a distance. Tyranny existed, but it tended to be local.
Economic growth also makes big government affordable. Citizens can pay high taxes without losing their own capacity to buy the many goods and services produced in modern economies. And these taxes are used in welfare states to buy social services that were unavailable or unnecessary in earlier, less technologically developed, times.
Cowen’s thesis is not a deterministic one. Similar technologies exist throughout the Western world but governments vary in what proportion of GDP they consume and in their level of regulation. But if citizens want big government, technology makes it possible in ways that it was not prior to the 20th century.
Andrew Norton is a Research Fellow at the Centre, he attended the Mont Pelerin Society meeting in Stockholm this week.
