Limited Government
This book explores why, despite increased government spending on income-support, health and education, the costs of public goods are rising and their quality is declining. Charting the rise of big government, the author identifies a growing divergence between public-sector ideals and the realities of troubled political economies grappling with debt, deficits, ageing populations, improvident social insurance, declining education test scores and multiplying health costs. Limited Government analyzes in detail the social and political factors in major economies that drive up public spending, as well as the relationship between spending and outcomes. By developing an alternate model of public finances, and engaging in a critique of the managerial society, the author emphasizes the positive effects of self-management, social self-organization and technological automation, arguing that high-quality, low-cost goods are the result of nations that save, not states that tax. A sociological account of public finances, Limited Government outlines how governments can spend less and yet help ensure good broad equitable standards of health, education and income security.
Peter Murphy is Adjunct Professor in the School of Humanities and Social Sciences at La Trobe University, Australia and Adjunct Professor in The Cairns Institute at James Cook University, Australia. He is the author of Auto-Industrialism: DIY Capitalism and the Rise of the Auto-Industrial Society (2017), Universities and Innovation Economies: The Creative Wasteland of Post-Industrial Societies (2015) and The Collective Imagination: The Creative Spirit of Free Societies (2012).
Limited Government
The Public Sector in the Auto-Industrial Age
Peter Murphy
First published 2019
by Routledge
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2019 Peter Murphy
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British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Murphy, Peter, 1949- author.
Title: Limited government: the public sector in the auto-industrial age / Peter Murphy.
Description: 1 Edition. | New York: Routledge, 2019. | Includes bibliographical references and index.
Identifiers: LCCN 2018024839 | ISBN 9781138894631 (hbk) | ISBN 9781315179896 (ebk)
Subjects: LCSH: Expenditures, Public. | Finance, Public. | Liberalism.
Classification: LCC HJ7461 .M87 2019 | DDC 336.3/9dc23
LC record available at https://lccn.loc.gov/2018024839
ISBN: 978-1-138-89463-1 (hbk)
ISBN: 978-1-315-17989-6 (ebk)
Typeset in Times New Roman
by Deanta Global Publishing Services, Chennai, India
Contents
While I was writing this I benefited greatly from conversations with John Carroll, Peter Dansie, Peter Fenwick, Ken Friedman, Trevor Hogan, Vrasidas Karalis, Simon Marginson, Greg Melleuish, Anders Michelsen, Michael Moore, Brian Nelson, John OSullivan, Ken Phillips, David Roberts, John Rundell and Keith Windschuttle.
Thanks to the editors of Quadrant magazine for their kind permission to draw on material from The Legend of the Nurturing State, Quadrant , JulyAugust 2016.
A century of spending
The facts speak for themselves. In 1830, the United Kingdom spent 10 percent of its GDP on public outlays. The country had a GDP that was a little over 0.4 billion pounds. Industrial capitalism rapidly expanded the size of the countrys wealth. By 1860 Britains GDP had risen to 0.7 billion pounds. In the meantime, government spending had fallen to 9 percent of GDP. By 1890 GDP was 1.4 billion pounds and spending a still-modest 10 percent. Yet after the 1890s, something changed. In the first 15 years of the twentieth century, public outlays rose to an average of 15 percent of GDP. From that period onwards, public expenditure kept climbing.
The biggest leaps in twentieth-century public spending were connected to the First and Second World Wars (
Public sector spending
^percentage increase over the previous decade.
Sources: IMF, Historical Public Finance Dataset 18002011, government expenditure as % of GDP plus government interest payments on debt as % of GDP (cf. ourworldindata.org/public-spending for calculation methodology); US and UK 20122016, ukpublicspending.co.uk, usgovernmentspending.com; Australia 20122015, Singapore 19802015, Germany 20122015, IMF Government Finance Statistics Yearbook 2016; Singapore 20162017, UK 2017, US 2017, Australia 20162017, Germany 20162017, IMF Fiscal Monitor.
The growth of the state was not uniform across the board. Some segments ballooned. Over the long run, other parts hardly grew at all. We see this if we compare the cases of defense, welfare, pensions, health and education spending along with the remainder (general expenditure). In 1900, public spending on these Across the century, defense spending declined while general expenditure increased quite modestly. In contrast, the share of GDP spent on welfare, pensions, health and education expanded radically: 10-fold, 80-fold, 24-fold and 3-fold respectively. The classic core of the stateas it had been constituted in the nineteenth centurywas smaller at the beginning of the twenty-first century than at the start of the twentieth century. Amongst other things mechanization had made armies less expensive. Meanwhile the income-support and healthcare functions that the state acquired early in the twentieth century grew to such an extent that they dwarfed the old classic core.
The growth of state spending and public employment had a dampening effect on economies. Industrialismin combination with modern capitalism, large-scale urbanism and the public spherehad a catapulting effect on modern economies after the 1770s. What resulted was a massive and historically unprecedented expansion of wealth driven by increases in productivity. The fruits of this wealth were broadly distributed to populations through rising real levels of household income. A great upward spiral occurred. Increased affluence drove greater wealth that sought higher productivity that produced added real wealth that resulted in more prosperity that was reflected in greater purchasing power. But the pace of this beneficial upward spiral was slowed by one thing. Beyond a certain virtuous level, public spending inhibits economic activity ().