| The State should serve us shouldn't it? |
Certain elements of the political right see the state as part of the problem and not part of the solution. That does not always need to be the case, the state and a strong effective government are necessary for a healthy society,whatever Mitt Romney and his acolytes wish to tell us. Government needs to be vigorous,strong and efficient but it doesn't need to do everything itself however it does need to ensure the right services are delivered in an effective way for the benefit of the people. The state cannot be divorced from this process and does need to be part of it. It does have a general responsibility for the welfare of its people and this responsibility cannot and should not be privatised although the provision of services certainly can be.
The state through its democratic institutions should represent the people and their views and aspirations but that is not always the case -- If the state is dominated by the interests of selfish and powerful elites then it too can become selfish and unrepresentative and not an instrument of social justice,equality and peace. This has happened in the past when the people have not taken a stand and let events rule their world. So a strong and respected state is a must have requirement -- however when things go wrong then it is difficult to put the state back where it once was. The first state to fall to the Nazis was Germany and the first state to fall to the communists was Russia. To move these states back to a semblance of democratic control has taken over 50 years. It has been more successful in Germany than in Russia. The latter finding it very difficult to escape from its totalitarian past and still it sports a very authoritarian government which it seems will remain with it for a long time.
Some countries suffer from a lack of state power not too much state power. If you suffer a heart attack in certain parts of the world there is no ambulance service to save you because that state infrastructure just does not exist - even if individual people are rich enough to pay for it. So it is evident that not all state power is inherently evil. Some people are suspicious of the state when it invades every aspect of their lives and tries to tell them what and how to think, we should all guard against this as best we can.
Some economic theorists contend that the state can crowd out private sector activity and ingenuity if public spending is at a level in excess of say 30% of a country's GDP then the state can obtain more resources than the private sector when it is competing with it in private markets hence the private sector is crowded out. If only state spending were lower the private sector would therefore suffer from less crowding out and would deliver more jobs and higher economic growth. The picture of our economy is more complex than that. Reductions in state spending are not inherently good as such -- it depends what the money is being spent on and the impact of any reduction in that spending on the wider population. The idea that if state spending was drastically reduced to say 20% of GDP or less then the private sector would bridge this employment and growth gap seems a bit fanciful. Any private sector impact would take a long time to make any difference in my view and this is already evidenced in the British experience.
Any reduction in state spending needs to be matched with increased dynamism of the private and not for profit sectors or else there will be long periods of unemployment and economic instability. Austerity on its own will not save us. Austerity coupled with some intelligent incentives for investment and business growth in the not for profit and private sectors could make a difference if properly targeted to foster calculated risk taking and further innovation.
Reductions in public spending might be necessary but are not sufficient in themselves to foster increased non state activity to bridge any gaps. Other moves to improve the conditions for private and not for profit investment should be introduced that make a real difference to the investment plans of individuals and businesses and yes, the state can have a role to make this happen as an enabler and not just a provider of public and not for profit services. This is probably the direction the modern state will need to move in to re-define its role in the 21st century. If the commercial banks are not lending as much as they should might the state fill their lending void thus encouraging wider growth and prosperity as we really do need it.
Some economic theorists contend that the state can crowd out private sector activity and ingenuity if public spending is at a level in excess of say 30% of a country's GDP then the state can obtain more resources than the private sector when it is competing with it in private markets hence the private sector is crowded out. If only state spending were lower the private sector would therefore suffer from less crowding out and would deliver more jobs and higher economic growth. The picture of our economy is more complex than that. Reductions in state spending are not inherently good as such -- it depends what the money is being spent on and the impact of any reduction in that spending on the wider population. The idea that if state spending was drastically reduced to say 20% of GDP or less then the private sector would bridge this employment and growth gap seems a bit fanciful. Any private sector impact would take a long time to make any difference in my view and this is already evidenced in the British experience.
Any reduction in state spending needs to be matched with increased dynamism of the private and not for profit sectors or else there will be long periods of unemployment and economic instability. Austerity on its own will not save us. Austerity coupled with some intelligent incentives for investment and business growth in the not for profit and private sectors could make a difference if properly targeted to foster calculated risk taking and further innovation.
Reductions in public spending might be necessary but are not sufficient in themselves to foster increased non state activity to bridge any gaps. Other moves to improve the conditions for private and not for profit investment should be introduced that make a real difference to the investment plans of individuals and businesses and yes, the state can have a role to make this happen as an enabler and not just a provider of public and not for profit services. This is probably the direction the modern state will need to move in to re-define its role in the 21st century. If the commercial banks are not lending as much as they should might the state fill their lending void thus encouraging wider growth and prosperity as we really do need it.
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