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Society and the State: Does Size Matter?

One of the key debates as we approach the general election concerns the relationship between society and the state. The division is no longer a simple left-right argument about whether governments or markets best provide for the public good: all the major parties believe that power should be decentralised and that citizens should play a greater role in the decisions which affect their daily lives.

But does the devolution of power, without the mediation of governments, simply increase the influence of the articulate few and further disenfranchise the already disadvantaged? Or does the intrusion of the state suppress the ideas, energies and social entrepreneurialism which which underpin successful societies? How and where should the balance be struck?

Two of the UK’s leading thinks tanks, the Institute for Public Policy Research and Policy Exchange, regarded respectively as intellectual power houses for the Labour and Conservative Parties, join the debate.

Guy Lodge and Jonathan Clifton

Institute for Public Policy Research

Guy Lodge is Associate Director at the Institute for Public Policy Research (ippr), where he leads a joint ippr and PricewaterhouseCoopers LLP research programme on the Smarter State. Guy is also a Visiting Research Fellow in the Department of Politics and International Relations at Oxford University. In 2007 he acted as an advisor to the Flanagan Review of Policing.

Jonathan Clifton is a researcher at the Institute for Public Policy Research (ippr) where he also works on the joint ippr and PricewaterhouseCoopers LLP Smarter State research programme. Before joining ippr Jonathan completed his MA as a commonwealth scholar at the University of British Columbia, Vancouver.

The Institute for Public Policy Research is the UK’s leading progressive think tank, producing cutting edge research and innovative policy ideas for a just, democratic and sustainable world.

Since 1988, the IPPR has been at the forefront of progressive debate and policymaking in the UK. Through its independent research and analysis it defines new agendas for change and provides practical solutions to challenges across the full range of public policy issues.

With offices in both London and Newcastle, the IPPR ensures its outlook is as broad-based as possible, while its international and migration teams and climate change programme extend its partnerships and influence beyond the UK, giving it a truly world-class reputation for high quality research.

Andrew Lilico

Policy Exchange

Dr Andrew Lilico is the Chief Economist of Policy Exchange. He was previously the Managing Director of Europe Economics and has also worked as an economist for the Institute for Fiscal Studies and the Institute of Directors, as a business analyst for two plastics multinationals, as a mathematical chemist for ICI, and as an opera singer for Opera New Zealand.

He is a member of the IEA/Sunday Times Shadow Monetary Policy Committee, one of Europe's top experts on the economics of financial regulation and a leading UK authority on cost of capital analysis

Andrew has also lectured on Money and Banking, Macroeconomics, and Corporate Finance at University College London and has a Masters degree in Philosophy from the University of London.

Policy Exchange is an independent educational charity. Its mission is to develop and promote new policy ideas which will foster a free society based on strong communities, limited government, national self-confidence and an enterprise culture.

Policy Exchange is committed to an evidence-based approach to policy development. It works in partnership with academics and other experts often examining international experience for lessons for the UK.

The authority and credibility of Policy Exchange’s research is one of its greatest assets, ensuring not just that its reports have greater impact but also that top companies, professional associations, universities and politicians from across the political spectrum are keen to collaborate with it.

Proposition

The Enabling State - A Force for Public Good

‘Power to the people’ has become the mantra of all political parties in the run-up to the election, but it is David Cameron who has been most vocal in his calls for a ‘big society’ to replace the ‘big state’. In his view, the expansion of the public sector under Labour has crowded out personal responsibility, leaving communities uninvolved in how their services are run. The growth of government, he argues, has disempowered ordinary people.

There is an element of truth in this criticism of Labour’s public service reforms. The government has been too dependent upon ‘big state’ solutions which have sometimes resulted in top-down targets and a centralised bureaucracy. We accept that the left needs to release itself from the Bevanite spell it has been under for most of the post-war period: power needs to be more meaningfully decentralised and dispersed.

But it is not possible simply to equate a growth of government with declining community involvement. The right’s analysis overlooks that it was the unfettering of market forces in the 1980s that encouraged a more individualistic and unequal society. Moreover, many countries with a ‘big state’ also have ‘big societies’ with strong social and civic ties. Indeed, in the UK there has been a measured increase in volunteering, charitable giving and participation in community organisations in recent years.

Nor is it possible to assume that by reducing the role of government, communities and individuals will automatically be empowered to take on more responsibility. As David Miliband has argued, “we do not reveal a powerful populace simply by withdrawing the state…a free and powerful people is made not born”. Removing government can just give more power to those who already have the loudest voices and leave the communities most in need further disadvantaged. Indeed, the ‘bueaucracy’ of the welfare state was specifically designed to address the inequity generated by the market which society on its own – be it in the form of individuals, families, charities or communities – could not overcome.

The big challenges facing the UK are ones that require collective action, not individuals going it alone. Climate change, the financial crisis, social care, chronic health conditions, unemployment, inequality and declining trust in our political system will not be solved simply by having a small state. The right’s preoccupation with the size of the state ignores the more important question: how do we get it to work better?

It is clear that the best outcomes can be achieved when the resources of both society and the state are brought together. On their own, neither government nor citizens have access to all the time, energy, knowledge and resources necessary to provide public goods. The government must produce services in partnership with individuals, not leave them to fend for themselves. To take one example, an initiative in which nurses take courses for asthma patients to teach them how to care for themselves more effectively, has led to better inhaler technique and a 69% reduction in sufferers visiting GPs. This is not about ‘more’ or ‘less’ state, but about a different way for the state to work to achieve better outcomes.

Empowering individuals and communities to be more involved in public services is clearly essential. But it would be a mistake to assume that this necessarily requires a small state. Government can be a force for good when it supports and enables people to take and use their power. It’s time to move beyond the argument that suggests an irreconcilable conflict between active government and a strong society. We need both.

Proposition

The Big State - A Constraint on Freedom and Fraternity

The size of the state does matter.  The state must be large enough to do what it does well: defending the realm; projecting the nation's values abroad; preserving law and order; enforcing property and contract rights; delivering (or facilitating the delivery of) public infrastructure and key public services; maintaining social and economic stability. 

But if it becomes too large, the state tends to become a burden on economic dynamism and a constraint on human freedom and to crowd out those important aspects of society - such as family, clubs, faith groups, charities - where we work together freely without going via the state.  An over-sized state is a threat to community and society as well as to the economy.
 
And the state in Britain has become too big.  This has happened very suddenly - so suddenly that politics has not yet caught up.  Only three years ago, the Government spent about 41% of GDP. Though this was up markedly from the 36% spent in 1999/2000 and with the benefit of hindsight was probably too much, it was not obviously excessive at the time: around 40% of GDP had been a fairly normal level of spending over the previous 25 years. 

But from 2007/8 to 2010/11 the size of the state has risen dramatically to nearly 50% of GDP. This huge increase was not because of supporting the banks (this is the figure excluding that support), and most of it was not directly related to the recession either (e.g. it was not benefits or debt interest or spending on public works).  Instead, the Government has chosen to increase spending enormously (by around 20%), even though the economy that had to support that spending was shrinking.
 
This cannot go on.  It will damage economic growth (probably reducing the rate at which the economy grows each year over the long term by more than 1%).  It will increase dependency upon the state - six million people already depend upon out-of-work benefits, whilst another six million people now work for the state directly.  This increased dependency smothers enterprise, stifles initiative and undermines cooperation and fraternity.

We need a state, but we need a state that grants room for community, for society.  We need a state that exercises discipline and self-restraint, rather than seizing the opportunity of a crisis vastly to expand its role.  We need a state that is humble, recognising the limits of what it can achieve by itself and understands that it is individuals and families in cooperation, creating community in a spirit of fraternity, that are the key agents of social bonding and the most effective support for each other and for those less fortunate.

But what we have is a state that strives to control far too much from the centre; a state that is arrogant about its role in society and in the economy; a state that has expanded without discipline, undermining economic growth and creating a huge fiscal deficit that could yet humble our nation and diminish our international role permanently; a state that has failed to eliminate pockets of extreme deprivation and misery despite ever larger bills; a state that seeks to expand ever further into family life, snooping in our dustbins and discouraging benign help with children by checking millions of us on suspicion of horrible crimes; a state that keeps and loses data on us that it should never have gathered; a state that does not know its place.

It’s long past time for that to change.

Response

Andrew asserts that a large state will damage both the economy and the community. But where is the evidence?

Contrary to his claim that big government reduces economic growth, there is no long-term correlation between the growth of GDP per head and the amount a government taxes its people. Indeed, a study on Taxes and economic growth which the IPPR has just published concludes that, based on OECD data for 22 advanced economies since 1970, there is no relationship between tax take and long-run economic performance.

To counter his second claim – that big government damages community – we’d point to the US. This has the sort of small government Andrew desires but, as influential sociologists such as Robert Putnam have pointed out, America has suffered a thirty year decline in social institutions and people are increasingly disconnected from each other. Meanwhile Scandinavian governments tax and spend heavily, but score well on measures of social capital and participation.

In other words, it is perfectly possible to sustain both big government and a big society. The suggestion that people in Britain don’t go to church, don’t join clubs and experience family break-up because the government spends a higher percentage of GDP than it did ten years ago is very hard to sustain.

We agree that communities and societies should flourish and that services are best delivered when they are more involved. We agree that the current government has tried to control too much from the centre. But we disagree that these aims necessitate a smaller state. They won’t be achieved by simply rolling government back. A more effective, decentralised state would be a far better solution.

Response

We do not claim that "by reducing the role of government, communities and individuals will automatically be empowered to take on more responsibility".  Given how damaged civil society has been by many decades of encroachment by the state and by the failure of past regimes of all political stripes to recognise the fundamental role of community, the process of regeneration of society is not simply a matter of the state stepping back.  But the process cannot even begin until the state first recognises its failings in this respect and at present the situation is one of its continuing aggressive and rapid expansion.

IPPR argues that “the government must produce services in partnership with individuals, not leave them to fend for themselves”.  We don’t claim that people who are disadvantaged do not need support, but why assume that only the Government can provide it?    Our contention is that family, charity, church and wider community are often more effective agents for support than the centralised state.

The big centralised state has failed millions of people.  As spending has increased by one half relative to the economy over the past ten years, numbers on out-of-work benefits have increased, the numbers living in extreme poverty have increased and inequality has increased.

IPPR seems to believe that we should do more – much more – of what fails: the big state.  Our view is that we should change and try something new: the big community.

Conclusion

Although Andrew is still arguing about the centralised nature of the state, that isn’t up for debate here. As we made clear, we have long believed that power needs to be more meaningfully decentralised and dispersed.

The main point of difference is that while Andrew claims social problems cannot be tackled until the state starts to shrink, we believe there is room for both society and state to work together. People’s verdict on the state should be based on how it works, not what percentage of GDP it spends. 

We would argue:

First, Andrew’s case is based on a depressing view of society. Increased government spending has not squeezed out community involvement in the last few years as he claims. On the contrary, surveys show that over the last seven years increasing numbers of people feel they belong strongly to their neighbourhood, that rates of civic engagement have held steady and that volunteering and charitable giving have increased.

Second, Andrew overlooks the role of the market and inequality in driving many of the problems he identifies. It is tough for him to point to rising numbers on out-of-work benefits without reference to the recession as the root cause. Neither is inequality driven by government spending – in the 1980s when there were cuts in spending, measures of inequality increased. And it is unreasonable to argue that people don’t join clubs or go to church is because of government policy: it is simply because they want to spend their time in other ways.

Third, we believe that active government can be a force for good and that it is risky to rely on support provided by ‘family, charity, church and wider community’. Of course these are essential supports for many and we want to see them flourish; we have never claimed that government should be the only provider of support. But not everyone has access to strong families and communities. There are times when if the state steps back, charity will be unable to step into the breech. It is at those times that the weakest in society will be hit the hardest.

In summary, we believe that although it is important to reform the state, we shouldn’t be too dogmatic about its size. It is how government operates that really counts. The state must empower people by giving them support and a platform on which to stand. The state must be decentralised so it works at the local level. The state must work in partnership with citizens to produce better outcomes for all. The big society works alongside – not instead of – the state.

Conclusion

There is extensive evidence that high levels of taxation and spending damage economic growth. The most authoritative research measuring the affect of taxation on OECD economies conducted by  the economist Willi Leibfritz and colleagues in 1997 found that a 10% increase in the tax to GDP ratio reduces the growth rate by 0.5 – 2%.  This finding has been confirmed since by other economists whose studies have reached strikingly similar conclusions.

It is also wrong to assert, as the IPPR does, that the alternative to the kind of state we have in the UK is the state in the US.  In 1999/2000 the UK Government spent just over 36% of GDP – in 2010/11 that figure will be close to 50%.  At the same time the state has become ever more invasive, with the introduction of ID cards, intrusions into family life such as restrictions on smacking, intrusions into community life such as restrictions on the policies of religious organisations, restrictions on sports and many others. 

We do not need to imagine reinventing ourselves as other countries.  Even merely keeping the state at its current size, relative to the economy and slowing down the rate at which the state invades every area of community life would be a major success if it could be delivered.

We do not assert that big government has created all of society’s ills.  Individuals are quite capable of betraying each other, abandoning their children and neglecting their neighbours without any assistance from big government.  But big government was intended as the solution to these ills and it hasn’t worked.  Those at the centre saw that communities did not always address their ills perfectly and believed that they could do better.  But government is not perfect either and big, invasive, centralised government has failed many of those same people that communities themselves did not deal with perfectly whilst creating its own new and unique problems.

No system is perfect.  We do not assert that by removing government all society’s ills will be solved.  We do not even assert that government has no role in addressing all the problems it today addresses. It may still have a role in enabling and facilitating, even if not always in providing solutions. 

But we believe that government must be more humble, recognising its own failings and recognising that communities have strengths of their own that are not mediated through the state.  It is simply not true that those that care more will always favour a bigger state.  The big community can be effective and fraternal as well as free.

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