Twenty years ago, early on a Friday evening, a senior Howard government minister was enjoying a convivial drink or two in a Manuka bar with some journalists. The government, elected in 1996, had begun to introduce spending cuts along with a far-reaching reorganisation of the public service, including contracting out hitherto in-house IT services. Just where was the evidence for the efficiency argument the government was running, the minister was asked.
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In a moment of candour – and safely off the record – the minister shrugged, conceding the arguments were, at best, feeble. "Look," he said, "the reality is that it's all about giving the private sector a slice of the action." It was, of course, what that group of professional sceptics, this writer included, had suspected all along, but here was a very rare affirmation of that scepticism.
Contained in this telling exchange is the core of ideology that drives much of the small-government agenda, although suitably dressed up in the more respectable (and palatable) guise of efficiency.
American anti-tax activist Grover Norquist has become the most formidable crusader for not just small government but minimal government, summed up in his expressed desire "to shrink government down to the size where we can drown it in the bathtub". Interestingly, Norquist was recently in Australia at the invitation of the right-wing Institute of Public Affairs, whose influence reaches deep inside the Turnbull government. Prominent backbencher Tim Wilson is a former IPA policy director while ministers such as Mitch Fifield and Mathias Cormann have strong links to it.
With the rise of neoliberal ideology in the late 1970s and its accompanying mantra of limited government – most forcefully advocated in Australia by the so-called "dries" in the Liberal Party, led by former IPA official John Hyde – cutting government spending and reducing the size and scope of government has been the catch-cry of right-of-centre governments everywhere.
But the extent to which they have succeeded (if succeed is the right term) is debatable in terms of economic efficiency, even though taxes have been cut and the scope of government action has been reduced significantly.
Ronald Reagan, elected United States president in 1979, led a two-term Republican administration that, in Reagan's own words, held the view that "government is the problem, not the solution" to whatever issue was raised.
Coming in after the one-term Democratic administration of Jimmy Carter, Reagan, during his election campaign and immediately after, made much of the fact that, in Carter's last year as president, the federal government accounted for an "outrageous" 27.9 per cent of national income. Assailing the "irresponsible" and "free-spending" Carter administration at every turn, Reagan pledged himself to slashing the size of government. Yet, after the first quarter of 1988 at the end of his term, federal spending accounted for 28.7 per cent of national income.
The budget for the Education Department, which candidate Reagan had promised to abolish along with the Energy Department, had more than doubled to $22.7 billion, while social security (welfare) spending had risen from $179 billion in 1981 to $269 billion in 1986. Medicare spending was $43.5 billion in 1981; it hit $80 billion in 1987.
Reagan, with his sweeping taxs cuts, effectively tripled the gross federal debt, from $900 billion to $2.7 trillion. It took 31 years to accomplish the first postwar debt tripling in the US. Reagan did it in just eight.
In Britain, Margaret Thatcher's Conservative government took similar aim at the size of government, embarking on a wholesale privatisation program, and, while more successful than Reagan, results were mixed.
While spending generally kept pace with inflation, it fell markedly as a share of GDP. When Thatcher entered office in 1979, total expenditure was 45.1 per cent, briefly reduced to 44.6 per cent in her first year before rising every year until 1982-83, peaking at 48.1 per cent. Spending then fell in every remaining year, totalling just 39.2 per cent in 1989-90 after the economy grew by an average of 4.7 per cent between 1984 and 1988.
Public spending then rose under Thatcher's successor, John Major, largely as a result of the 1991-92 recession, peaking at 43.7 per cent of GDP in 1992-93.
In Australia, John Howard – an open admirer of Reagan, Thatcher and their economic policies – was elected in 1996, but his record on government efficiency, despite a privatisation program and public sector rationalisation, is dismal. The International Monetary Fund branded the Howard era as profligate, characterised by needless and wasteful spending.
Over the 11 years under Howard, federal government spending, adjusted to reflect today's prices, rose from $11,255 to $14,239 per Australian while taxes rose from 22 per cent of GDP to 24 per cent. The tax hike reflects not only the introduction of the GST but also an increase in income-tax collections, despite the headline cuts in personal and company tax rates over the period.
Liberal Democrat senator David Leyonhjelm, a strong libertarian advocate of limited government, says the spending cuts introduced when Howard first came to office were soon overturned by "a big spending attitude in every corner of government".
One aspect of the small-government agenda is the reduction in government employment but, as Britain is now finding out, diminished resources can be a handicap in times of crisis, just as depleted military numbers are when war breaks out.
Public service in an increasingly complex and globalised world is as much, if not more, about problem-solving than routine administration – a fact former Australian prime minister Kevin Rudd, to his credit, acknowledged in earmarking funds for upgrading public servants' skills. But in Britain, after long years of civil service attrition, the immense tasks of extricating the nation from the European Union while maintaining existing programs is proving exceedingly difficult.
Civil service numbers have been under intense scrutiny ever since Thatcher set up her "efficiency unit" in 1979. Overall, civil service employment has more than halved since the end of the 1940s. Austerity has hit most government agencies.
A joint report by two highly regarded think tanks, the Institute for Government and UK in a Changing Europe, warns Brexit will push civil servants "to the limit" and more officials will need to be drafted into Whitehall to cope with the workload during the two years of departure negotiations. The report also suggests existing programs are at risk, with departments in need of clear direction as to which projects can be "delayed or dropped" to free up resources for Brexit.
The concern is shared by Britain's National Audit Office, which scrutinises government spending. The office said Brexit would "further increase the capability challenges" facing a civil service already struggling to cope with major projects. It said the government must show "greater urgency" in filling skills gaps in its workforce.
The office's chief, Amyas Morse, warned the government it must be prepared to prioritise its activities and be ready to stop work on projects "it is not confident it has the capability to deliver".
He said: "The civil service is facing ever-increasing challenges. The work of government is becoming more technical, continuing budgetary restraint is putting pressure on departments and the decision to leave the EU means government will have to develop new skills and take on work previously done by others.
"Government has gaps in its capability and knows it must do more to develop the skills it needs. It is making plans to do so but the scale of the challenge ahead means greater urgency is needed."
Advocates of limited government constantly stress that we are all better off if they can have their way. Efficiency has not been proved, and what we saw under Reagan and Thatcher, and to some extent under Howard, was growing economic inequality, which brings its own problems, and a serious decline in socially important infrastructure investment.
Reducing the scope of government action is by no means an unalloyed blessing. The withdrawal of government, for example, from the energy field, has seen spectacular rises in costs to the consumer, perhaps not an entirely unexpected outcome from privatisation.
Even darker implications flow from the lack of accountability through outsourcing, privatisation and globalisation, while at the same time increasing inequality by dismantling the welfare state. Without robust government, nothing stands between the citizen and a rapacious corporate sector, intent on profit at any cost.
The most overlooked part of the characterisation of democracy popularised by Abraham Lincoln as "government of the people, by the people, for the people" is that of "for the people". There is such a thing as society, Thatcher not withstanding; there is such a thing as the public interest that needs defending. And only mechanisms operated by government, properly accountable to the people, can do this.
The private sector might well want a slice of the action, but it cannot be allowed to have it all.
Dr Norman Abjorensen is a Canberra political historian. He is writing a history of democracy.
