What made government grow?
The pillars on which the Big Government model rest are starting to crumble
"Democracy" I hear you say.
I have often heard this point asserted, but less often made.
First of all, the history does not fit. Most adult males in the United States have had the vote since the 1830's.Yet federal government spending never exceeded more than 3 percent of GDP in peacetime at any stage during the nineteenth century. Britain, too, was more democratic at the end of the nineteenth century than at the beginning and yet the state was less redistributive in the 1890's than in the 1820's and 1830's.
And then there is Prussia. Perhaps the least democratic state in Europe, it pioneered Big Government.
In my new book, The End of Politics and the Birth of iDemocracy, I point out that government in many Western states started to grow soon after the introduction of unequal taxation. In the first decade of the twentieth century, in Britain, America, Australia and elsewhere, so-called progressive taxes were introduced.Government has grown in every decade since.
This is hardly controversial. Those demanding a progressive income tax in Britain and America at the time did so, in part, precisely because they wanted to redefine the role of the state. With everyone not having to pay a proportionate amount, they knew it would be easier to overcome the parsimony of the electorate and get them to accept more government.
Unequal taxation allowed the ruling elite to subvert the democratic constraints that once kept government small. Borrowing and the manipulation of the money have likewise allowed officialdom to spend without asking the rest of us too. Far from being a product of democracy, maybe Big Government is a product of the elite, officials wanting more officialdom?
But here's a thought; what if the digital revolution makes it more difficult for governments to keep on spending without asking?
In my book, I argue that the internet will make it much harder for governments to keep on debauching money as they have done since 1971.They simply won't be able to keep siphoning off resources in this way.
Instead of taxing income, where it is much easier to charge unequal rates, I also suggest that in the digital economy of the future, states will need to tax consumption. In other words, taxes are going to have to get necessarily flatter. And once everyone is paying a proportionate amount, many assumptions about the electorates' willingness to accept Big Government will be overturned.
The pillars on which the Big Government model rest are starting to crumble.
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