The Cost of Bad Government

We often hear comments about the high cost of government while seldom seeing a thoughtful analysis of the value received for the investment made.  The August 23 & 30 edition (it used to be a weekly) of Newsweek carries a small article entitled “The Professional Class Flees Russia.”  The story describes how as many as a third of Russian businesses are being shaken down by dishonest law enforcement officials working with organized crime to gain control of legitimate businesses.  The result of this corruption is that more than 20,000 educated Russians sought political asylum in the European Union last year while others sought refuge in the U.S.  It’s not surprising that people who have a choice choose to live and invest in a place where government is generally honest and reliable.

Later in the same issue of Newsweek, the magazine lists its picks for the best countries in the world.  The U.S. comes in at number 11, behind Finland at number 1, but ahead of Germany and the U.K. at 12 and 14 respectively.  I disagree with the list for a variety of reasons, but I do not find it surprising that nearly every country in the top 25 is a democratic republic.

Speaking of lists, a group called “The World Taxpayers Association,” places the U.S. total tax burden at 25th among developed nations, behind (not surprisingly) almost every country ahead of us on the Newsweek roster of “The Best Countries in the World.”  Only Japan, which ranks number 9 on the Newsweek list, is reported to have a slightly lower tax burden than the U.S.

Regardless of some skepticism about lists and the difficulties of comparing tax systems, I believe there is overwhelming evidence to support the conclusion that good government is a good investment and that bad government is a very difficult burden to overcome.  In a speech in the House of Commons on November  11, 1947, Winston Churchill said:

“No one pretends that democracy is perfect or all-wise.  Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.

Governance is not easy when you consider that government is asked to reconcile the interests of large numbers of people and make decisions that render the greatest good for the greatest number.  Democracy as we know and practice it has done a better job than anything that preceded it, but it has not flourished without resources.  While there is surely a point of diminishing return where further investment produces no appreciable benefit, there is also a threshold requirement for good government.  The danger of not reaching that threshold is the corruption, incompetence, and failure causing Russian professionals to leave their country every day.