Why governments' attempts to pick winners produce more losers than winners.
It occurred to me, as I wrote the last post, that we have a problem with terminology.
I am sure I have been as guilty as David Cameron of lazily attacking bureaucracy. And attacks on red-tape are commonplace amongst the right.
But the left have an easy defence. They challenge critics to provide examples of this bureaucracy and red-tape. And it often proves surprisingly difficult to come up with really bad examples.
I think that's because we picture bureaucracy and red-tape as the effect of form-filling, pencil-pushing jobsworths. But that's not where the greatest negative impact on our lives springs from, though it seems closely associated in our minds.
I think what we are really talking about is the effect of bad rules and incentives. These are often very bureaucratic, but it is not in the bureaucracy that their harm lies. The harm lies in their arbitrary and unmerited effect on our position relative to others.
For example, I wrote recently (not for the first time) about the negative impact of a particular grant decision. These negative effects are legion in those parts of society and the economy where grants or other subsidies are handed out (and that's pretty much everywhere, nowadays). They are usually horribly bureaucratic but they would be equally harmful if they were not.
We lost out because a competitor knew how to manipulate the system to get money out of the government. They doubtless had to fill in acres of forms to get the grant, and provide a distorted picture of what they planned to do (or plan actually do the wrong thing) in order to maximise their chances of qualification. But we would have been just as upset if all they had had to do had been to tick a box. It wasn't the bureaucracy that hurt, it was the commercial advantage achieved not through being more efficient but being better at brown-nosing the politicians and civil servants, or simply by falling into a category of which they approved.
There will never be a system where there will be enough money that everyone can be handed money equally, whether they tick a box or fill out a hundred-page form. The object of the exercise for the government is to prefer some applicants over others, and the outcome will always be unfair, and usually uneconomic. No amount of effort on our part will be able to overcome such advantage, which makes us question whether effort is worth expending. That sense of powerlessness is frustrating and depressing. That is what we are angry about.
This effect is repeated ad infinitum in our industry. I'd say we learn of something like this on an almost daily basis. I think it's likely that people experience similar unfairness and disincentivisation in other walks of life and in their home lives as well. And it is this that they are referring to when they complain about bureaucracy and red-tape. What they really mean is arbitrary rules from which they lose out and which they are powerless to counter.
What we want, then, more importantly even than fewer bureaucrats, is less picking of winners, through grants, subsidies, tax and benefit rules, regulations, school-selection procedures, etc. The bureaucrats will fall away with the discarded or simplified schemes, but that is not the important part. The important part is the simplification and reduction of government intervention.
"But the solution of these problems must be brought about under state leadership, and cannot be left to unregulated individual actions, which have a disturbing influence on the national economy, and which have therefore been repeatedly forbidden by governmental as well as Party agencies."