A common argument against socialism is that it paves a path to corruption and authoritarianism. In essence, it is a political argument based on an assertion that an enlarged government decreases society’s governance quality, or puts society at greater risk of a collapse in governance quality. Governance quality is a technical term in the development literature whose meaning closely resembles the more popular political concept of “good government”. It refers to the degree to which a government is stable, rule-bound, competent, publicly accountable, and acts in accordance with the public interest.
With all due deference to the scenarios dreamed up by Friedrich Hayek, is there anything to this argument? You should not base your beliefs on whether it is endorsed by someone who is famous or respected, but rather whether or not you see evidence that the argument is true. This analysis looks at bivariate relationships between government expenditure levels and countries scores on the World Bank’s World Governance Index.
Our findings suggest countries with larger governments tend to be better governed, perhaps in part because better developed economies tend to have bigger governents.
To probe the relationship between big government and bad governance, I draw on World Bank data. Size of government is measured by government expenditures (% GDP).1 The measurement strategy is based on the notion that a government that provides more services, performs more functions, or assumes an expanded purview will require more supplies, labor, and other resources. To measure governance quality, we consdier four metrics from the World Governance Indicators:2 Voice and Accountability, Political Stability and the Absence of Violence, Rule of Law, and Concrol of Corruption. These data are based on meta-analyses of survey data caputring experts’, businesspeople’s, diplomats’ and others’ opinions on countries governance quality. All of these variables are measured on standardized scales, with mean = 0 and SD = 1. We look at data from 2015.
We review the results of four comparisons. A point to note: Readers might not that Switzerland, Canada, and the United States register government expenditure levels that appear to be low. These figures likely exclude these governments’ sizable subnational government spending. These measurement issues are likely to understate the strength of our results: that countries with bigger governments tend to be better governed as well. Note that all these figures exclude micro-states (i.e., with populations of less than one million).
Voice & Accountability
Our first figure presents the relationship between govenrment expenditures and the WGI’s Voice and Accountability Index.This index captures “perceptions of the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media.”
The figure immediately gives us a sense of this relationship. Given that better-developed or wealthier countries tend to have larger governments3, it makes sense that countries with larger governments are also perceived to have more accountable, more democratic governments. This is a fairly strong correlation of 0.51
Political Stability & the Absense of Violence
Political Stability & the Absence of Violence, which measures “perceptions of the likelihood of political instability and/or politically-motivated violence, including terrorism.” This figure visualizes a correlation of 0.21
Rule of Law
Rule of Law, which captures “the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence.” Corrlation: 0.39.
Control of Corruption
Control of Corruption, which measures “perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as”capture” of the state by elites and private interests.” Correlation: 0.36
These findings do not strongly establish the view that bigger governments improve governance, but they certainly cast doubt on the proposition that bigger governments lead to worse governance. Better developed, wealthier countries tend to have bigger and better functioning governments.
Anyone who wishes to make the case that big government leads to worse governance needs to explain how their view can be maintained despite the fact that a straightforward comparison suggests that the opposite is true.
- Variable GC.XPN.TOTL.GD.ZS in World in World Bank (2019) World Development Indicators Online database. https://datacatalog.worldbank.org/dataset/world-development-indicators↩
- World Bank (2019) World Governance Indicators Online database https://datacatalog.worldbank.org/dataset/worldwide-governance-indicators↩
- see Cohen, Joseph N. 2019. “Government Revenues to GDP.” Retrieved (osf.io/kmp4a).↩