The Public Spending Paradox
by planetparker
The Public Spending Paradox is a feature associated with an important part of the economies of western countries. Unfortunately, it tends to be overlooked by many economists whose models and understanding are based on clear, measurable ,numerical variables. The true extent of the Public Spending Paradox often relies on rather complex even “fuzzy” variables, which may not be easily measured. What’s more it also relies on that most troublesome form of data – anecdotal evidence.
Put simply, when a government announces say a ten per cent increase in a specific area such as health, the people in whose interest the increase has been made (the sick etc.) don’t see any real improvement in the service delivered.
Let’s stick with health spending. The UK government has announced various increases in spending, yet hospital patients are still plagued by a host of problems, from bed shortages and inadequate clinical cover to problems like misdiagnosis; regional health trusts still report deficits leading to ward closures. Now if the government were to announce a ten per cent cut in health spending the results would be far more immediate (and no less dramatic), with widespread hospital closures and withdrawal of services such as physiotherapy.
In other words an increase in spending leads to indifferent results and no very clear cut improvements for the sick, whereas a cut leads to immediate disimprovements and hardship for those relying on the health system.
What is true of health is also true of education and the social welfare and training sectors, and what is true of our sister isle is very much true in Ireland.
The reasons for this? Well these areas are part of the public service and are dominated by hierarchical systems and bureaucratic mindsets. Inflexibility is the order of the day. Rules and regulations are to be observed tout simple. There is just no point in questioning them.
An increase in spending is like pouring water on a sponge above the mouths of the very thirsty. Now some will eventually trickle through the sponge and into the thirsty peoples’ mouths, (who incidentally are tied to a chair, so if the water coming out of the sponge is insufficient they can’t raise their hands to administer a vigorous squeeze.) And let’s not forget a not inconsiderable amount of water stays trapped in the sponge. On the other hand a ten-per-cent cut means that no water it poured on the sponge and the thirsty people can cry all they want but no water will come out of the sponge because none has gone in (well hardly any, except for “essential” salaries), and all things considered the best thing is possibly to shoot the poor bastards to put them out of their waterless misery, so long as the petty cash extends to the bullets. But remember, the sponge remains: it’s a vital part of the system.
So public sector cuts in areas like health, education or social welfare hurt – far, far more than any comparable increases. Anyone who denies it is a bit like the parsimonious dentist offering cut-price extractions and fillings because he’s saving on anaesthetic. “I promise you, you won’t feel a thing, and you know it’s for your own good so open wide…”
