I often see comments like this, but what's a good solution to the ever expanding cost of public services (to the point most of western europe now has gov spending at 40%+ of gdp)? You do need to cut back if you're starting to run a significant deficit or more and more of your budget will go on interest payments.
Any large org tends to get more inefficient with time as it accumulates inefficient components it can't get rid of, but unlike companies, government departments aren't going to go bust and close down.
I genuinely don't know a good answer here, but would be curious about other people's.
> (to the point most of western europe now has gov spending at 40%+ of gdp)
Perhaps that's fundamentally barking up the wrong tree. West-European governments in the post WW2 era have had higher relative spendings then that, without every financial expert and their dog declaiming that doomsday is near and services need to be cut.
We've been able to finance better healthcare before, we've able to finance better education before, we've been able to finance better infrastructure before, etc. So which costs have risen out of proportion to the point that none of that is possible today.
>So which costs have risen out of proportion to the point that none of that is possible today.
It's not the costs that have rise sharply, it's the revenue and taxes that have declined since WW2 due to increased competition from globalization and the offshoring of jobs abroad, plus tax heavens aiding big corporation avoid paying taxes locally in western european countries, meaning governments today are missing out on a lot of income they used to get in the past, income which is now in places like China and in tax heavens.
I don't know of that's the cause, but it could be an interesting theory to look into.
But taking job offshoring, as an example. It could be fairly straightforward to determine how much tax revenue a car produced in, say, Germany, contributes to the economy, vs the same car imported from abroad. But where it gets complicated is that, German unemployment being low, the worker that lost his or her job to offshoring didn't turn out jobless, and by his or her work is still contributing to tax incomes. So what is the loss?
A lot of money is lost to tax havens, but the hourly productivity has also increased drastically, meaning that governments might still get more income per worker, per working hour. Governments are loosing in absolute terms, but have they lost income in relative terms?
The general feeling I have, is that a lot more money is lost to greed. As an example, we could take healthcare. It is undeniable that the average quality of healthcare has increased (for instance, looking at cancer suitability), but the cost of basic healthcare items have also, in some cases, increased disproportionately. (For instance looking at the cost of insulin in the US, or a dose of COVID vaccine, etc). So the general impression is that we are paying a lot more than before for only a slight increase in health and well-being.
And how does that apply to other trades? Construction costs have exploded, but we are not getting much better houses for it.
And therefore the general question was more: which parts of society are profiteering from forms of greed and price-gouging, how can we quantify that, and what can be done about it so that we, as a society can continue to improve on the care and the services we offer to our citizens, as opposed to accepting regression as the inevitable way forward.
Less bargaining power, that's a fact. But I'm not certain about the lesser wages.
I've been looking at the inflation + CPI index in Europe [0] over the 1990-2020 period. The result is that for an equivalent €100 in 1990, you would need to earn about €200 in 2023. According to [1], the wages in Germany have not increased enough (due to the well known wage stagnation of the 2000-2008 era). But the wages in France [2] (with data over the 2000-2023 period) have. Over the 2008-2019 period, the wages in both countries were increasing at the same rate.
The inflation + CPI index is not perfect, but it gives an indication of the costs changes of a "representative" consumer basket. With our sample of 2, this means that those basic costs have not increased disproportionately w.r.t. wages over the 1990-2023 time period. The pill was a bit harder to swallow for the Germans, but they also started at a higher level.
But what the inflation + CPI index totally fail to take into account is the explosion of other costs that now put single-income families in great difficulties w.r.t. a few decades ago. And the mechanism behind those costs increase is the one that would be interesting to understand and analyze.
But maybe those experts should've been raising alarm over this? Western Europe is doing pretty poorly when it comes to economic growth. And prior to that Germany got a lot of help from the US, Spain did not do well, Italy was questionable, Portugal did not do well. Netherlands did well, but a lot of it is down to their location as a place for trade. That only leaves France and Belgium. Did they do well?
>We've been able to finance better healthcare before
Modern healthcare is better than anything before. Even in its dysfunctional state it is better. Sure, you might have to wait longer to see a specialist, but the number of cases where the reply you get is "nothing we can do" is lower.
The things you mention are more expensive to provide today. One of the reasons is that our requirements for those services are much higher leading to much higher inherent costs.
> That only leaves France and Belgium. Did they do well?
Looking at France and the quality of their industrial output in the 70s to 90s, ranging from high-speed trains, rockets, passenger airplanes, Concorde, helicopters, (racing) cars, submarines, nuclear power plants, medical labs, etc. I would say yes. Their infrastructure has also been of high quality, so has the education system of their elites, and their healthcare.
And from what I could see of Belgium and their infrastructure, it also looked like that period was good for them.
> Modern healthcare is better than anything before. Even in its dysfunctional state it is better.
This is a more relevant point. The question is if we aren't well past a point of diminishing returns. For instance, for France, the data shows that the life expectancy of women was increasing by 2 years every 10 years, until 2010. It has increased by 0.5 years since then. The life expectancy of men followed a similar trend.
In fact, we might not have seen the full effect dysfunctional health care just yet, and we could be riding on the momentum of previous gains. And the ever increasing delays to see a specialist can only have detrimental effects in the long term. In parallel, the disproportionate increase of healthcare costs per patients means that, at some point, life expectancy is going to go down.
> One of the reasons is that our requirements for those services are much higher leading to much higher inherent costs.
No, I don't think I agree. The house you are getting has not improved 3 fold in quality compared to 20 years ago. The roads you are driving on are not 2 times better. Train travel is not a lot safer, nor faster, nor with more frequent service. On the contrary. The food quality in your supermarket has not improved. The electricity you use still has the same voltage and the same frequency. The clothes you wear are not of higher quality.
France also has kind-of a colonial empire still going on. Could that have an effect?
>The house you are getting has not improved 3 fold in quality compared to 20 years ago
That's true, but there is likely the 80/20 principle at play. Every additional level of quality costs more and more to achieve. Not to mention that often the increase of quality isn't really noticeable. Eg lead paint vs not, better wiring (fewer house fires), better insulation (lower heating costs), better air circulation (less mold) etc.
You also have the problem of survivorship bias. The old homes that are still used today are the probably the better ones. The worse ones from back in the day just didn't last.
But all-in-all, I can only suggest reasons. I'm from a former Soviet state. Some of the transformations are that good. Eg sidewalk roads actually feel 2x better if not more. These days they are nice and smooth roads you could skateboard on. Back in the day I'm not sure I would even want to ride a bicycle on them because they looked like the surface of the moon. And clothes are much cheaper in relative terms and even in absolute terms. But I think this is an exception and not a general trend.
> France also has kind-of a colonial empire still going on. Could that have an effect?
They were officially post-colonial by that time, and what is left is perhaps more a financial drain than a net income gain, although geostrategically invaluable.
> Every additional level of quality costs more and more to achieve. Not to mention that often the increase of quality isn't really noticeable. Eg lead paint vs not, better wiring (fewer house fires), better insulation (lower heating costs), better air circulation (less mold) etc.
They might increase cost, or they might not, as they are logical continuation of progress (as in, does lead-less paint really cost more to produce than leaded paint?) but in the end, they are "marginal" costs on a house, maybe in the order of 15%? So by themselves, they are not going to increase the price by 300%.
> I'm from a former Soviet state.
That brings a very different perspective, yes. Having spent quite a lot of time in eastern Europe, it is clear that the life experienced in that period was very, very different, and that many improvements where brought in, in quality and quantity.
But taking the road example, if you go to Belgium, you will have the joy of experiencing the inverse phenomenon, with a decrepit infrastructure that has been much, much better in the past. Imagine the moon surface you described, and then on a motorway, with cars driving by at 130 kph.. I've seen motorway signs covered in moss, as if an apocalypse had hit.
For clothes, I have items that were bought at the turn of the century and are still "wearable", but no recent clothing item seem to survive more than a year or two, independently of the cost. Which is an annoyance: I wouldn't mind paying more for something that lasts, but, so far, haven't found a brand that does. Of course, the current state of affair is an upgrade on the quality and quantity of clothing that was available in ex Eastern-block states. (Although, as bad as the fabric and colors were, I can only assume that they were built to last?)
Which I think is partially due to institutions becoming less efficient with time as more organizational scar tissue accumulates (certainly seen a lot of this at the companies I've worked for). Plus gov departments tend to accumulate extra low-return responsibilities from politician gimmicks (the mismatch between what sounds good in a headline and whats cost effective).
Which in turn I think comes from scope insensitivity, we just aren't good at understanding scale and underestimate defuse costs.
High government spending doesn't mean the government is bigger necessarily. The big expenses are just getting moved right back out to the private sector for agricultural subsidies, energy subsidies, etc...
The better metric would be how many employees work (directly or indirectly) for the government and then compare those numbers.
> Any large org tends to get more inefficient with time as it accumulates inefficient components it can't get rid of
This is really the crux of it. Same incompetence and inefficiency, we see in tech industry. Are there any serious studies on the disease that comes with scale, and possibly its cure?
Any large org tends to get more inefficient with time as it accumulates inefficient components it can't get rid of, but unlike companies, government departments aren't going to go bust and close down.
I genuinely don't know a good answer here, but would be curious about other people's.