Private sector shrinkage and the growth of industrialized economies: Reply

Further tests and thoughts on the OECD data lead me to conclude that, if anything, my 1986 paper underestimated the magnitude of the inverse relation between economic growth and government size. If one takes the nominal-based measure of government scale, as advised by Saunders, the significance levels, coefficient magnitudes and goodness of fits improve over what I found with my initial investigation. I would suggest that Saunders reconsider his reluctance to believe that the size of the public sector is unrelated to economic growth in OECD countries over this time period.One additional thought appears relevant to the current policy debate concerning budget deficits and economic performance within the major industrialized economies. The empirical work displayed here and in my 1986 paper suggests serious problems associated with the various proposals urging governments to raise taxes and/or ease fiscal policy. Elsewhere, I have suggested that available empirical evidence implies that plans to increase taxes as a way out of budget deficits are plans that carry the potential for raising government spending and possibly future deficits as well. Coupled with the evidence presented here, we should also recognize the potential of tax increases to raise the level of government participation in a country and, accordingly, exert inverse influences on its future economic performance as well. As suggested in my 1986 paper, the empirical evidence may suggest the following irony: While political participants may crave larger and larger non-market resource allocations, their future ability to satisfy that craving may very well be severely constrained by the satisfaction of that same appetite.     

Reviews

Recently, various authors have examined the relationship between growth in government size and total economic growth. In each case, the authors permitted only a monotonic relationship. This paper examines the issue of a non-linear relationship between growth in government and overall growth in the economy.Government contributes to total economic output in various ways. The provision of Pigovian public goods enhances the productivity of the private sector inputs increasing total output. However, the public decision-making process can result in an inefficient quantity of public goods. The likelihood of this outcome increases with the size of government. Further negative effects are created by the revenue raising and spending mechanisms of government, and the increasing diversion of resources into unproductive rent-seeking activities. The magnitude of these effects is likely to increase with the relative size of government.     

The Virtuous Polity, The Accountable Polity: Liberty and Responsibility in The Federalist

The Federalist claims to present a republican response to thetypical political problems faced by republics. That solutionrequired a departure from all models of republics known at thattime, and in particular a break with Anti-Federalist modelsthat posited heavy reliance on responsibility, understood aseither political accountability or as moral and political virtue.The Federalist challenges the Anti-Federalist notion that a"no-gap polity" is the means to safe and effective republicanism.It also challenges those who believe that virtue of people orrulers is the precondition of a republican polity. Publius doesrequire quasi-virlues of certain sorts—and thus does notrely entirely on calculating selfinterest—but these aresignificantly different from the virtues posited by earlierrepublican theorists or certain contemporary interpreters ofThe Federalist.     

Project USA: American competitiveness and what must be done to restore it

The United States today faces a loss of influence as a world power, a reduction in American independence as a policymaker, and a decline in the standard of living on which Americans have come to depend. History teaches that nations weaker and less productive than the United States can rise to become economic powerhouses and rapidly increase their standards of living. History also teaches that nations failing to recognize their fundamental problems will inevitably decline. American politicians must face what is abundantly clear: the United States is losing ground and must act quickly to reverse its course. This White Paper outlines what must be done. Information about the nation's current status must be analyzed and communicated. Incentives to improve the level of competence in government must be provided and maintained. The emphasis of government policy must be changed to reflect broad economic and technological interests as opposed to special interests. Savings must be encouraged and increased. Infrastructure must be improved Tax laws must be modified to help bring these changes about. Economic and technological issues must be elevated to the importance they require. American thinking must reflect the new realities: that the age of leadership through military power is over, that the requirements for success in the world of the 1990s and beyond require a sound and growing economy that is internationally competitive. The US can accomplish these goals only through foundation-shaking, comprehensive, fundamental changealong the lines we propose herein.This paper is the executive summary (with minor editing modifications) of a white paper that is available from Cornell University's Johnson Graduate School of Management.     

Book Review

Radical myths and superpower relations in the 1980s

A review of Mark Kaldor, Gerard Holden, and Richard Falk (eds), The New Detente: Rethinking East‐West Relations, Verso, London, 1989.

Paul Taylor and A.J.R. Groom, Global Issues in the United Nations Framework, Basingstoke, Hampshire, The MacMillan Press Ltd., 1989.

Roger A. Coate, Unilateralism, Ideology, and US Foreign Policy: The United States in and out of UNESCO, Lynne Reinner Publishers, London, 1988.

Bary Buzan, Morten Kelstnip, Pierre Lemaitre, Elzbieta Tromer, and Ole Weaver, The European Security Order Recast: Scenarios for the Post‐Cold War Era, Pinter Publishers, London & New York, 1990, pp.x. 282, £8.95 pbk, £30 hbk.     

Book reviews

Transborder Data Flows (Proceedings of an OECD Conference) Edited by Hans‐Peter Gassmann North Holland (Elsevier Science Publishers) 1985, US$74.00

Plastic and Electronic Money: New Payment Systems and Their Implications Patrick Frazer Woodhead Faulkner Limited 1985 £35

A User's Guide To Computer Contracting: Forms, Techniques and Strategies Davis, Allen, Bowman and Armstrong Harcourt Brace Jovanovich 1985, $75

Legal Protection of Computer Programs and Data C. Millard Sweet & Maxwell/Stevens 1985, £24

Piracy of Phonograms Gillian Davies ESC Publishing Ltd. 1986. 2nd edition. £17.95.

Biotechnology and Patent Protection—An International Review F. K. Beier, R. S. Crespi and J. Straus O.E.C.D. 1985, £5

Protecting Privacy in Two‐Way Electronic Services David H. Flaherty Mansell Publishing Company 1985, £23.50

High‐Tech Espionage Jay Tuck Sidgwick and Jackson Ltd 1980, £10.95     

Reviews

Terry Cox and Gary Littlejohn, eds., Kritsman and the Agrarian Marxists. (Library of Peasant Studies, No. 7), London: Frank Cass & Co. Ltd., 1984, 149 pp., £18.50.

S. G. Wheatcroft and R. W. Davies eds., Materials for a balance of the Soviet national economy 1928–1930 (with foreword by Richard Stone). Cambridge: Cambridge University Press, 1985, xxiv + 467 pp., £35.00, $59.50.

I. Birman, Ekonomika nedostach. New York: Chalidze Publications, 1983, 470 pp.

Richard F. Staar, USSR Foreign Policies After Detente. Stanford, Ca: Hoover Institution Press, 1985, xxvii + 300 pp., h/b $26.95, p/b $10.95.

John J. Maresca, To Helsinki: The Conference on Security and Cooperation in Europe 1973–1975. Durham, North Carolina: Duke University Press, 1985, xiii + 292 pp., £47.50.

Mark V. Kauppi and R. Craig Nation eds., The Soviet Union and the Middle East in the 1980s. Lexington, Mass, and Toronto: Lexington Books, D.C. Heath and Company, 1983, ix + 293 pp., £25.00.

Jonathan Haslam, The Soviet Union and the Struggle for Collective Security in Europe, 1933–1939. New York: St. Martin's, 1984, xii + 310 pp., $29.95.

Alfred L. Monks, Soviet Military Doctrine: 1960 to the Present. New York: Irvington Publishers, 1985, xii + 351 pp., $34.50.

Jeffrey D. Boutwell, Paul Doty, and Gregory F. Treverton eds., The Nuclear Confrontation in Europe. London: Croom Helm, 1985, 247 pp., £22.50.

Condoleezza Rice, The Soviet Union and the Czechoslovak Army, 1948–1983: Uncertain Allegiance. Princeton, N.J.: Princeton University Press, 1984, xiv + 303 pp. Tables. £40.40.

Vitaly Rapoport and Yuri Alexeev, High Treason: Essays on the History of the Red Army, 1918–1938. Translated by Bruce Adams. Durham: Duke University Press, 1985, xvii + 436 pp., £35.00.

Robert Conquest, Inside Stalin's Secret Police. NKVD Politics 1936–1939. Stanford, California: Hoover Institution Press, 1985, ix + 222 pp., $22.95.

Jeffrey T. Richelson, Sword and Shield. The Soviet Intelligence and Security Apparatus. Cambridge, Massachusetts: Ballinger Publishing Company, 1986, xix + 279 pp., $39.95 h/b, $16.95 p/b.

P. Marer, Dollar GNPs of the USSR and Eastern Europe. The Johns Hopkins University Press, Baltimore and London: For the World Bank. 1985, xiii + 241 pp., £20.00.

Moshe Lewin, The Making of the Soviet System: Essays in the Social History of Interwar Russia. London: Methuen, 1985, viii + 354 pp., £19.00 h/b, £8.95 p/b.

Eric P. Hoffmann and Robbin F. Laird, Technocratic Socialism: the Soviet Union in the Advanced Industrial Era. Durham: Duke University Press, 1985, viii + 228 pp. h/b £37.50, p/b £12.50.

Robert Cassen ed., Soviet Interests in the Third World. London: Sage Publications, 1985, xi + 329 pp., h/b £27.50, p/b £10.50.

Václav Havel et al., The Power of the Powerless: Citizens Against the State in Central‐Eastern Europe, Ed. John Keane, Introduction by Steven Lukes. London, Melbourne, Sydney, Auckland, Johannesburg: Hutchinson, 1985, 228 pp., £16.95.

Michael M. Boll, Cold War in the Balkans: American Foreign Policy and the Emergence of Communist Bulgaria, 1943–1947. Lexington, Ky.: The University Press of Kentucky, 1984, ix + 250 pp., £27.50.

Edward R. Girardet, Afghanistan: The Soviet War. London: Croom Helm, 1985, 259 pp., £17.95.

Henry S. Bradsher, Afghanistan and the Soviet Union. Durham: Duke University Press, 1985, viii + 384 pp., £12.95.

David W. Lovell, Trotsky's Analysis of Soviet Bureaucratization. London: Croom Helm, 1985, ix + 82 pp., £7.95.

Katerina Clark and Michael Holquist, Mikhail Bakhtin. Cambridge, Mass, and London: Harvard University Press, 1984, xi + 398 pp., £19.95.

Hans‐Georg Heinrich, Hungary. Politics, Economics and Society. London: Frances Pinter, 1986, xviii + 198 pp., £17.50.

Henry Rollet, La Pologne au XX^e Siècle. Paris: éditions A. Pedone, 1985, 603 pp., 240F.

Mieczyslaw F. Rakowski, Ein schwieriger Dialog. Aufzeichnungen zu Ereignissen in Polen 1981–1984. Mit einem Vorwort von Peter Bender. Econ Verlag. Düsseldorf‐Wien 1985. 269 pp. Index. DM. 38,00.

John Ambler, Denis J. B. Shaw and Leslie Symons eds., Soviet and East European Transport Problems. London and Sydney: Croom Helm, 1985, xix + 260 pp., £19.95.

Joan de Bardeleben, The Environment and Marxism‐Leninism: The Soviet and East German Experience. Boulder and London: Westview Press, 1985, xi + 338 pp., no price quoted.

John R. Lampe, The Bulgarian Economy in the Twentieth Century. London: Croom Helm, 1986 x + 245 pp., £25.00.

Pedro Ramet, Nationalism and Federalism in Yugoslavia, 1963–1983. Bloomington: Indiana University Press, 1984, xviii + 299 pp., $27.50.

Boris Meissner, Partei, Staat und Nation in der Sowjetunion. Ausgewdhlte Beitrage. Berlin: Duncker & Humblot, 1985, 544 pp., DM148.00.

Jiri Hochman, The Soviet Union and the Failure of Collective Security, 1934–1938. Cornell Studies in Security Affairs. Ithaca and London: Cornell University Press, 1984. 253 pp. $32.95.