Why Governments Fail – Reasons Why the Public Does Not Work

While we hope for politicians to prioritize the nation’s well-being, public officers to diligently perform their duties, and voters to make choices aligned with their interests, the presence of government failure and public choice dynamics complicates matters. These factors reveal that intricate motivations, such as self-interest and political considerations, can lead to outcomes that diverge from the common good. Understanding why this occurs is essential to unraveling the complexities of modern governance.

Here at denationalize.me, we tend to refer about taxes as immoral and the state as evil, burdens that we should try to free ourselves from. This is something that surprises many: they think that it is just a question of not wanting to pay taxes and share what we earn with the rest of society.

Certainly, even within the realm of entrepreneurship, there’s a distinct possibility that individuals may not fully grasp the comprehensive scope of the challenges posed by the State’s unfavorable treatment – a reality they directly experience. While entrepreneurs tangibly feel the impact, a comprehensive understanding of the issue might still elude them.

Today I would like to dedicate an article to explaining what the problem is with states and the way they govern us, and why, no matter how much we try to improve it, it is unlikely to get us where we want to go.

The other day I saw a very recommendable video on this subject in which an economist explained quite simply why governments fail. This video is what I want to base myself on to talk about all this.

This economist started by discussing the conflicting interests of the various factions within the government, highlighting a misalignment among three key players: politicians, public officers (bureaucrats), and voters. Government intervention exacerbates these differences, shaping the dynamics at play.

In a perfect world, all three groups would have the same goal, to make society work, to make us live in a just world (whatever that is), and to ensure that we all have what we need to live a full life.

Of course, the reality is somewhat different.

Voters strive to optimize their well-being through consumption, acquisition, creation, and altruism. They engage with matters up for vote when they perceive value. This engagement is vital for decisions regarding public goods that affect collective welfare.

The goal of politicians is also happiness. To be happy they must get 51% of the votes (or the number needed to be elected). If they fail, they will not be able to do what they want to do, and therefore they will not be happy.

Bureaucrats also want to be happy. In the case of most people who work for the state, being happy means having jobs that suit their needs. “Comfortable” jobs, so to speak.

Considering the objectives of these groups, can a government effectively craft an ideal society? However, inherent market failures and divergent interests challenge this notion.

Democratic process

Let’s delve into the democratic process. Imagine a bill where 98% of group A must contribute $10, half of which is burned, and the remainder is given to the 2% in group B. Common sense would say this won’t pass. But, consider this: voting isn’t free.

Voting demands effort. Voters maximize happiness by pursuing personal goals, investing effort only if worthwhile. To vote, you inform, decide, then act – an effort matching a $20 equivalent. Why vote against a $10 law?

Take our earlier example. Group A’s voters, with limited incentive, won’t likely engage. Group B’s voters, motivated, will mobilize for support, emphasizing their cause.

Practical case: tariffs on foreign goods. Regulations strain local firms (group B). They appeal to politicians for protection via tariffs. This benefits them but costs all (group A).

Politicians aim to secure votes. Group A isn’t passionate; Group B is. Politicians opt for vocal minority’s benefit over indifferent majority.

This common situation distorts democracy. A small group gains hugely, while a larger group loses minimally.

Politicians

OK, now say that the problem is that we just have not had any luck with politicians, that what we must do is to change that and we will have the society we all want (is there a society we all want?).

Imagine two politicians: one strives to uplift society, reduce poverty, enhance governance, curb corruption, etc. The other prioritizes winning votes, catering to party and citizens. Who leads the party and governs: the society-focused or vote-driven politician?

And this is not the only problem facing modern states. Another point that allows us to understand why politicians and, through them, governments in the end do what nobody wants is the median voter theorem.

According to this theorem, politicians, in order to be elected, try to do what the average voter wants, even though in reality, most voters want something different. So, if we had a group of nine people entitled to vote, where four people wanted to go to an Indian restaurant and four people wanted to go to a Chinese restaurant, in the end they would most likely go to a Mexican restaurant, which is where only one of the nine people wanted to go, because that is the option that the majority would be willing to accept.

Therefore, if we have two large groups, one of people who advocate having a powerful army capable of protecting the country and the other who do not want to have an army at all, in the end, according to the median voter theorem, we will have what nobody wants, a medium-sized army that is useless.

Bureaucrats

Now let us look at the public officers and people who work for the state. As we said before, their aim is not the happiness of the citizens they serve, but their own comfort.

On what basis do we say this? Well, if you have a civil servant in your family or circle of friends, or have ever dealt with one, it should be clear to you that this is the case, but let us explain it a bit more.

Imagine stepping into a shopping center – there’s ample parking, comfortable and often free. But don’t be fooled, this isn’t a philanthropic gesture for society’s benefit. It’s a strategic move to woo customers away from competitors, serving the shopping center’s own interests.

However, when you go to renew your passport, or to do any official procedure, you will find a parking area, yes, but you will see that it is exclusively for workers. If you go as a customer, you will have to find a parking space elsewhere. This is not because the bureaucrats are bad people who want to annoy customers, but because they want a comfortable job for themselves. They know that you will not be able to go to the competition and therefore they do not fear for their jobs if they do not make it easy for you.

A similar scenario unfolds on official websites. Be it a residence permit, e-certificate, fine payment, or the like – navigating these tasks often leads through a convoluted maze of pages. Now, juxtapose this experience with the seamless online purchasing or service requests on private company websites…

It is true that there are states that after many years have ended up with a more or less functional website, but the process up to that point has been far less efficient than in the private sector, and has undoubtedly involved hiring private companies to do what public officers could not or would not achieve.

Are bureaucrats by nature bad? No, of course not, but they have no incentive to improve their service. They are surrounded by other bureaucrats who just want a comfortable job, since as long as they do not do something terribly wrong, they will not have to fear that one day they will be fired.

Therefore, even if one official wanted to change things so that customers/citizens could get a better service, the other bureaucrats would be all over him/her, as they do not want to work anymore and have no incentive to make an effort to change anything.

Are people working in the private sector better people than bureaucrats? No, of course not. The point is that they do have an incentive to provide a better service. Business owners want to sell more and workers want to earn more and not lose their jobs.

Concluding

As you can see, the fact that states do not function as one would wish is not a matter of chance, nor that politicians are worse now than before, nor that there is a hidden organisation trying to lead us down dark paths. It is simply a systemic problem.

That systemic problem is precisely why we should try to keep states as small as possible and avoid centralised decision-making.

As a citizen, the best option you have is to flee from states with governments that try to control every aspect of life and go to others where you pay little tax and are allowed to make your own decisions or, directly, to be a Perpetual Traveller and not be tied to a single country.

Stopping paying taxes in a country where the state increasingly occupies more and more parts of people’s lives has two positive effects: The first is that you will no longer be subject to its rules and will no longer have to pay taxes. The second is that, by no longer paying taxes, you will contribute to a better life for the citizens who remain in the country, because by denying your resources to the government, the government will cease to grow.

If you want to stop contributing to something that, as you can see, cannot work, you can book your Denationalize.me consultation now.

Because your life is yours!