I’ve just finished Who Rules? How government retains control in a privatised economy by Michael Keating. Keating’s basic analysis, with which I agree, is that governments are facing a problem of rising demands and bounded state capacity. Hence, wherever possible, they are economising on capacity, for example by using regulation rather than direct public provision of goods and services. Thus, the reforms of the 1980s and 1990s are seen, not as cutting back government but as making it more effective. An obvious inference is that, if the size of the public sector, relative to the economy as a whole, has remained roughly constant for the past 25 years, and the effectiveness of the state has been enhanced, then government is playing a larger role than before, contrary to the hopes of neoliberals and the fears of social democrats. I think this is broadly correct.
Not surprisingly, Keating has a more favourable view of the reforms, many of which he helped to implement, than I do. On almost every point, I felt he was a little too supportive of the reform agenda and a little too dismissive of the critics. Still, it’s an important contribution to the debate, and well worth reading.
fn1. Interestingly, I get quoted a few times, but mainly for criticisms of the pre-reform status quo, such as the observation that industry policy in the era of tariff protection was ad hoc and incoherent.