The size of government fallacy

January 8, 2008

Ben Ofosu-Appiah makes the mistake in a long article on the socio-political and economic environment in Ghana :

Again, government needs to downsize. The current size of the government is too big and costly, in fact over bloated. Japan runs the World’s second largest economy with just 17 ministers. How come a country like Ghana has over 70 ministers and deputy ministers not counting the nephews and nieces who double as special assistants? (..) The people are overburdened with taxes while government displays a great deal of fiscal indiscipline. (..) Elsewhere taxes are cut to spur growth, but in Ghana, an economic team that lacks fresh ideas always look up to increased taxation as a way of generating revenue. Government needs to simplify taxes, lower tariffs on imports, and clear away red tape to encourage entrepreneurial skills. Too much taxes stifle growth.

It’s far from being a frindge opinion. Ugandan journalist and activist Andrew Mwenda has similar views in his infamous TEDTalk speech (for some reason, I can’t embed the video). His argument about government waste in Uganda is based on a few facts:

    – 25% of the government budget goes to “public administration”
    – 70 cabinet ministers
    – 114 presidential advisors
    – 81 units of local government
    – 333 members of parliament
    – 134 commissions and semi-autonomous government bodies

The fact is, in Africa, cabinets do tend to be extraordinarly large. 40, 50 ministers is the norm with many countries having more. The notable exception (apart from loose federation that is Comoros where only 9 ministries cover all federal competences) being Africa’s growth and governance success story: Botswana and its 14+3 members cabinet.

Of course, years of budgetary crisis and payment emmergencies, millions in aid and debt without much to show for it have made us all wonder where the money went. And since anyone on the continent can tell you long stories of state largesse, especially at the highest level a narrative based big governments and big cabinets is appealing.

What makes it even more appealing is that Botswana is a success story and even bigger and richer countries like Japan or the US (or even France and the UK) are indeed governed by small cabinets. So yeah, Mwenda, Ofosu-Appiah and many other think that growth, government expendure and cabinet size are perhaps correlated.

The problem is that such correlation simply doesn’t exist because government are usually a bit bigger than Cabinets.

Take a look at goverment expendure as a percentage of GDP which in my opinion says a lot about the importance of government in the economy.
According to the Heritage Index of Economic Freedom Ghana and its 50 ministers stand at 33% which is slightly lower than the USA’s 36% or Japan’s 37% but higher than the 23% of GDP spent by Uganda’s 70 ministers and much lower than Botswana’s wooping 43% (and just for your information, Zimbabwe is 25%). And the tax revenue as a percentage of GDP ? 25% in the US, 25% in Japan, 22% in Ghana and then 11% in Uganda and 40% in Botswana.

While the 2 to 1 ratio between government spending and tax revenue in Uganda definetly support Mwenda’s narrative about Aid and free-lunch politics, the fact remains that Uganda’s government is a low spender by international standards. And Ofosu-Appiah’s comparision between Ghana and Japan is problematic as Ghana is neither spends nor taxes more than Japan. It’s not particularly more fiscally irresponsible either (though the 15% inflation has to come from somewhere).

The focus on the number of ministers is indeed strange as it says nothing about the size or the cost of civil service or the budget. And I mean, when one even implies that technocratic Japan could be an example of limited government, you have to be suspicious.

Yet, the size of cabinet is not totally irrelevant. While it says nothing about expendure, it does say a lot about affectation of those ressources. Mwenda’s best argument is the fact that a quarter of Uganda’s budget goes to what is basically overhead costs. Now that could be related to the size of the cabinet.
Basically, when you take a closer look at the ugandan cabinet, you see a lot of doubles and a lot of specialization. A president, a Vice-President, A Prime Minister and 3 deputy Prime Ministers is a bit much, especially when there’s a Minister for the Presidency and (*takes a long breath*) a Minister-for-General-Duties-Office-of-the-Prime-Minister. At best those are people paid to do nothing. At worse, they are actually doing something: producing a lot of bureaucratic white noise.
The other issue with such configuration is the political appointees to technocrat issue. In short, when Japan limits its cabinet to 14 ministers, it actually limits the number of non-civil servants in the government. Everyone below the ministers are professional technocrats. And to an extend when you have a Minister of Roads & Highways, a Minister of Ports, Harbors, & Railways, a Minister of Transportation, a Minister of Aviation like Ghana does, instead of just a Minister of Works & Transportion like in Botswana that means a lot of political micromanagement and probably serious coordination issues.
And even assuming the political appointees are technocrats, a new ministry means more investment at the top level, that is a building in the capital, a ministerial staff, cars, whatever. Each of those dollars is one that doesn’t go to doing real government work that the population actually needs.

But see, the issue is that talking about inefficient government doesn’t hit the same way. After all, what could happen is your government actually listenning and getting its thing together. And when you’re a professional barker or you have your own political ambitions, that’s not acceptable.

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6 Responses to “The size of government fallacy”

  1. omodudu Says:

    You are doing the same as they are. Misuse of statistical arguments. Huh. Cross country comparisons are misleading, in my opinion never ever use them. Nice attempt however.


  2. […] Shakara: Not that I agree with the methods, but it is definitely worth reading. […]

  3. Ben Smith Says:

    Shakara:

    I read my Ofosu-Appiah’s article on ghanaweb and by no means was it a comparison between Japan and Ghana. There’s no basis of comparison between the two countries….What Mr. Ofosu-Appia did in his article was to draw on a simple fact in Japan and apply it in the Ghanaian situation. Japan can afford to have 100 ministers with its economy but it has just 17. Does it make sense to you that Ghana has a Ministry of And Minister of Roads & Highways, a Minister of Ports, Harbors, & Railways, a Minister of Transportation, a Minister of Aviation instead of just a Minister of Works & Transportion like in Botswana ? This is purely a waste of scarce national resources and job for the boys policy.Everyone eating big from the state coffers because they wield power….that is patronage at its worst and such duplication of functions create confusion, coordinating problems, inefficiency, and unhealthy rivalry. Kenyan assistant ministers complained they had no jobs to do and they were forced to read Newspapers but it took them 4 years to realize this simple fact. Now wonder we are where we are in our development efforts in Africa.

  4. aflakete Says:

    I don’t think Japan can afford 100 ministers either.

    My thing is Ofosu-Appiah sort of makes the wrong diagnosis. Yes, the size of the cabinet is an issue, Yes it’s bad. Yes, to quote you: confusion, coordination, innefficiency, rivalry, waste, patronage etc..
    But my point was that it’s not a general cost issue, it’s not a size of government issue. It’s how that government allocates those ressources within itself.


  5. […] examines the question and argues the need for the dramatic downsizing of African governments. Shakara then offers an interesting counterpoint. Sphere: Related […]


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