“Big Government” isn’t the problem, lack of accountability for corruption is.

Great article in The Atlantic this week titled, “What Americans Don’t Get About Nordic Countries”. TLDR: Scandinavian-style social welfare is a central purchasing organization that simplifies the lives of everyone by using scale to get efficiency that allows for increased productivity — it is not Soviet style socialism which encourages apathy instead of entrepreneurship.

The article encouraged me to ponder why in America does “Big Government” mean a more wasteful, less efficient, and generally worse way to do things to many? Bigger can be better, more stable, higher quality and we prove it here through our free capital markets — in general “Big Businesses” are more efficient, more stable, and overall more profitable than smaller businesses [If you disagree with this statement let’s discuss in comments and maybe I’ll write another post — I don’t want to lay out all of the foundation for it here so read the rest of the article with the understanding that I’m writing it from the perspective where this is true].

So what do the failed “Big Businesses” have in common with the inefficient “Big Government”? We have the “all in” style risk based bonus systems in the financial sector — this falls in both the accountability and corruption buckets. Outside the financial sector we have many of the major corporations of the post-war era that have had to file bankruptcy due to lack of accountability over their workers because of the union shield.

Both of those paradigms exist in the federal government. Elected representatives “know” if they take care of people they’ll get rewarded when they leave office. This is similar to the financial sector problem as the representative spends/takes risks with other people’s money and if it goes well stands to gain huge personal benefit.

On the other side of the coin the federal government is more unionized than any other industry. Even non-union employees in government aren’t going to be eligible for performance related bonus plans. Nobody is held accountable to perform above a baseline minimum, nobody is asked to do their best.

So how do we fix this? The same way we fix other places where we have a lack of accountability and corruption. Use existing laws or put better ones in place to enforce transparency and honesty. Pushing the spending from federal down to state just spreads out the corruption, localizes it, and makes government less efficient overall for the same reasons small business is less efficient than big business.

Term limits don’t fix the “all in” mentality, they may perhaps make it worse as representatives know they have a short time to push through their “payday” legislation. People that pass legislation need to be ineligible to receive financial benefit from it. This make may it very difficult to go from Congress back to the private sector but I’d rather pay them a congressional salary pension for life than encourage them to spend $100B of our money so they can get a $20M paycheck after they’re out of office.

The union issue is more complicated. In a utopian society people would do their best each day regardless of an “incentive pay for performance” plan. We sadly don’t live in utopia so people with no incentive often do the minimum required. The best way to fix this is any job with a measured baseline of performance needs to be automated. If it is too complicated to automate then people deserve some sort of performance incentive. We don’t have to fix this overnight, let the current generation of workers finish out their careers and phase them out moving forward.

If we don’t address both accountability and corruption we will end up bankrupting our country. In some states now people are paying > 50% of their income in “income tax” (NY and CA), start adding on property tax, sales tax, gas tax, and all of the other taxes and up to 2/3rds of some people’s earnings are going to taxes. We also have some of the highest corporate tax rates in the world incenting businesses to evaluate opportunities to move to other nations. Raising taxes isn’t the answer, we’re running out of room to do it — further increases run the risk of decreasing federal revenues as income earners will look for opportunities elsewhere.

So how do we implement the “selfish” Nordic style social services in America? I don’t believe it can start at the national level even though that would be the most efficient way to do it. My suggestion is start with Montana — every American that believes in the Nordic system should move to Montana, elect a new government there and get it going. The state is big enough to support a large population increase. It doesn’t have much of the baggage many other more indebted states have. It has a relatively high per capita income relative to cost of living and a currently strong economy with low unemployment. Go make it happen — double the state from 1 million to 2 million people, prove it out with 2 million and as you’re proving it out the state will grow to 10 million or more at which point other states will want to stop losing people and copy the success.

At the national political level it makes for nice rhetoric on the Sanders campaign trail but it has little to no chance of happening. If you’re voting for Bernie I encourage you to ponder the Montana idea and to encourage 1 million more Bernie supporters to join you there — that is in your control and it is possible to make it happen now. Once you’ve proven the success other states will follow.

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