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Governments should Reform to change the Dynamic of Society

by on March 1, 2012

Governments in the UK and The Netherlands should be looking for at reforms for a dynamic solution to their budgetary problems instead of focussing just on cuts. Reforms that allow society to make more decisions using the unique knowledge of every individual  are going to benefit growth and reduce dependence on the governments coffers. 

In the Netherlands there is currently a debate on  future budgetary cuts. One of the most outspoken commentators is Coen Teulings in the FT.  In the UK, George Osborne  too, is in a “Tug of War” on the Budget. Both countries seem reluctant to cut further. In reality both governments have merely decreased an increase in government debt in the past years. In 2006-2008 The Netherlands did have a small budgetary surplus.  The UK must go back  to 2001 to find a surplus (Eurostat).

Budgetary cuts are often as presented as a binary option. It is more useful to talk about reforms that will change the way the economy is run. Some initially budget neutral examples would be:

  • increasing the income tax free amount and offset with reduced housing subsidies
  • reducing subsidies on public transport, and decreasing fuel duties.
  • Reducing employment regulation and abolishing development aid.

The net static effect is zero (or slightly less). This way both governments will be able to concede some ground to the opposition, yet the dynamic effect could be far reaching.

Work will have a higher reward ,as workers will keep more of their money and the reduced employment regulation reduces the cost of hiring, giving employers and employees the opportunity to share the difference.

As stated earlier the transport budget has been a political disaster.  This policy will allow people to find a better way to transport each other. This not only decreases the government expenditure on public transport, but could generate economic growth though innovation of new methods.

Charities are important. Funding, however, is limited. Charities should compete for funds. Individuals must decide, which charities do the best job for society and get the most funding. This will create better charities as they race to the top. It is not up to the government to decide who is the most charitable. Some charities will focus on domestic efforts other will look abroad. In time, charities may be able to take over roles of the state. The focus of charitable giving should be determined by society, not the vanity of of government officials demanding international bragging rights at political gatherings.

From → Extended Society

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