You are on page 1of 16

European Journal of Political Research 16: 36s-380 (1988)

0Kluwer Academic Publishers. Dordrecht - Printed in the Ncthcrlands

The growth and decentralisation of the modern democratic state


L.J. SHARPE
Nuffield College, Oxford, U K

Abstract. That modern democratic governments have grown is beyond dispute, as is the fact that this growth has promoted intense misgivings amongst a number of writers, not least amongst the followersof Hayek. But an examination of the growth in governmental activity reveals that it is the sub-national level of government which has absorbed a greater share of governmental growth than the centre. The author continues by exploring a number of reasons for this development and concludes that the most likely explanations lie in the continued urbanisation of most western countries; the associated need for more governmental services; and in the possibility that taxpayers' resistance to tax increases is lower at the sub-national than it is at national level.

The growth of western government One of the few indisputable aspects of modern democratic government has been its growth. Such growth has been as universal as it has been rapid. No state in the so-called advanced industrial democracy (AID) group has escaped it, and in some cases expansion has been nothing less than dramatic. In the United States, for example, government absorbed less than 7 per cent of GNP in 1900. In the UK and Germany the comparable figures (in 1890) were 7 and 12 per cent (Brennan and Pincus 1983: 33). One of the problems immediately confronting all discussions of government growth however, is definitional; what do we mean by growth in this context? And how do we measure it once we have identified its indicators?' Do we mean the growth of a government's functional scope or its power, or itspersonnel, its expenditure, or the outputs and outcomes of government activity? Probably in an ideal world we need to consider all of them. However, some of these measures of government are difficult to conceptualize let alone measure, and even data on personnel, which it is possible to measure, can be very ambiguous simply because it is so heterogenous. Moreover, it is unlikely to be commensurable as between different countries. The generally accepted measure of government growth has therefore become largely confined to expenditure. It must at the outset, however, be emphasized that expenditure as a measure of government presents problems simply of what is to be measured. Most studies exclude national public corporations and other governmental bodies that are selling their output in the market, but it is difficult to justify such exclusion if

one is seeking the true extent of a government's influence or power. Even if that hurdle is ignored there are technical difficulties in arriving at a satisfactory money measure. There are also other problems (Peters and Heisler 1983). For example, inefficient governments can increase their expenditure without any real increase in that government's inputs. Alternatively, significant increases in government capacity can occur which have no expenditure effects, or effects that are out of all proportion to the increase in costs entailed. Is an increase in capacity an increase in government perse? Clearly in one sense it is, but governmental growth of this kind obviously will not be picked up in expenditure figures. Provided such deficiencies of the expenditure method of measuring government are born in mind and the difficulty of knowing how far cross-national data is strictly comparable, there exists fairly clear evidence that government as a whole in almost all western democracies has been growing during the post-war period, even during the late 1970s following the post-oil shock recession. Using total government expenditure as a percentage of national income as the measure, Warren Nutter has examined the expenditures of 13 western democracies over the period 1950 to 1974 and has found that, whereas the median percentage of national income absorbed by government for the sample of countries was 34 in 1953, by 1974 it was 49 (Nutter 1978). In short, government has increased for the sample from about a third to half of national
Table 1. Changes in general government expenditure as a percentage of G D P , 1970-80 and 1975-80.
I97(!-80 1975-80 +20.09

Sweden Belgium Japan Italy Spain Germany UK Norway Australia France Switzerland Austria Finland Canada USA Mean value

+15.10
+11.40 +10.85 +10.32 9.56 9.00 8.77 8.55 8.38 8.38 8.35 + 6.97 5.49 + 3.05 9.62

+ + + + + + +
+

Sweden Spain Belgium Japan France Norway Austria Australia Italy Finland UK Switzerland Canada USA Germany Mean value

+ 12.57 + 7.X6 + 6.98 + 4.54 + 3.87 + 3.28 + 2.89 + 2.76 + 2.74 + 2.10 + 1.16 + 0.91 + 0.87
-

0.21 3.46

- 0.39

Source: Newton and Karran (1985: 4).

367 income. This is the median increase; within the sample there is quite a large range. In 1974 the smallest government absorbed only 27 per cent of national income, the largest 62 per cent. But the trend is unmistakable and the range in 1953 was, lowest 19 per cent and highest 44 per cent. As Nutter concludes, Wherever governments were once small they have become bigger. Nothing is so rare as a shrinking government (Nutter 1978: 1). It must be noted in relation to Nutters conclusion, before we proceed further, that since the mid-l970s, that is to say the period not covered by his analysis, there have been concerted attempts in many western states to reduce the rate of growth of government expenditure and even to reduce its absolute size. Although the first policy seems to have succeeded to some extent in most countries, in the two western states where the objective of absolute reduction has been at least the most vigorously proclaimed - the USA and the UK government expenditure has still grown, although at a much slower rate. For a selection of 16 AIDSthe mean rate of growth for the 1975-80 period was about a third of that for the preceding decade, as Table 1 reveals. The reason why this decline has not been even greater seems to be that the post-oil shock recession increased unemployment pay and social security generally. Since, however, transfers constitute a relatively weak measure of government in any sense, for they are usually merely cash payments that are largely spent in the market sector, there is a case in this instance for excluding them and if this is done for
Table2. Changes in general government expenditure minus transfer payments, as a percentage of GDP, 1970-80 and 1975-80.
1970-80 Sweden Belgium Australia Germany UK Finland Austria Spain Japan Italy Switzerland Norway France Canada USA Mean value
~ ~~

1975-80 +7.47 +4.88 +4.50 +4.45 +3.84 +3.82 +3.13 +2.79 +2.57 +2.35 +2.35 +1.91 +1.86 +0.33 + 1.07 +3.01
~

Sweden Spain Belgium Australia Finland France Italy Austria Switzerland Japan Germany Norway Canada UK USA Mean value

+5.23 +2.07 + 1.77 +1.20 +1.09 +0.89 +0.69 +0.61 +0.21 -0.05 -0.44 -0.45 -0.46 -0.54 -0.84 +0.73

Source: Newton and Karran (1985: 5).

368
the two periods - that which includes the pre-recession period 197S80, and the wholly post-recession period 1975-80- then there is a small reversal of the post-recession trend for 5 of the 16 states where total government expenditure actually declines in the post-recession period as Table 2 reveals. Yet the most striking feature of Table 2 is not the marginal decline of the 5 in the last period, but the continued increase in governments' expenditure despite what by post-war standards was a very sharp increase in unemployment, a decline in economic activity generally and a consequent decline in tax revenues, to say nothing of the growth in most western countries of increasing governmental and public scepticism about the wisdom and efficacy of continued public expenditure increase at the pre-recession rate. There are, it seems, very powerful forces at work making for government growth that may be independent of short-term government action and of public desires. For many AIDS the public sector already absorbs the lion's share of GNP. If we project the rate of growth of the public sector, averaged out over the post-war period, say, so as to include the much slower rate since the mid-1970s. we still cannot escape the conclusion that at some time in the twenty-first century there will be very little activity left within most democracies that is not derived to some extent from the state.

11. The anti-statist reaction

The zero-sum gume version This is the prospect that has exercised the imaginations and stimulated the intense misgivings of many. Such misgivings may be said to be at the core of the classical liberal view of the state. In more modern terms the conclusions drawn from state growth, while perhaps less enamoured of unremitting laissez-faire, also tend to see the state in predatory terms and are likely to be the more lurid and momentous depending on how far the relationship between government and individual autonomy is seen as a zero-sum game. Where it is so seen every expansion of government is an automatic diminution of individual freedom and such an assumption means that we must be heading inexorably to the totalitarian state. Orwell's 1984 was n o t wrong. as it were, merely premature. The view that the state is predatory rather than beneficial for the individual is deeply etched into the political tradition of western democracy, especially perhaps in its Anglo-Saxon manifestations. It is also part of the daily fare of most non-socialist western parties and politicians. In practice it is rare for the anti-statist claim to be formulated in the precise terms of a zero-sum game, but some of the arguments it deploys imply relationships that are very close to a zero-sum game since distinctions are very rarely drawn between different types of state activity in relation to the individual. The fairly obvious fact that

369 some state activity directly promotes individual liberty is also usually ignored. Friedrich von Hayek must stand in for a vast army of protagonists of the anti-state thesis, although as something of an extremist he includes an extra dynamic element whereby there is an acceleration effect in the curtailment of individual liberty once the state reaches a certain scale: We can unfortunately not indefinitely extend the sphere of common action and still leave the individual free in his own sphere. Once the communal sector, in which the state controls all the means, exceeds a certain proportion of the whole, the effects of its actions dominate the whole system. Although the state controls directly the case of only a large part of the available use resources, the effects of its decisions on the remaining part of the economic system become so great that indirectly it controls almost everything. Where . . . the central and local authorities directly control the use of more than half the national means . . . they control indirectly almost the whole economic life of the nation. There is, then, scarcely an individual end which is not dependent for its achievement on the action of the state, and the social scale of values which guide the states action must embrace practically all individual ends (Hayek 1944: 60-61).

111. The relative decline of the centre

When we unpack government growth, however, in terms of level of government it is clear that there may be grounds for arguing purely in power distribution terms that Orwell is just as wrong for the twenty-first century as he was for the twentieth, for since the beginning of the Second World War, or thereabouts, the sub-national level of government in western states has tended to absorb a greater share of governmental growth than the centre. In short, as measured by expenditure, the 40 years since 1945 has tended to mark a process of decentralization rather than centralization of the modern democratic state. It is to a discussion and possible explanation of this phenomenon that the bulk of this paper will be devoted. The first aspect of this decentralization process to be noted is how surprisingly understudied it is. Not only does it not fit most of the explanatory theories for governmental growth, but the fact of this decentralist trend has barely been recognized. Table 3 illustrates the increasingly clear decentral inclination of government over the period 1950 to 1973 for the whole of the AID bloc, which comprises 22 countries in all. It will be seen that in only two (Ireland and Switzerland) did the central share of total government not consistently decline over the period. In one case - Luxembourg - the centres share more than halved and it came close to doing so in Austria. The median decline

370 of the centre's share for the period is 16.1 percentage points. The decentralist expenditure trend so evident for the period 1950-1973 appears not to be so marked for the 1970s, at least up until 1982, as Table 4 makes clear. This Table does not cover, as Table 3 does, the whole of the AID group, but a sample of 14 of them for the period 196CL1982 and compares expenditure growth rates of central and sub-national government at 1986 prices. It clearly reveals that for the 14 countries the rates of growth of expenditure at the two levels have been much closer than for the earlier period covered by Table 3. In half of the 14, the central growth rate has actually exceeded the sub-national, and the median (Belgium) is precisely zero. However, as Gould and Zarkish (1986: 35) emphasise, even the more modified growth of the sub-national level in the 1970s is surprising given that central expenditures throughout the West comprised such a high proportion of transfers - on average in excess of 50 per cent - which have certainly been the fastest growing item of all in public expenditure generally over the period.

Table 3. Central government share in general government expenditure


Country Australia Austria Belgium Canada Finland France West Germany Greece Iceland Ireland Israel Italy Japan Luxembourg Netherlands New Zealand Norway Portugal Sweden Switzerland UK USA
a

1950 79.9 73.0 66.9 54.7 61 .7a 35.2 77.8 67.1 66.8
-

1960 70.8 48.8 55.1 58.0 54.5 53.7 24.2 61.3 61.9 74.3 82.7 48.2 31.7 47.0 35.3 85.5 69.5 75.9 45.1 42.7 64.6 53.3

1965 57.99 45.5 51.1 50.0 53.5 49.2 26.7 55.8 55.0 65.2 80.2 43.7 29.5 44.3 28.8 82.2 69.3 75.0 42.6 51.6 57.4 50.2

1970 56.6 43.1 49.8 42.2 48.3 47.1 22.9 59.4


-

1973 55.6 37.1 49.0 41.9 47.9 45.6 20.9 66.1 76.4 39.9 35.4 40.0b 28.2 81.5 74.0 70.1b 32.0 56.3 38.3

58.0 56.0' 86.2d 48.3' 87.0 85.8" 79.1 54.3 28.1 72.5 54.4

77.6 82.0h 40.6 30.2 39.6 30.9 82.8 75.6 77.7 33.2 46.1' 55.1 42.8

1953 figure; 1972 figure; 1955 figure; This estimate is not strictly comparable with those for 1961 on; ' 1969 figure. Source: Foster et al. (1980: 127-128).

37 1 Moreover, as we have noted, if expenditure is a less than perfect measure of government activity, transfers are the least perfect aspect of expenditure for reflecting any aspect of government, largely involving as they do merely cash payments that are mainly expended in the market sector. For most transfers there is not even the exercise of discretion by government. For these reasons, Table 5 provides expenditure growth rates for the same group of states for the same period but with transfers excluded. It shows that sub-national government expenditure for goods and services grew faster than national government expenditure in all 14 countries and the median difference is 2.5 percentage points. In other words, when transfers are excluded, the sub-national level has a rate of growth that is comparable with the rate for the earlier period when central transfers were far less important. We may conclude that there has been an unmistakable and marked decentralist shift in the pattern of public sector expenditure in the democratic state over the whole period since 1950. Whether this reflects a comparable shift in power must remain problematic, if only because of the inadequacy of financial statistics as a measure of government discussed at the outset. Nevertheless, whereas finance may be an imperfect

Table 4. Annual percentage growth rates of total expenditures on goods and services and transfers in current prices, by level of government 1960-82.

Country Country

Total expenditure growth rates, % per annum Central government


16.7 12.8 12.4 14.7 12.2 9.0 23.5 27.4 17.1 14.2 15.1 8.9 13.9 9.5

State/local government
14.9 12.8 15.2 16.6 15.1 9.6 23.3 24.5 15.1 13.1 14.7 10.1 13.2 10.3

Australia Belgium Canada Finland Franceh Germany (FR) IrelandC Italyd Japand Netherlands Sweden Switzerland UK USA

Data availability:a Only 1962-1982; Only 1961-1982; Only 1970-1981; Only 1970-1982; Only 1968-1982. Note: All growth rates are compound. Source: Gould and Zarkish (1986: 34).

372
measure it does not follow that it bears no relationship to power; the relationship is imperfect but not non-existent. So it is also possible to claim that there has been some, probably considerable, decentralist shift in government in the modern democratic state. This is a trend that has not only been largely unsung but, as we have noted, under-explored as well, so it is impossible to do any more than offer the most tentative checklist of possible explanations. But before doing so two aspects of this decentralist trend need to be made. First, a note of caution must be struck in relation to the figures in Tables 3, 4 and 5. There are no international standardized procedures for allocating expenditure between levels of government. In some cases, for example, grants in aid from the central level to the sub-national level may be counted as central expenditure, in others as sub-national expenditure. It is impossible to rectify this possible deficiency here; however, given the unmistakable decentralist trend in almost all countries, it is unlikely that its origin lies in the deficiencies of the data, although it could affect the degree of decentralization in particular instances. In any case it is not clear what role a grant in aid plays in relation to the distribution of power between different levels of government. Is the capacity to undertake tasks that a grant confers, which hitherto were beyond the means of a sub-national level, an example of

Table 5. Annual percentage growth rates of expenditures on goods and services in current prices, by level of government, 196&1982.*
Country Country Total expenditure growth rates, % per annum Central government Stateilocal government

Australia Belgium Canada Finland France Germany (FR) Ireland Italy Japan Netherlands Sweden Switzerland

UK
USA
* Notes as for Table 4. Source: as for Table 4.

13.6 11.5 9.5 12.6 12.3 7.1 22.2 20. I 12.5 10.2 10.8 6.6 12.6 7.5

15.2 12.4 13.4 16.3 13.6 9.6 23.7 23.9 14.3 11.1 14.5 9.1 12.7 10.1

373 central or decentral power? Does he who pays the piper automatically call the tune? These are imponderables and would, at the very least, require prior agreement on the definition of autonomy and control before any firm conclusions can be drawn. It is the likelihood that the decentralization of expenditure does reflect decentralization of governmental capacity that leads us back to a discussion of the zero-sum game variant of the anti-statist thesis, that is to say, its extreme version which sees every extension of the public sector as an automatic diminution of individual liberty, a diminution that according to Hayek also accelerates beyond a certain level. If a sizeable part of western state growth has occurred at the sub-national level, can the zero-sum game thesis be sustained or, indeed, some of the more restrained variants of the anti-statist thesis? Can a local council be as inimical to individual liberty as the central state? For some adherents of the thesis it clearly can, for it will be remembered that Hayek, in the quotation given earlier, made no distinction between central and local government as being inimical to the individuals interest. However, in some democratic traditions and ones Hayek usually admires, for example the American, individual liberty and local, or sub-national, autonomy are run together and the territorial division of power is seen as being part and parcel of liberty (see Sharpe 1970; also Sayed 1966). Corporate and individual liberty are a seamless web so that an extension of decentralized power cannot possibly be inimical to individual liberty. Such a direct association of sub-national autonomy with individual liberty may be a peculiarity of the American version of democracy, but it must have echoes in all conceptions of individual liberty in a democratic state if only because the role of sub-national government in most countries impinges on a smaller fraction of the citizens fundamental rights and is, further, much less likely to be involved in those coercive instrumentalities of the state that can directly constrain his autonomy. Above all, the trend, by definition, infringes one of the most important emblems of anti-statism, namely the centralization of power. Moreover, in positive terms it can be argued that because the seat of power of sub-national government is likely to be more accessible to the citizen he can defend his autonomy better than if all state functions were centralized. He can also defend his interests better at the sub-national level since, by definition, his vote will count for more the smaller the polity in which he votes. His chances of taking a direct hand in his own government as an elected representative is also correspondingly greater too. These conclusions on the relationship between decentralized public power and individual liberty, albeit brief and necessarily sketchy, are however, sufficient as to render the relative lack of interest in the decentralization of the modern democratic state even more mysterious, especially, it must be said, by the anti-statists, especially those who embrace the zero-sum thesis. It is almost

as if, like many pessimistic theories, it is more important that the object feared retained its claimed pristine awfulness than if it can be shown to be somewhat less awful. It is difficult to escape the suspicion that the anti-statist thesis is directed not so much at alleviating the individuals freedom that it defines the state as diminishing, but rather as providing arguments for restricting the state for other motives. Be that as it may, there remains the question that decentralization poses which was cited earlier namely, why has it occurred?

Causes of sub-national growth Gould and Zarkish (1986: 37) offer the following seven possible explanations: (i) Public services have been transferred from central to sub-national government. (ii) The existing functions of sub-national government have been subject to continuous expansion while those of the centre have not or have contracted. (iii) There has been less control of sub-national expenditure growth as compared with national government. (iv) The utility maximizing proclivities of bureaucrats are greater at the subnational than at the central level. (v) Sub-national government is more susceptible than national government to public pressure for expansion. (vi) The relative price effect is greater at the sub-national than at the national level because the former is more labour intensive. (vii)There is less voter-induced constraint on sub-national government than central government because the former does not have to raise all of its own revenues via taxation but has access to central grants. Gould and Zarkish only examine two of these possible explanations: the second on sub-national service expansion and central decline, and the last on the differential revenue constraint effect. Their, albeit very brief, conclusions on the former are straightforward; it seems to be broadly correct at least in relation to sub-national expansion, for in most of the countries examined the sub-national levels have been allocated the lions share of those public services that have expanded rapidly over the period such as education, health, social welfare, transport and communications. It is possible that if sufficiently accurate data were available on the functional distribution between the centre and sub-national levels this functional explanation would be re-enforced by the negative effect of central functional decline. For example, it is possible that at the earliest phase of the post-war period, the centre was still functionally overloaded as a consequence first, of defence, and secondly of the very much greater powers that were given to the central state during the war that were

375 retained for a period during peace time. Thus the decline in central expenditure is to some extent an aberration. By contrast, at precisely this stage the sub-national level was in many West European states equally likely to be immersed in the massive task of refurbishing the urban infra-structure following the depredations of aerial and other bombardment thus inflating its overall expenditure. Appealing as this hypothesis may be, it has to be conceded that the data, very broad gauge though they are, do not offer much that would confirm their validity. Those countries that have the highest growth rates of sub-national expenditure for the earlier period (see Table 3) are Luxembourg, where its share more than doubled between 1959 and 1972, and Austria, where it almost doubled. Both, it is true, were in the thick of the Second World War, but the third and fourth highest sub-national growth figures were recorded by Australia and Sweden neither of which suffered physical damage of any consequence. The second hypothesis that Gould and Zarkish were able to throw more light on was the differential revenue constraint effect arising from the fact that all sub-national governments are in receipt of central grants. For all 14 countries, Gould and Zarkish (1986: 38) regressed the growth of sub-national expenditure on the growth of locally-raised revenues and central grants over the period 1960-1982. The growth of central grants was revealed to be the most powerful explanatory variable for most countries. Sub-national growth, it seems, looks as though it may be in part a function of sub-national government not having to face a tax-paying electorate for all of its expenditure. But the story is not quite so simple as that since sub-national taxation systems in the 14 country sample, as Gould and Zarkish also discovered, were not very buoyant. This meant that, unlike the progressive income tax - often the main source of revenue for central governments - which generates disproportionately more revenue automatically with economic growth, sub-national tax systems are required to raise tax rates in order to increase revenue, which is an overtly political act and therefore more likely to incur public ire. Central grants, then, may be regarded as being to some extent a counterweight to the greater extent of revenue constraint faced by the sub-national level when it seeks to increase its own taxes, rather than an opportunity to spend more freely. In any case central grants are usually designed with a redistributive intention so that they tend to be higher the poorer the recipient sub-national unit. As poor areas their ability to raise local taxes will be correspondingly more difficult than in rich sub-national areas even when they receive substantially more central subventions. In other words the net effect of increasing central grants is unlikely to lead to a commensurate decrease in the alleviation of voter resistance to local taxes. Gould and Zarkishs five remaining possible reasons for the clear decentralist expenditure shift in the modern democratic state lie outside our scope since

they require extensive comparative empirical verification. However, another likely explanation for the more rapid growth of sub-national expenditure is the rapid and continuous urbanization of most western states over the post-war period. There can be little doubt about the extent and universality of urbanization throughout the West over the post-war period. During the 1970s alone the number of people living in urban areas in OECD countries increased by 17 per cent, or 83 million. For comparative global figures, for the period 1970-80, see Table 5. That such changes in the sociogeographic structure of modern societies raises governmental costs is suggested and to some extent indicated by a number of studies (see Fabricant 1952, Brazer 1959, Haider 1976; also Sharpe 1981, Newton et al. 1981: Ch. 8). Precisely why urbanness raises decentral expenditure is much less apparent. Three of the more important likely reasons would seem to be that urban government: provides more services; incurs higher costs for the same services; and provides better services. The possibility that urban government provides more services than rural government seems to have four likely causes. First, there is what may be called the urban dependency factor. This is derived from the likelihood that urban dwellers need more government than their rural counterparts. For example, in theory at least, a farmer can supply his own water, sewage disposal, refuse disposal, recreation and parking space; whereas no urban dweller can even contemplate such self-sufficiency. Secondly, urban dwellers will be provided with certain public services because only in densely populated areas does a viable catchment area arise to make certain public services feasible. The fire service seems to be of this type in the sense that, whereas it is not excluded from rural areas, its quality is minimal because to provide a fire service to urban standards in an area where population is scattered would be prohibitively expensive. More obviously, such a community could not support colleges of further education, rapid transport systems, reference libraries, sports centres, museums, specialist hospitals, and municipal theatres. Large city centres, by contrast, can provide such facilities because they have relatively

Table 6. Growth of urban population in OECD countries, 1970-80.


Millions Mediterranean North America Japan Northern and Western Europe Australia and New Zealand All OECD countries
Yo

21
20 16 15 2 83

24
19

21 1 0 15
17

377 large populations living in close proximity and they also tend to have a higher per capita tax base than rural areas. The third factor making for more government in urban areas, that is to say areas with high population density, is the need to manage and control the consequences of people living in close proximity to each other. The higher the density of population the greater the likelihood of negative externalities being generated by each individual, household or firm. In order to minimize the impact of such externalities government has to step in to manage and regulate the production and flow of such externalities by means of, for example, land use planning controls, building regulations, traffic management, parking and general policy. There remains one further feature of urban areas that merits our attention as a possible cause of higher decentral collective expenditures. This is the honey pot effect; that is to say, the tendency for urban areas, and in particular big cities, to attract and retain that strata of the population which makes disproportionate demands on collective consumption services. Such groups include, in particular, the old and single parent families, the indigent and the out of work generally. The second possible reason why urbanization may entail higher local expenditure is that urban government may, service for service, be more costly than rural. Labour costs, for example, are usually higher than average in urban areas, expecially in big cities. Also there may be diseconomies of scale. Urban units of government tend to be comparatively large; the government of New York City, for example, is second only to the US Federal government in scale and expenditure. The Greater London Council, before it was abolished, was larger in population terms than half the member states of the UN. The third possible cause of higher expenditure in urban areas - that such areas provide better services - also seems plausible given that cities also tend to attract higher qualified staff than rural areas, and such staff not only cost more but also tend to set higher standards, including insistence on the full panoply of all the most modern technical apparatus. Finally, the greater prevalence of socialist or labour dominated governments in urban areas may also lead to better services because such governments, as a conscious act of policy, seek to spend more on some public services. It is likely that some of the undoubted extra governmental costs that urbanization entails is met directly by the centre, but the bulk will almost certainly be spent at the local level. So to conclude the discussion of the urbanization effect it would seem that it is as likely a candidate for sub-national growth as the differential revenue constraint and functional allocation. Again, however, it must be emphasized that all explanations at this stage must be highly tentative. The remarkable post-war decentral shift in public sector expenditure that we have been discussing needs much more detailed attention than is possible in

378 this article before causes can be specified with any confidence. With that caveat in mind, there is one further possible cause of sub-national expenditure growth that merits attention. This factor has its origins in the increasing popular dislike of taxes arising from the fact that the public sector in most countries has tended to grow at a faster rate than the economy. Since 1950, the public sector has grown five times as much as individual take home pay in Sweden, in Italy by four and a half times, and in the US, Britain and France by almost three times (Rose and Peters 1978: 62). Such growth has not been wholly assuaged by the fiscal dividend simply because fiscal drag becomes progressively less significant as the public sector grows as a proportion of GNP. Moreover, its possible moderating effect has to be set against the fact that the proportion o f the electorate in the income tax system (still the largest source of revenue for many countries) has increased dramatically during the post-war period. In 1950 a British head of household, for example, did not pay any income tax until his earnings reached the national average wage. By 1975, however, he began paying taxes at less than half the average national wage (Rose and Peters 1978: 98). All things considered, we may assert with some confidence that the centre in most western states has been under increasing revenue constraint as a result of such an extension of the tax paying public. That being so, governments had, broadly speaking, three strategies they could adopt in order to ease the political pressure they were under. First they can simply attempt to cut expenditure. This strategy is more easily said than done since the deflationary effect of the cut in the economy is likely to lead to an increasing burden on the states role in the social welfare and income maintenance sectors. A second option is to lower the general level of tax visibility by shifting to indirect taxes and the growth of VAT throughout the West demonstrates that this is certainly a popular move among governments. The third option open to governments is to transfer some of the functional burden. and perhaps some of the fiscal burden, to another level of government. In short, one explanation for the decentralization of the modern democratic state is simply the desire of the centre to escape the political bind it finds itself in as a result of the publics tendency to favour discrete benefits (say public education, health services), over the general disbenefits of higher taxes. It is unlikely that the consciously directed growth of services at the sub-national level rests only on the centres need to deflect taxpayer dissatisfaction. More general problems of overload, whether they be derived from the executive bottleneck difficulty or a more ideological motivation to decentralize derived from a reassessment of the welfare state, are likely to have played a part as well. Nevertheless. it is perhaps one of the distinguishing characteristics of modern democracy that a fundamental change in its character has at least some of its origin in the mundane world of electoral tactics.

379

Conclusion To sum up briefly, in expenditure terms the modern western state has certainly been growing over the past forty years. But whether the growth spells a decline in individual liberty to the extent that is often claimed by the liberal anti-state school is problematic. Certainly in most western states the largest element in that growth has occurred at the sub-national level which by definition cannot form part of a centralization process. Nor can it be simply equated with central growth, whatever interpretation is put on it in terms of diminishing individual liberty. However interpreted, sub-national growth also poses the question as to why it has occurred. The list of likely causes is certainly lengthy and Gould and Zarkishs suggestion that two possible candidates are, first, that subnational services have grown whilst central services have diminished, and, second, that tax payer resistance to governmental growth is less at the subnational level, seem plausible. However, their second cause may be less likely than Gould and Zarkish assume because in some countries grants do not necessarily diminish sub-national tax effort. A further likely cause of faster sub-national expenditure growth is urbanization, expecially the strong likelihood that as population density increases, so more government is required. Urbanization may also raise the cost of service provision and tend to raise the quality of service as well. The final possible cause of faster decentral expenditure growth is what may be called the off-loading of the central tax burden. By allowing the sub-national service burden to grow, the centre may divert some of public disenchantment with the growth of taxation away from itself. We are back, in short, to the world of electoral tactics.

Notes
I . See Taylor (1983) for a discussion of growth measurement. 2. For a discussion of the technical problems of measuring the public sector, see Bird (1979, Appendix A).

References
Bird. Richard M. (1979). Tlle Growth of Government in Canada. Toronto: Canadian Tax Foundation. Brazer, H. (1959). C i t y Expenditures in the United States. New York: National Bureau of Economic Resources. Brennan, Geoffrey and Pincus. Jonathan (1983). The growth of government: do the figures tell us what we want to know?,in: Taylor. C.S. (ed.). Why Governments Grow. Beverly Hills: Sage. Fabricant, Solomon (1952). The Trend of Government Activity in the United States Since 1900.

380
Washington: National Bureau of Economic Research. Foster. C . D . et al. (1980). Localgovenimenffinunce in a unitary state. London: Allen & Unwin. Gould, Frank and Zarkish, Froozeh (1986). 'Local government expenditure and revenues in western democracies'. Local Government Studies JaniFeb. Haider. Donald H. (1976). 'Fiscal Scarcity: A New Urban Perspective', in: Masotti. Louis M. and Linberry, Robert L . (eds.), The New Urban Politics. Camhridge: Ballinger. Hayek, Friedrich A . (1944). The Road to Serfdom. Chicago: Phoenix. Newton, K. et al. (1981). Balancing The Books. London: Sage. Newton. K. and Karran, T.J. (1985). The Politics of Local Expenditure. London: Macmillan. Nutter. G . Warren (1978). Growrh of Government in the Wesr. Washington: American Enterprise Institute. Peters. B. Guy and Heisler, Martin 0. (1983). 'Thinking About Public Sector Growth: Conceptual, Operational. Theoretical, and Policy Considerations', in: Taylor, C.S. (ed.), Why Governmen& Grow. Beverly Hills: Sage. Rose, R . and Peters, G. (1978). Cun Governrnenrs Go Bankrupt? London: Macmillan. Sayed, Anwer (1966). The Political Theory ofAmerican Local Government. New York: Random House. Sharpe. L.J. (1970). 'Theories and Values of Local Government', Polirical Studies 18. Sharpe. L.J. (1981). 'Is There A Fiscal Crisis in Western European Local Government?'. in: Sharpe L.J. (ed.), The Local Fiscal Crisis in Western Europe. London: Sage. Taylor, C.S. (1983). 'The Public Sector: Some Concepts and Indicators'. in: Taylor, C.S. (ed.), Why Governments Grow, Beverly Hills: Sage.