http://www.businessweek.com/articles/2013-04-08/is-small-government-the-answer-lessons-from-rwanda

Africa

Is Small Government the Answer? Lessons From Rwanda


Young students are taught by their teacher during a lesson at school in Ruhengeri, Rwanda

Photograph by Christopher Roberts/Gallery Stock

Young students are taught by their teacher during a lesson at school in Ruhengeri, Rwanda

The sequester has cut U.S. government spending by $85 billion and, frankly, most Americans hardly notice the difference. That’s in part because the effects will take time—but it’s also surely because a government the size of America’s does a lot of things that don’t absolutely, positively have to get done for things to go on pretty much as normal.

To small-government conservatives, that’s sufficient reason to continue to “starve the beast” and impose even deeper cuts in federal spending. If Washington were forced to make do with less, the thinking goes, it would deliver services more efficiently and produce greater returns on taxpayers’ money. What’s more, say conservatives like Michael Tanner of the Cato Institute, “Big government limits freedom.”

So does smaller government truly lead to better governance? A look at other countries around the world suggests that governments with low expenditures relative to the U.S. can still deliver a lot to their citizens for a lot less. At the same time, those same countries demonstrate that small government is no recipe for liberty or greater national wealth.

The U.S. sequester cut about $271 in spending per person from America’s federal budget, around 2 percent of the total. Data from the World Bank suggest there are at least 13 countries worldwide where all government consumption and investment—from national to local—is lower than $271 per head (this using purchasing power exchange rates). The list includes Bangladesh, Nepal, Mozambique, and Uganda.

It also includes landlocked Rwanda, a very poor country in sub-Saharan Africa that’s suffered cycles of civil war ever since its independence, culminating in the 1994 genocide. Total annual government expenditure in Rwanda was $2.8 billion in 2011. That’s a little more than one-half of the budget of Chicago—a city with fewer than 3 million people, compared with Rwanda’s 11 million. Its total government expenditure comes to about $258 per head per year.

Despite that tiny outlay, Rwanda’s government achieves a great deal. It spends about $67 per head per year on providing health services to its citizens—compared with around $4,000 per person per year spent by the U.S. government. (In both countries, private spending is about the same size as public spending). For less than 2 percent of America’s expenditure on health, Rwanda gets about 70 percent of the life expectancy: 55 years compared with the U.S. average of 78. As recently as 1995, life expectancy in Rwanda was just 30 years.

Over the same period, the chance that a child born in Rwanda will die before her fifth birthday has declined from 28 percent to below 6 percent. That’s at least partly attributable to a strong provision of child health services. Over the last decade, the percentage of births attended by a skilled attendant rose from less than a third to more than two-thirds. Nearly all children are vaccinated against the most common communicable diseases. Rwanda’s reported child immunization rate for diphtheria, pertussis, and tetanus, at 97 percent, is higher than the level in the U.S.

It isn’t just health services where Rwanda is getting better at providing the basics: 98 percent of primary school-aged children are enrolled in school. When it comes to upholding the rule of law, the percentage of companies operating in Rwanda that identify crime, theft, and disorder as a major constraint was only 4 percent—compared with an African regional average of 28 percent.

What does this tell us about the relationship between spending and services? Americans may not feel it much when government expenditures are cut by 2 percent. But when that 2 percent is all a government’s got to play with, the money it spends can have a much bigger impact on people’s lives. On a shoestring budget, Rwanda’s government is ensuring a steadily higher quality of life for most of its people.

Still, fans of small government should heed cautionary lessons from Rwanda’s experience. It’s hard to get much smaller than a government that spends less than $1 per day per citizen, as Rwanda’s does. Yet Human Rights Watch still calls the country an effective one-party state, and opposition politicians and journalists are regularly locked up. Operating on a shoestring doesn’t prevent governments from abusing their powers or violating civil liberties.

And Rwanda, like its fellow micro-government exemplars, remains desperately poor. The country has a GDP per capita of $1,280, compared with the U.S. level of $48,000. While it is cheap to provide a basic level of education, health, and security, the government services required to sustain high incomes are a lot more expensive. Take infrastructure—companies in Rwanda complain of frequent blackouts and (even) erratic water supply. And while most kids finish primary school, only a third enroll in secondary school and only a little over one in 20 go on to college.

That all makes Rwandan workers a lot less productive than their American counterparts. And it’s a reminder that starving the beast of government might not be the secret to freedom and wealth after all.

Kenny is a senior fellow at the Center for Global Development and author of The Upside of Down: Why the Rise of the Rest is Great for the West.

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