Quotulatiousness

April 6, 2013

The old class system and the modern welfare state

Filed under: Britain, Bureaucracy, Government — Tags: , , , , , — Nicholas @ 09:34

A majority of Britons who are on state assistance now believe that the system is too generous and discourages recipients from seeking jobs:

In 2003, 40 per cent of benefits recipients agreed that ‘unemployment benefits are too high and discourage work’; in 2011, 59 per cent agreed. So a majority of actual benefits recipients now think the welfare state is too generous and fosters worklessness. Surely those well-off welfare cheerleaders, when shown these figures, would accept that perhaps they don’t know what they’re talking about. But no, they have simply come up with a theory for why the poor are anti-welfare: because they’re stupid.

Even more resented than those who abuse the system are those who run it:

Working-class mothers hated the way that signing up for welfare meant having to throw one’s home and life open to inspection by snooty officials, community health workers and even family budget advisers.

They didn’t want ‘middle-class strangers’, as they called welfare providers, ‘questioning them about their children’. They felt such intrusions ‘broke a cultural taboo’.

And the use of welfare as a way of allowing society’s ‘betters’ to govern the lives of the poor continues now. Indeed, today’s welfare state is even more annoyingly nannyish than it was 80 years ago.

As the writer Ferdinand Mount says, the post-war welfare state is like a form of ‘domestic imperialism’, through which the state treats the poor as ‘natives’ who must be fed and kept on the moral straight-and-narrow by their superiors.

Mount describes modern welfarism as ‘benign managerialism’, which ‘pacifies’ the lower orders.

Working-class communities feel this patronising welfarist control very acutely. They recognise that signing up for a lifetime of state charity means sacrificing your pride and your independence; it means being unproductive and also unfree.

April 4, 2013

Canadian public sector workers earn between 9% and 12% more than private sector workers

Filed under: Bureaucracy, Business, Cancon, Government — Tags: , , , — Nicholas @ 09:12

Once upon a time, back in the far-distant past, public sector workers got lower wages but better job security, benefits, and pensions than their private sector counterparts. Over the last few decades, the public sector wages caught up and surpassed the private sector, and if anything the benefits and pensions got better. The Fraser Institute calculates that currently there is between a 9% and a 12% premium paid to public sector workers for similar jobs (and that understates the overall differential):

Comparing Public and Private Sector Compensation in Canada examines wage and non-wage benefits for government employees (federal, provincial, and local) and private-sector workers nationwide. It calculates the wage premium for public-sector workers using Statistics Canada’s Labour Force Survey from April 2011, after adjusting for personal characteristics such as gender, age, marital status, education, tenure, size of establishment, type of job, and industry. When unionization is included in the analysis, the national public-sector “wage premium” (i.e., the degree to which public-sector wages exceed private-sector wages) declines to 9.0 per cent from 12.0 per cent.

Aside from higher wages, the study also found strong indications that Canada’s government workers enjoy more generous non-wage benefits than those in the private sector, including:

  • Pensions: 88.2 per cent of Canadian government workers were covered by a registered pension plan in 2011 compared to 26.4 per cent of private-sector employees.
  • Early retirement: Government employees retired 2.5 years earlier, on average, than private-sector workers between 2007 and 2011.
  • Job security: In 2011, 0.6 per cent of government employees lost their jobs — less than one sixth the job-loss rate in the private sector (3.8 per cent).

To ensure public-sector compensation is fair to both taxpayers and government workers, the report argues that better data collection is needed and suggests that Statistics Canada should gather data on wages and non-wage benefits more regularly and systemically than it does now. In addition, comparisons between the public and private sectors should focus on total compensation, not just wages or specific benefits such as pensions.

About one in five Canadian workers is in the federal, provincial, or local government civil service or related organizations, and only 15% of Canadians are self-employed. The vast majority of government workers are unionized, while the reverse is true in the private sector.

April 2, 2013

Revisiting the revisionist view of the “Satanic mills” of the British industrial revolution

Filed under: Britain, Economics, History — Tags: , , , , — Nicholas @ 08:55

Rather in keeping with the sentiments expressed in today’s Quote of the Day post, Emma Griffin explains why the workers generally thought of the industrial revolution as a very good thing indeed:

Writers and academics often show an interesting ambivalence about industrialization. Today, they regard it as a blessing, the single-most-effective way to lift people out of poverty. But in thinking about Britain’s Industrial Revolution, they have tended to reach the opposite conclusion: The rise of the factory, they argue, caused the end of more “natural” working hours, introduced more exploitative employment patterns and dehumanized the experience of labor. It robbed workers of their autonomy and dignity.

Yet if we turn to the writing of laborers themselves, we find that they didn’t share the historians’ gloomy assessment. Starting in the early 19th century, working people in Britain began to write autobiographies and memoirs in ever greater numbers. Men (and occasionally women) who worked in factories and mines, as shoemakers and carpenters, and on the land, penned their stories, and inevitably touched on the large part of their life devoted to labor. In the process, they produced a remarkable account of the Industrial Revolution from the perspective of those who felt its effects firsthand — one that looks very different from the standard historical narrative.

[. . .]

Higher levels of employment also helped change the balance of power between master and laborer. So long as jobs remained scarce, workers, by necessity, obeyed their employers. The price of dissent or disobedience was unemployment. With more jobs, such subservience became less and less necessary. In the booming new industrial towns, workers could, and did, walk out on employers over relatively minor matters, confident that finding more work wouldn’t be difficult. One autobiographer left his position simply because he “grew sick” of the work; another because he didn’t want to “beg pardon” after a falling out with his master; another objected to wasting his precious Sunday mornings at his master’s religious services; and another quit when his master refused to let him take his tea breaks off the premises. All working relationships are defined by a disparity in power between master and servant. But that inequality is rendered more palatable if we’re well remunerated for our services and can leave at will.

The way in which working people described the upheavals of this period provides us with a powerful reminder of the transformative effect of industrialization and of its capacity to improve living standards, even for the poor. Generations of historians have dwelled on the loss of old working patterns and presumed that the introduction of more intensive ones was detrimental to workers’ welfare. But these developments weren’t viewed in such a sinister light at the time. Industrialization promised full employment, and for those used to scraping together a living from the land, this was very good news indeed.

March 30, 2013

All those manufacturing jobs are never coming back

Filed under: Britain, Business, China, Economics, USA — Tags: , — Nicholas @ 08:37

Tim Worstall explains why this is at the Adam Smith Institute blog:

I’m always rather puzzled by those who shout that we’ve got to bring manufacturing back to the UK. Apparently this will solve all our problems over what to do with dim Northern lads or something. Once they’re all hammering out whippet flanges then we just won’t have a problem with unemployment ever again. The problem with this idea is that modern manufacturing simply doesn’t provide many jobs. And if it were to provide mass employment it would be very badly paid employment too:

    Americans working to produce traded goods and services earn, roughly, according to their productivity. If low-skill workers in America aren’t much more productive in manufacture of traded goods and services than low-skill workers in China, then they can’t earn much more than workers in China while being employed in manufacture of traded goods and services. They can earn a rich-world wage in production of non-traded goods and services, like sandwiches and haircuts, so long as there is sufficient local demand. In other words, the only way to get less-skilled Americans a good wage in a manufacturing industry is to significantly raise their skill and productivity level. If that can’t be accomplished, they can only hope to find good wages in non-traded industries. At least, that is, until wages of less-skilled workers across the developing world come much closer to converging with those in America.

Of course, that’s all about America but the same logic pertains here as well. Chinese manufacturing wages are around $6,000 a year at present. Meaning that if we had mass employment in manufacturing, as they do, then wages would need to be around that level. Or, alternatively, UK based manufacturing would have to be much more productive to support higher wages. And “more productive” is the same as saying “uses less labour”. Thus you can have few well paid jobs (in the Rolls Royces etc of this world) or you can have many badly paid jobs (Shenzen). It isn’t actually possible to mix and match between the two.

March 23, 2013

“Having it all” versus “being happy”

Filed under: Business, Media — Tags: , , , , — Nicholas @ 09:32

In the Globe and Mail, Margaret Wente talks about the tension many women feel in trying to lead full lives, both professionally and personally:

Sheryl Sandberg, the billionaire COO of Facebook, is everywhere these days. Her new book, Lean In, is a smart, strategic guide for women who want to succeed. Be more assertive, conquer your fear, manage your guilt, don’t sabotage yourself.

All good advice, in my view. But these days, a lot of smart, highly educated thirtysomething women are having an entirely different conversation. They’re not talking about leaning in. They’re talking about leaning back.

[. . .]

Given the realities of the modern workplace, the mystery isn’t why there aren’t more women at the top but why so many want to get there. “To reject a high-flying career … is not to reject aspiration,” Judith Shulevitz writes in The New Republic. “It is to refuse to succumb to a kind of madness.”

Most women, if they have the choice, are happy to trade long hours and money for flexibility and control. This explains why nearly a quarter of women who have MBAs and children have dropped out of the work force 15 years after graduation, according to a U.S. study. When these findings were released, they produced much hand-wringing about the failed promise of feminism and lingering discrimination in the workplace. But what they really reflect is women’s stronger preference for a balanced life.

High-achieving younger women don’t think this is going to happen to them. It takes them by surprise. They get an MBA or law degree, a demanding job and an equal-opportunity husband. And then they have a baby and – wham. As one young mother in her early 30s puts it, “I had no idea I’d be so crazy about my child.”

I suspect a lot of the frustration young women encounter is that they’ve been lead to expect that they can cope with both a full-time, active, fulfilling career and raising a child simultaneously. The reality is that for most women, it’s a binary choice: you get either the job or the family, but not both. When this realization hits home, it can feel like a betrayal.

March 3, 2013

Arms merchant’s golden customer: an Arab nation with oil money

Filed under: Britain, Business, Middle East, Military — Tags: , , , , , , — Nicholas @ 12:56

Strategy Page explains why some of the most lucrative customers for high-tech weaponry are Arab nations:

Britain has been quite successful selling their new Typhoon fighter to Middle East nations. Two years ago Saudi Arabia bought 72 Typhoons from Britain. That was followed by an order for 12 from Oman and now the UAE (United Arab Emirates) is negotiating the purchase of 60 of these expensive aircraft. This is big money, as the aircraft have a basic price of $65 million each and there are many ways to greatly increase that. For warplanes sold to Arab Gulf states there is an additional bonanza. The biggest additional cost is providing support services and personnel to keep the aircraft operational. The Typhoon manufacturer, BAE Systems, is energetically recruiting qualified maintenance personnel to keep these aircraft flying. This a much larger profit center for Arab customers than for anyone else. Few local Arabs will be recruited for this work and most of these technicians will come from the West. That is very expensive. Why can’t locals be found for these high paying jobs? The reason is simple; there are few Arabs qualified or even interested in such exacting work. This is a common problem in the Middle East.

For example, the unemployment rate in Saudi Arabia is 12 percent and many of those men are unemployed by choice. Not even counted [are] most women, who are barred from most jobs because they are women. Arab men tend to have a very high opinion of themselves, and most jobs available, even to poorly educated young men, do not satisfy. Thus most Saudis prefer a government job, where the work is easy, the pay is good, the title is flattering, and life is boring. Thus 90 percent of employed Saudis work for the government. In the non-government sector of the economy, 90 percent of the jobs are performed by foreigners. These foreigners comprise 27 percent of the Saudi population, mostly to staff all the non-government jobs and actually make the economy work. This means most young Saudi men have few challenges. One might say that many of them are desperate for some test of their worth, but a job in the competitive civilian economy does not do it, nor does the military.

The Saudi employment situation is not unique. The UAE (United Arab Emirates) has foreigners occupying 99 percent of the non-government jobs. The unemployment rate is 23 percent, but only a tenth of those are actually looking for a job. A survey indicated that most of the unemployed are idle by choice. Kuwait is more entrepreneurial, with only 80 percent of the non-government jobs taken by foreigners. The other Gulf Arab states (which have less oil) have a similar situation.

February 22, 2013

Ford’s wage-doubling myth

Filed under: Business, History, USA — Tags: , , , — Nicholas @ 00:02

In the Financial Post, Philip Cross explains the myth and reality of Ford’s famous wage-doubling ploy:

Start with the premise that Ford raised wages to increase purchasing power. As the Fortune article documents, before raising wages, Ford already had doubled output of the Model T with his innovative use of the moving assembly line, without adding to employment. The moving assembly line is what Ford deserves accolades for. To get an idea of how revolutionary it was, Ford built just over a quarter of a million cars in 1914, as much as the rest of the industry combined, but with 80% fewer workers. In other words, productivity already had doubled, allowing Ford to double wages without increasing labour costs.

And he needed to raise wages. Employee turnover at the Highland Park Model T assembly plant hit 370% in the year before the wage increase, clearly symptomatic of a dysfunctional internal labour market. That means Ford incurred the cost of hiring 52,000 people in 1913 to fill 14,000 jobs. The real reason Ford hiked wages was to reduce the cost of this turnover, not a soft-hearted desire to transfer purchasing power from management Scrooges to the Cratchits of the world.

The plan worked like a charm, as turnover plunged to 16% after wages were doubled, reducing labour costs despite the wage hike. Saying he did it to raise purchasing power was just good public relations. Who wants to advertise that their workplace was so disagreeable they could not keep workers for more than a few weeks at a time?

[. . .]

Ford is still reaping good publicity from the notion its founder spread joy and good cheer in the workplace by raising wages. Its website marvels that “newspapers from all the world reported the story as an extraordinary gesture of goodwill.” The universal appeal of this fable, repeated today by gullible journalists like those at Fortune, is probably because it feeds everyone’s fantasy that one day you’ll show up at work and get that long overdue raise, without your firm compromising its competitive position.

February 20, 2013

Incentives matter (a lot) — the growth of “Disabled America”

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 09:40

Colby Cosh discusses the rise and rise of “Disabled America”, the increasing number of adults of working age who are claiming disability support:

Just looking at fiscal and demographic stats from California will cause a cold, invisible hand to clutch at one’s throat, but talking to an endless series of seemingly able-bodied people who casually disclaim any capacity for honest work is even more chilling. When I got home I found out it’s not just California’s problem. In the OECD’s 2010 “Going for Growth” report, the percentage of the working-age labour force (20 to 65 years) receiving any kind of disability benefit or worker’s compensation is estimated at around 5.1 per cent for Canada. For OECD nations as a whole, the figure is 6.7 per cent.

Northern European welfare states, amiright? But for the super-competitive U.S.A., land of the proudly threadbare social safety net, the number was 9.2 per cent.

[. . .]

There is a handful of economists working on the problem without ever gaining much traction in the popular press; the atmosphere of general crisis hasn’t made it any easier for them to be heard. Reading their papers and seeing them plead for the same reforms every few years is almost as depressing as contemplating Disabled America itself. Just as social security for the aged was devised at a time when workers could expect only a few years of life after clearing 65, social security for the disabled was conceived at a time when manual labour was the norm and “disability” denoted identifiable, incapacitating physical injury. No one envisioned a world in which clerical and “knowledge” work had taken over, but the number of people judged totally unable to work had skyrocketed, owing to vague musculoskeletal disorders, unverifiable chronic pain and an astronomical expansion in the definitions of mental illnesses.

If the system is set up to provide more income through disability payments than through a paying job, there will be a tendency for minor ailments to be parlayed into a disability. When the incentives are rigged to encourage a certain kind of behaviour, people will adapt to take advantage of those incentives. If the system will effectively reward you for being “disabled”, it should be no surprise that we get more people applying for disability support.

Even if the economic climate was better, it’s not likely that governments will crack down on those abusing the system for a couple of solid reasons. First, it’s a public relations nightmare waiting to happen and every government worker knows that you never want your name to appear in the media in this kind of context. Second, people on the disability programs don’t count as unemployed and therefore reduce the pressure on the government to “do more” about jobs. And third, it’s easier to just go with the flow and not try to create any ruckus.

February 18, 2013

Reason.tv: 3 reasons to build the Keystone XL pipeline

Filed under: Business, Cancon, Environment, Government, USA — Tags: , , , , — Nicholas @ 12:30

Few energy projects have inspired the level of vitriol surrounding the Keystone XL Pipeline, that would run 1,700 miles from Alberta, Canada through the United States to refineries on the Gulf of Mexico.

The oil sands of Alberta are estimated to hold 170 million 170 billon barrels of petroleum, the largest reservoir of black gold outside of Saudi Arabia.

Because the pipeline crosses an international boundary, President Barack Obama has the final say over whether to give the project a green light.

February 14, 2013

Why raising the minimum wage won’t help the poor

Filed under: Business, Economics, Government — Tags: , , — Nicholas @ 09:22

“A triumph for our culture of self-pity, narcissism and whining entitlement”

Filed under: Britain, Government, Law — Tags: , , — Nicholas @ 00:01

In sp!ked, Neil Davenport explains why the legal victory against workfare in England isn’t actually a good thing even for people in that situation:

… the case is still seen as a major coup. Joanna Long, a member of campaigning group Boycott Workfare, captured the mood of Reilly’s supporters: ‘Today’s ruling is a victory for the people against a government which thought it could compel unemployed and sick people to work without pay, backed by a vicious regime of sanctions which made the poorest far poorer.’ Really? Only in this victim-centred age could doing a few shifts at Poundland be seriously compared to forced slavery.

What the ruling in favour of Reilly is not, however, is a victory for ‘the people’. Rather, it is a triumph for our culture of self-pity, narcissism and whining entitlement. The new ruling will further cushion and cosset young people, relieving them of any impositions or pressures. And it will bolster the infantile notion that young people must be protected from the demands of becoming economically independent or hard working. In the long run, this will do the development of young people far more damage than a few weeks working for benefits.

[. . .]

In this sense, today’s ruling will bolster the idea held by some young people that the world really does owe them a living. The Reilly ruling seems to acknowledge officially that young people should not be expected to meet society’s requirement to work in case it damages their vulnerable self-esteem. It suggests that self-pity and a sense of entitlement is now far more laudable than simply overcoming life’s challenges or learning how to grow up.

Nevertheless, it shouldn’t be too surprising that the court came to such a decision. For the past two decades, the state has been keen to show that adult autonomy is not something people should exercise too much. So while the ruling looks like a victory for people power-style leftism against a (mainly) Tory government, in truth it is a demand for the state to look after us. It is an acknowledgement that we should forgo individual sovereignty for a close relationship with the all-watching, all-checking and autonomy sapping state. Whereas genuine radicalism was always a demand for autonomy from state regulators, today’s radicals aspire to be more tightly bound to state institutions. Any excuse to bolster state legitimacy and authority over us, even at the expense of a Tory government, will always appeal to elite-minded, undemocratic judges. Reilly and her supporters demand to be treated like children. Is it any wonder that a paternalistic state will oblige?

February 12, 2013

Rules for the masses, but not for the bureaucratic elite

Filed under: Bureaucracy, Business, Europe, Law — Tags: , , , , , — Nicholas @ 10:33

The European Union’s rules on gender equality appear to apply to everything in the EU except the EU’s own bureaucracy:

Part of the aggrandised myth EU institutions like to propagate about themselves is that they are pioneers in promoting tolerance, gender equality, and diversity in the workplace. Read the promotional literature and you will find effusive descriptions of liberal workplace revolutions and the achievements of Soviet-style five-year plans. Yet, like the Soviet Union, there is an embarrassing mismatch between the trumpeted idealism and the reality.

Since its creation in 1967, DG Employment (Directorate-General for Employment, Social Affairs and Inclusion at the European Commission) has nominally been responsible for fair employment conditions in the European Union. Rising levels of workplace equality in member states (for which DG Employment take an undue amount of credit) are woefully incongruous with the situation of EU civil servants. Women occupy 19 per cent of senior management positions; compare this with the often decried 35.9 per cent of women in the top levels of the UK civil service.

Yet it is figures like the UK civil service’s that prompt EU proposals on affirmative action. One set of proposals has recently been discussed in the European parliament, for example, which if passed will introduce gratuitous and complicated legislation across the continent. That bureaucracy breeds bureaucracy is unsurprising, but it is hard to take seriously calls for equality from an institution endemically opposed to the concept.

The only European agency where women in management positions outnumber men is in the Institute for Gender Equality (the administration is 95 per cent female). Incontrovertibly, out of all the agencies, this is the one with the strongest prerogative for tackling equality in its workforce. But the message is clear: shout about equality to the world and create a dummy institute to anyone holding a mirror up to the EU bureaucracy itself. So far, the commission is on its fifth ‘action programme’ to tackle inequality within its institutions, taking the same form as every one that has come before it; vague guidelines forgotten until lobby group pressure becomes too annoying.

December 28, 2012

The Military-Industrial Complex leads to “a bloated corporate state and a less dynamic private economy”

Filed under: Bureaucracy, Economics, Government, Military, USA — Tags: , , , , , — Nicholas @ 09:59

An older article from Christopher A. Preble, reposted at the Cato Institute website:

The true costs of the military-industrial complex, they explain, “have so far been understated, as they do not take into account the full forgone opportunities of the resources drawn into the war economy.” A dollar spent on planes and ships cannot also be spent on roads and bridges. What’s more, the existence of a permanent war economy, the specific condition which President Dwight Eisenhower warned of in his famous farewell address, has shifted some entrepreneurial behavior away from private enterprise, and toward the necessarily less efficient public sector. “The result,” Coyne and Duncan declaim, “is a bloated corporate state and a less dynamic private economy, the vibrancy of which is at the heart of increased standards of living.”

The process perpetuates itself. As more and more resources are diverted into the war economy, that may stifle — or at least impede — a healthy political debate over the proper size and scope of the entire national security infrastructure, another fact that Eisenhower anticipated. Simply put, people don’t like to bite the hand that feeds them.

And that hand feeds a lot of people. The Department of Defense is the single largest employer in the United States, with 1.4 million uniformed personnel on active duty, and more than 700,000 full-time civilians. The defense industry, meanwhile, is believed to employ another 3 million people, either directly or indirectly.

What’s more, these are high paying jobs. In 2010, when the average worker in the United States earned $44,400 in wages and benefits, the average within the aerospace and defense industry was $80,100, according to a study by the consulting firm Deloitte. And 80 percent of that industry’s revenue comes from the government.

December 20, 2012

“Japanese are smart. Chinese are smart. Americans are smart. Even Finns are smart. But Canadians? We tend to be plodders.”

Filed under: Cancon, Economics, USA — Tags: , , — Nicholas @ 12:38

William Watson on a terrible psychological burden Canada has been labouring under for generations — the productivity gap — which does not actually appear to exist.

The good news just keeps pouring in. Last week we learned courtesy of a special report from TD Economics that median income in Canada had caught up with median income in the U.S. Never mind that the measure of income used was a little screwy: market income plus cash received from the government — basically all the goodies — with no accounting for taxes paid to the government. Most Canadians seemed tickled by the result anyway, as we always are when outperforming the Americans.

Now this week, just in time for Christmas, comes news that Canada’s productivity, far from having flatlined over the last 30 years, has actually been growing at a perfectly respectable pace that’s even comparable to American rates. It turns out we’re not nearly as incompetent as our official productivity numbers have been suggesting we are. We’ve just been calculating them wrong. In fact, it’s tempting to say our incompetence is mainly in the productivity section of Statistics Canada. Tempting maybe, but not fair. It’s Christmas, after all, and, besides, calculating productivity is like doing Sudoku for a living and there’s plenty of room for disagreement over what the data are saying.

[. . .]

StatCan’s estimates of our MFP have consistently suggested that as a people we aren’t at all clever. We may be lumberjacks. We may be OK. But doing more with less — or even more with the same — just hasn’t been our game. Japanese are smart. Chinese are smart. Americans are smart. Even Finns are smart. But Canadians? We tend to be plodders. Thus over the last half-century our business-sector MFP growth has averaged just 0.28% per year. By contrast, the Americans are used to rates a full percentage point higher. In 2010, they hit 3.4%! But now Diewert and Yu estimate that in fact over the last 50 years our MFP growth has averaged a perfectly respectable 1.03% per year. If you can add 1% a year to overall output without adding more and smarter people and machines to the mix — which of course you’re also allowed to do and we have been doing — your living standards will rise very nicely over time.

How can StatCan’s estimates have been so wrong? Diewert and Yu use quite different techniques at different stages of the calculation, but the main problem surrounds capital services. StatCan’s estimates of how much capital we use in production typically are much higher than Diewert and Yu’s. Partly the difference revolves around abstruse discussions about what internal rates of return to assume when trying to measure capital.

December 18, 2012

The real reason it’s so hard to cut military spending

Filed under: Bureaucracy, Government, Military, USA — Tags: , , , — Nicholas @ 11:00

From the January issue of Reason, Veronique de Rugy explains how the system is set up to protect military spending from even the most determined spending cuts:

The Department of Defense, with its 2.3 million workers, is the single largest employer in the United States. The defense industry, which is the main private-sector recipient of defense dollars, directly or indirectly employs another 3 million people. This, in a nutshell, is why it’s so hard to cut government spending in general and military spending in particular.

The scope and reach of the government are far bigger than we think, explains John J. Dilulio of the National Academy of Public Administration in the Spring 2012 issue of National Affairs. It’s more than just the money Washington spends or the people it employs. It’s also the people in the private sector who live off that spending. It’s the nonprofit organizations paid to help administer government programs. It’s the contractors who run the programs, the contractors’ sub-contractors, and so on.

[. . .]

Even when military contractors’ profits have reached an all-time high, Congress seems committed to sheltering the companies from any budget cuts. Industry lobbying probably plays a role here. According to the Center for Responsive Politics, the U.S. defense and aerospace lobby doled out $24 million to political campaigns and committees during the 2008 campaign cycle and spent nearly $60 million on lobbying in 2011. Lockheed Martin alone spent $15 million in 2011 on its lobbying efforts, plus $2 million in political contributions. Boeing spent $16 million on lobbying the same year.

In his seminal 1971 article “The Theory of Economic Regulation,” the Nobel-winning economist George Stigler noted that agencies eventually become captive of the very interest groups they were ostensibly designed to police. Writing regulation or even spending legislation requires in-depth industry knowledge, so federal agencies and lawmakers tend to hire directly from the very companies they must oversee or spend money on.

The reverse is true too. In order to gain better access to their regulators and government funds, companies hire lobbyists who used to work for Congress or government agencies. Of the 408 lobbyists employed by the military industry to apply pressure on Congress, 70 percent used to work on Capitol Hill.

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