Why are governments so bad at doing their job?

Not only is government big; it is complicated. It is doing lots of different things, requiring different skills, and in a world economy that is becoming ever more complex too

JP Morgan Chase chief Jamie Dimon has criticised the workings of the US government (AP)

Why aren’t governments better at their job? You can criticise any chunk of society – banks, universities, car manufacturers, lawyers, journalists – for being badly managed and making huge errors. But Jamie Dimon, chief executive of JP Morgan Chase, will have struck a chord with many when he declared: “It’s almost an embarrassment being an American travelling around the world.”

He was frustrated by America’s inability to invest in infrastructure and to overhaul the tax system.

“There would be much stronger growth if there were more intelligent decisions and less gridlock,” he said. “The United States of America has to start to focus on policy which is good for all Americans, and that is infrastructure, regulation, taxation, education.”

Some people will think it a bit rich for a banker to be attacking the US government, when it was the government that rescued the banking system less than a decade ago. Others will see this as a reaction to the election of Donald Trump and his inability to get legislation through Congress. But the problems of the banking system were in part the result of bad regulation, and political gridlock long preceded the present administration.

Further, this is not only a US issue. Whatever your views about Brexit the present UK Government is not putting forward a coherent, disciplined position ahead of the negotiations. Within Europe, France has been unable to reform its labour laws for a generation and suffers double the rate of unemployment of the US and UK, and Germany, while generally regarded as being well-governed, is now running the largest trade surplus in the world and unbalancing the eurozone as a result. (A lot of Germans think that it too should spend a lot more on infrastructure, by the way.)

So frustration with government is not only a US issue by any means. Why is this so universal?

I think the answer comes in three parts. First, governments are very big. In most developed countries they account for between 35 per cent and 45 per cent of GDP. About half of that is recycling money – taking in tax and social insurance payments and paying out benefits and pensions – while the other half is providing the whole range of services from defence to education, law and order, regulation, and so on.

Anything of this size is not only going to be hard to manage but the sheer size means that things will go wrong. In any open society when things go wrong they will get publicity. So we are very aware of the weaknesses.

The second part of the answer follows on from this. Not only is government big; it is complicated. It is doing lots of different things, requiring different skills, and in a world economy that is becoming ever more complex too. Thanks to this growing complexity the developed world has moved more from a system where governments provide service themselves to one where they buy in those services on behalf of the populace. Buying a service and managing the contracts requires a different set of skills from running something – and governments everywhere are not very good at that.

And the third part of the answer is that we have high expectations of government. That is partly the fault of politicians. The standard spiel of any politician is to say they can do something better and it won’t cost the rest of us much more to do it. Then they fail and we get angry.

But there is a further issue. It is that the mathematics of public spending have become much more adverse as a result of changing demography. A national pension system where each generation pays for the pensions of the preceding one is fine if each generation is larger than the one before. Now in much of Europe the size of the workforce is stable or falling but the ranks of the pensioners continue to swell. People talk about the costs of the elderly; they don’t about the size of the workforce. Actually the US and UK are somewhat less affected than continental Europe or Japan, but the rising costs of the elderly are still a problem.

Given all this it is hardly surprising that people should feel fed up. Government is very, very difficult. But there is meat in Jamie Dimon’s frustration because he also draws attention to four areas: infrastructure, regulation, taxation, and education.

The first should be fairly easy, though the political and planning blockages are substantial, as the London airport saga shows. Regulation needs to be clever and that ought to be possible to tackle. Taxation is particularly difficult to reform in the US, but in the UK, Europe and Japan it should be easier. And education? Well, that is something that just about everyone agrees in the western world must be improved, but hardly anyone agrees how best to do so.

But setting out areas to focus upon is a start. Until you accept that you are not doing something well, you cannot begin to improve it.