Wildavsky & Webber History of Taxation and Expenditure in the Western World

"A Cultural Theory of Unbalanced Budgets" (1986)

This is basically an article about state spending. The basic questions are:

1. Why does govt. grow?

2. Why are budgets so seldom balanced?

3. Why has expenditure control collapsed in the West?

Related to these questions are 5 more precise questions:

1. Why does governmental spending hardly ever decline as a proportion of GNP? Why are there no spending limits, say as a constant rate of GNP?

2. Why do govt. in some nations grow faster than others? If there is a logic of capitalism, why don't all nations spend the same proportion of GNP?

3. Why do political parties never reduce spending even when they claim they will to get elected?

4. Why do programs that grow the most - pensions, health, education - contain elements of redistribution?

5. Why do western nations and the Soviet union spend the same proportion of GNP on social-welfare programs?

The authors then set out the answer these questions, arguing that political and economic explanations don't tell the whole story. In fact, they claim, a cultural theory of governmental growth fits the facts better. They ask the cultural question: "which political cultures-shared values legitimating social practices-would reject ever greater governmental growth, and which ones would perpetuate it?" They claim the size of govt. is a function of combinations of political cultures.

Economic and Political Explanations

1. Wagner's law of increasing state activity: Wagner argued that as per-capita real income increases in particular nations, governments will spend a higher proportion of GNP. W&W argue that this explanation implies different spending patterns for rich and poor nations; however they find few differences.

2. Wilensky's law: Wilensky argued that govts. spend more on social programs when they have surpluses. W&W ask why increasing wealth should impel nations to spend proportionately more rather than proportionately less. And they argue that even when economic growth is not great, govts. Still spend more. This they say is due to the central commitment to equality

3. Marxists theories: these theories claim that originally, welfare programs were created by the State to keep labor pacified. However, Marxists theories can't explain the continued increases in welfare programs since it means the state is not entirely exploitative-it does help out the worst off.

4. Tax hypotheses: Peacock and Wiseman argue that spending is a function of available revenues. When the state has more, it spends more. However, why does the state decide to spend surplus tax revenue rather than holding spending constant and reducing tax rates?

5. Political explanations: some authors tried to link govt. spending to the ideological position of the govt. in power. W&W argue that what matters is not the position on the ideological spectrum, which is relative anyway, but the cultural attitudes toward the state in different countries.

Cultural Theory

W&W return to the issue of whether the political culture of a nation desires to move toward equality of results. They believe that hierarchy justifies inequality deriving from specialization and the division of labor that is beneficial on the societal level. Hierarchy is therefore animated by a sacrificial ethic where the parts are supposed to sacrifice for the whole. W&W conclude that it is the rise of sectarian political cultures with their passion for equality of condition that best explains the continuous increase in the size of govt.

They compare the US and Canada. Canada with strong markets and hierarchies follows a public policy that is more egalitarian and redistributive than does the US (which has strong market and weak hierarchies). They contend that ideological differences between the two nations are responsible for the differences on welfare state development; and thus they argue for a cultural theory.

Peltzman's Law or Culture Reconsidered

An empirical test of cultural theory would have to demonstrate the temporal priority of cultural determinants-increased inequality would have to proceed governmental growth. P's law states that equality of income stimulates growth of govt., whereas inequality stifles growth. This is because the rich in an unequal system won't vote to increase redistribution, since they would lose their advantage. When incomes are more equal, citizens want still more of it. "Equality it seems is a self-generating position." The general argument is that "the size of govt. responds to the articulated interests of those who tend to gain or lose from politicization of allocation of resources." W&W would like to broaden this notion to say that cultural change precedes and dominates budgetary change: the size of the state today is a function of its political culture yesterday.

Budgeting does not determine political alignments, rather because budgeting is a subsystem of politics, political cultures shape budgeting. So in the long run people must alter their ways of life before altering budgetary outcomes in any significant and lasting manner. W&W project that in the balanced budget arena, a struggle between sectarian and hierarchical regimes would lead to higher imbalances as they compete for credit over who has provided the most benefits. Further, they believe that it is likely that the more cohesive hierarchies will defeat sects and, without challenge, impose greater balance at the cost of reducing liberty.