It is a fact that no society throughout history has ever obtained a high level of economic affluence without a government. Where governments did not exist, anarchy reigned and little wealth was accumulated by productive economic activity. After governments took hold, the rule of law and the establishment of private property rights often contributed importantly to the economic development of the Western civilization, and it has similarly impacted on other societies as well. Having a Government is a necessary, though by no means sufficient, condition for prosperity. It is also a fact, however, that where governments have monopolized the allocation of resources and other economic decisions, societies have not been successful in attaining relatively high levels of economic affluence. Economic progress is limited when governments constitute zero percent of the economy and when it is at or near 100 percent as well. The experience of the old Soviet Union is revealing, as was the comparison of East and West Germany during the Cold War era, or of North and South Korea today. Too much government stifles the spirit of enterprise and lowers the rate of economic growth. If no government is too little, but all-encompassing government is too much, what is about right from the standpoint of maximizing economic welfare. Review of theories of government growth raises more questions than answers. However, it will also show that the relationship between government growth and economic efficiency is more complex than many classical liberals would like to believe. Economic growth may slow as countries reach a more advanced stage of economic development that also sees an increase in demand for governments, but without a causal connection. Growth in governments can also give rise to a drive in search for greater efficiencies on the part of reform-oriented politicians, making government growth more sustainable and increasing the efficient size of governments. Review of theories of government growth raises more questions than answers. However, it will also show that the relationship between government growth and economic efficiency is more complex than many classical liberals would like to believe. Economic growth may slow as countries reach a more advanced stage of economic development that also sees an increase in demand for governments, but without a causal connection. 

Growth in governments can also give rise to a drive in search for greater efficiencies on the part of reform-oriented politicians, making government growth more sustainable and increasing the efficient size of governments. Classical liberals have traditionally been concerned with growth in the size of governments because of its potentially adverse implications for economic efficiency and living standards. However, they also recognize that growth in governments can weaken the rule of law and undermine the voluntary relationships that constitute civil society. To the extent that classical liberals have mainly focused their advocacy on policies that promote economic efficiency, they may have unwittingly contributed to an induced expansion in the size and scope of government by easing the revenue and other constraints on government growth. Classical liberals need to locate arguments for more efficient tax and spending policies within a broader framework of advocacy for rules and institutions that promote limited government. The size of government as a share of the economy has been on a rising trend since the Glorious Revolution of 1688–89, which established Britain as a modern constitutional democracy (Greg Clark 2007). International conflicts such as the Napoleonic Wars and World Wars I and II had a ratchet effect, with the government’s share of the economy remaining above its pre-War level in the wake of these conflicts. The brief trend to smaller governments in the nineteenth century was reversed from around 1900 onwards, aided by the two world wars, the Great Depression, and the rise of the social welfare state in the post-World War II period. The growth of government spending in the twentieth century was documented by Tanzi and Schuknecht, who noted that countries with relatively smaller governments have economically outperformed their bigger government counterparts, without underperforming on a broad range of social, environmental and other indicators. This implies that many governments throughout the developed world likely surpassed their efficient or optimal size from around 1960 onwards (Vito Tanzi and Ludger Schuknecht 2000).

J. M. Keynes is a central figure in the emergence of the welfare-state paradigm, which he elaborated by rejecting the two extremes of state socialism and laissez faire and defining a middle ground between them. This new paradigm sanctioned ‘the enlargement of the role of government’ for the purpose of correcting deficient demand (Keynes, 1936:380-1). The problem with the new paradigm was that it consisted of the middle ground between two extreme options in an extreme case: the Great Depression. After the Western economies recovered, growing liberalization of international trade and (later) of capital flows challenged the role and competence of government’s economic management. Eventually, the welfare state reached its limit in the 1990s, when fiscal deficits and public debt grew to proportions that destroyed government’s ability to intervene effectively: additional government spending raises interest rates, which negates any stimulus it provides to demand. 

There are numerous signs that the tide of big governments is receding. Interest is growing in the high compliance costs of government. The appearance of Osborne and Gaebler’s book Reinventing Government (1992) suggests that governments are trying to increase the efficiency of public spending. In his 1996 Paradigm Shift. There are numerous signs that the tide of big government is receding. Interest is growing in the high compliance costs of government. The appearance of Osborne and Gaebler’s book Reinventing Government (1992) suggests that governments are trying to increase the efficiency of public spending. In his 1996 State of the Union Address, US President Bill Clinton announced that the ‘era of big government is over’. In the late 1990s, there is talk, and even some action, in the United Kingdom, the United States, Australia and New Zealand on replacing welfare handouts with ‘workfare’. The principal reason for this disillusionment with big governments is that, if it grows beyond a certain point, the public sector reduces welfare rather than increasing it. In his overall analysis of the link between taxes and growth, Gerald Scully, a leading pioneer in the field of the optimal size of government, has observed that: 

Economic theory suggests that up to some level, government expenditures increase the productivity of private economic resources. The provision of national defense and a judicial system protect private property and individual rights. Other publicly provided goods, such as infrastructure, also enhance private productivity. Thus, up to some point, government expenditure acts as a positive externality on private economic activity … Beyond some optimal size of government, increased taxation acts as a negative externality on the private sector (Scully, 1996:4-5).

In theory the relationship between government expenditures and economic growth is ambiguous. Long ago, Thomas Hobbes (1651) described life without government as “nasty, brutish, and short” and argued that the law and order provided by government was a necessary component of civilized life (Rothbard 1973). Taking the Hobbesian view, certain functions of government such as the protection of individuals and their property and the operation of a court system to resolve disputes should enhance economic growth (Knack and Keefer 1995) and Keefer and Knack 1997). Viewed from another angle, secure property rights, enforcement of contracts and a stable monetary regime provide the foundation for the smooth operation of a market economy.

Governments can enhance growth through efficient provision of this infrastructure. In addition, there are a few goods—economists call them “public goods”—that markets may find troublesome to provide because their nature makes it difficult (or costly) to establish a close link between payment for and receipt of such goods. Roads and national defense fall into this category. Government provision of such goods might also promote economic growth. However, as government continues to grow and more and more resources are allocated by political rather than market forces, three major factors suggest that the beneficial effects on economic growth will wane and eventually become negative. First, the higher taxes and/or additional borrowing required to finance government expenditures exert a negative effect on the economy. As government takes more and more of the earnings of workers, their incentive to invest, to take risks, and to undertake productivity-enhancing activities, decreases (Browning 1976). Like taxes, borrowing will crowd out private investment and it will also lead to higher future taxes. Thus, even if the productivity of government expenditures did not decline, the disincentive effects of taxation and borrowing, as resources are shifted from the private sector to the public sector, would exert a negative impact on economic growth. Second, as government grows relative to the market sector, diminishing returns will be confronted. Suppose that a government initially concentrates on those functions for which it is best suited (for example, activities such as protection of property rights, provision of an unbiased legal system, development of a stable monetary framework, and provision of national defense).

Gwartney et al (1998) illustrated the relationship between size of government and economic growth, assuming that governments undertake activities based on their rate of return. As the size of government, measured on the horizontal axis, expands from zero (complete anarchy), initially the growth rate of the economy—measured on the vertical axis—increases. Gwartney et al (1998) illustrated this situation in their study. As government continues to grow as a share of the economy, expenditures are channeled into less productive (and later counterproductive) activities, causing the rate of economic growth to diminish and eventually decline (See Barro 1990). The range of the curve beyond B illustrates this point. In the real world, governments may not undertake activities based on their rate of return and comparative advantage. Small government by itself is not an asset. When a small government fails to focus on and efficiently provide core functions such as protection of persons and property, a legal system that helps with the enforcement of contacts, and a stable monetary regime, there is no reason to believe that it will promote economic growth. This has been (and still is) the case in many less developed countries. Governments—including those that are small—can be expected to register slow or even negative rates of economic growth when these core functions are poorly performed. Unless proper adjustment is made for how well the core functions are performed, the empirical relationship between size of government and economic growth is likely to be a loose one, particularly when the analysis involves a diverse set of economies.

A fundamental model of economic growth developed by Robert Solow (1956) suggests that while some economies may be wealthier than others, in the long run they should all grow at the same rate. More recent work has suggested that not only do economies actually have substantially different growth rates over lengthy time periods (Quah 1996; Gwartney and Lawson 1997), there are also good theoretical reasons for believing that countries can maintain the different rates (Lucas 1988; Romer 1990). This issue is important because if long-run growth rates across countries are all the same (or approximately the same), the long-term consequences of economic policies that impede growth are less severe. 

Gwartney et al (1998) illustrated this growth in government expenditures in the United States, and showed that the increase in government expenditures is primarily due to the growth of transfers and subsidies, rather than in the core areas of government.. In the 1960s government expenditures at all levels of government averaged 29.9 percent of GDP, and increased to 32.8 percent of GDP in the 1970s, 34.7 percent of GDP in the 1980s, and 35.3 percent of GDP in the 1990s. As a share of GDP, transfers and subsidies have more than doubled since the 1960s. They have risen from 6.4 percent of GDP in the 1960s to 13.5 percent of GDP during the 1990s. Thus, transfers and subsidies consumed an additional 7.1 percent of GDP in the 1990s than during the 1960s. The share of GDP devoted to total government expenditures rose by 5.4 percent over that same period (and 6.2 percent between 1960 and 1996). This expansion in the size of the transfer sector is likely to reduce economic growth. Transfers and subsidies that enlarge the size of government will require higher tax rates, which will reduce productive incentives. Compared to expenditures in core areas, additional government expenditures on transfers will exert little positive impact on growth. Transfers and subsidies also bring with them the problem of rent seeking. Gwartney et al (1998) found that as investment has fallen over the four decades from the 1960s to the 1990s, the growth in output per hour has also fallen. In turn, the slowdown in productivity has reduced the growth rate of real GDP during each of the last three decades (see Gwartney et al, 1998). The story told by Gwartney et al (1998) is that as government has grown, it has crowded out investment which has resulted in declining productivity growth and a slowdown in the growth rate of real GDP. Larger government leads to less economic growth.

Evidence from the OECD Countries

Compared to most other countries around the world, the institutional arrangements and income levels of the 23 long-standing OECD members are relatively similar. Politically, all OECD countries are stable democracies. Their legal structures generally reflect a commitment to the rule of law. Monetary arrangements have been stable enough to avoid hyperinflation during the post World War II era. In the area of international trade, OECD members have been at the forefront of those promoting more liberal trade policies within the framework of GATT and the World Trade Organization. Gwartney et al (1998) presented data on the average year-to-year growth rate of GDP according to the size of government. As illustrated, total government expenditures summed to less than 25 percent of GDP in seven OECD countries in 1960. In total, there were 81 cases during 1960-1996 where a nation had government expenditures less than 25 percent of GDP. Countries in this category averaged a GDP growth rate of 6.6 percent during these years. When the size of government was between 25 percent and 30 percent of GDP during a year, the average growth rate fell to 4.7 percent. The year-to-year growth declined to 3.8 percent when government expenditures consumed between 30 percent and 40 percent of GDP. Still larger government was associated with still lower rates of growth.

Japan did register very high growth rates for several decades. But even here there is a revealing story (Gwartney et al (1998). At the beginning of the 1960s, the total expenditures of the Japanese government were only 17.5 percent of GDP and they averaged only 22.0 percent of GDP during the decade. With that environment, the Japanese economy registered an average annual growth rate of 10.6 percent in the 1960s. During the 1960s the Japanese economy fits the small government, high growth mold. Over the next three decades, the Japanese government grew steadily; by 1996 government spending had soared to 36.9 percent of GDP. At the same time, Japan’s growth rate moved in the opposite direction, falling to 5.4 percent in the 1970s, 4.8 percent in the 1980s and sagging to 2.2 percent in the 1990s. As in United States, the growth of government in Japan has been associated with a slowdown in the rate of economic growth.

The growth of government has been so pervasive in the last half of the twentieth century that there have been only a few instances where nations have substantially reduced its size. This is particularly true for the high-income industrial economies. There are three instances of a substantial decline in government expenditures as a share of the economy among OECD countries during the 1960-96 period. The first case is that of Ireland, which saw government expenditures as a share of GDP go from 28 percent in 1960 to 52.3 percent in 1986. This situation was reversed during the 1987-96 period. As a share of GDP, government expenditures declined from the 52.3 percent level of 1986 to 37.7 percent in 1996, a reduction of 14.6 percentage points. From 1960 to 1977 government expenditures increased from 28 percent to 43.7 percent, and Ireland’s real GDP growth rate was 4.3 percent. It declined to 3.4 percent during 1977-86, as the government further expanded to 52.3 percent of GDP. During the recent decade of shrinking government, the annual growth rate in Ireland’s real GDP rose to 5.4 percent. As government expenditures shrank in Ireland, Ireland’s economic growth increased. The experience of New Zealand is also revealing. Between 1974 and 1992, New Zealand’s government expenditures as a share of GDP rose from 34.1 percent to 48.4 percent. Its average growth rate during this period was 1.2 percent. Recently New Zealand began moving in the opposite direction. The percentage of GDP devoted to government expenditures was reduced from 48.4 percent in 1992 to 42.3 percent in 1996, a reduction of 6.1 percentage points. Compared to the earlier period, New Zealand’s real GDP growth has increased by more than two percentage points to 3.9 percent. The United Kingdom provides additional evidence. Government’s share of GDP rose from 32.2 percent in 1960 to 47.2 percent in 1982. During this period, UK’s GDP growth rate was 2.2 percent and there was widespread reference to the “British disease.” Between 1982 and 1989, government’s share of GDP declined by 6.5 percentage points to 40.7 percent. Responding, UK’s rate of GDP growth increased from 2.2 percent to 3.7 percent. While shrinking government has been rare in the past few decades, evidence from places where government has shrunk is consistent with the hypothesis that larger government lowers economic growth. The evidence illustrates that if the size of government is reduced, higher rates of economic growth can be anticipated.

The data in Gwartney et al (1998) study for OECD countries suggests that smaller government is correlated with faster rates of economic growth. While in theory government could be too small to provide the necessary environment for economic growth, the data in Exhibit 4 give no indication that any OECD government was excessively small at any time during 1960-96. Within the size of government range of this period, smaller government was consistently associated with more rapid economic growth. Gwartney et al (1998) study probes this issue further by looking at government expenditures as a share of GDP for the 10 nations with the fastest rates of economic growth during 1980-95. The average annual per capita GDP growth of these countries ranged from 7.4 percent for South Korea to 4.2 percent for Malaysia. There are no OECD members in this group of fastest-growing economies. The numbers in the table show total government expenditures as a share of GDP at five-year intervals during the 1975-95 period. The numbers in South Korea, the world’s fastest-growing economy during this period, had government expenditures that were relatively stable at between 20 and 21 percent of GDP. Non-investment government expenditures in South Korea showed a steady decline from just over 15 percent of GDP to just over 10 percent during the two decade period, indicating that South Korea has increasingly been devoting government expenditures toward investment. The total government expenditures of Thailand, the second fastest-growing economy, were generally less than 20 percent of GDP throughout most of the period, and they also showed a trend toward increased government investment. Taiwan, third on the list, showed a substantial increase in total government expenditures, from 21.5 percent of GDP to 30.1 percent, but still ended the period with government expenditures well below the world average. Taiwan’s non-investment government expenditures were still less than 20 percent of GDP. Singapore and Hong Kong, the next two countries, saw substantial declines in government expenditures as a percentage of GDP, and both countries had 1995 government expenditures well below 20 percent of GDP.

A persuasive argument can be made for designing government policies in order to maximize the economy’s rate of growth. In the long run, a strong economy is the best way to benefit all citizens. One need only look at the progress of the 20th century to see how economic growth has helped even those least well-off in the economy or compare the well-being of those in poverty in the United States with the typical standard of living in less-developed economies, to see why policies that foster economic growth are the key to long-term prosperity of non-investment government expenditures in cases where these figures are available. If one wanted to design a government that maximized economic growth, how large would that government be? The data examined earlier give no indication because for every nation examined, none had governments so small that they impeded economic growth, even though there were several instances in which total government expenditures were less than 20 percent of GDP. Because there is no evidence that any existing government is smaller than the growth maximizing size of government, some other method must be used to surmise what size of government would maximize an economy’s growth rate. One way to address the question would be to look at the size of the government within the framework of the theory discussed earlier in the literature. There are certain core functions of government that assist economic growth by protecting property rights and creating an environment conducive to growth. As economies expand beyond these core functions, larger government impedes growth because of: (a) the disincentive effects of taxes, (b) the tendency of government to expand into areas that are better suited for private sector production, (c) increased rent-seeking (rather than productive) activities, and (d) the crowding out of private investment.

The term cabinet is the most easily recognized generic description of this body, but it might create some confusion between cabinets as a collective political body and cabinets. In particular, France, sense a group of advisers working for a minister, comprising friends, political allies, and politically sympathetic civil servants dealing with political aspects of the post. An understanding of the cabinet government is key to an understanding of policymaking within parliamentary democracy as Laver and Shapsls (1994) point out ‘’any discussion of governance in parliamentary democracies must incorporate a systematic account of cabinet decision making’’. Without such an account, it is impossible to model the making and breaking of governments because it is not possible to specify how legislators envisage the consequence of their actions. Wright (1998) in describing ‘ten paradoxes’ of the French Administration referred to four types of cabinets. First one is Cabinet as Spectator, with major decisions being taken elsewhere in ‘central executive territory’, either by the chief executive, the chief executive in bilateral negotiation with relevant ministers, cabinet committees, interdepartmental committees of high ranking civil servants, ad-hoc commissions, and so on. In Ireland, Belgium, Sweden, Austria, and the Netherlands the cabinet is rarely reduced to the role of spectator. The real debate takes place, even if they are sometimes framed ‘framed’ by the Prime Minister or Chancellor or by ‘pre-cooking’ of the party bosses. The second is, Cabinet as Clearing House for rubber-stamping decisions made elsewhere and for formal reporting. The American & Russian cabinets work mainly as spectators and or clearing house. Third, Cabinet as arena for reviewing, debating ministerial initiatives, and for legitimizing decision-making. Fourth, Cabinet as actor, with power to initiate, filter, coordinate, and, as final court of appeal, to impose constraint or even vetoes. In Britain and French cabinets are found carrying all four functions depending on the prevailing position of the chief executive. Mackie and Hogwood (1985) offered a similar typology of the cabinet.

The form and membership of the cabinet largely vary in the developed and developing countries. In Belgium, Germany, the United Kingdom, and English speaking Commonwealth countries, a cabinet is an assembly of senior party managers or a group including technocrats (Austria, French, and Spain), or a combination. In some countries, following Wesminister model, parliamentarians are appointed as ministers while in other countries in particular, Spain and Austria, outside experts can be brought in the cabinet. In France, Norway, Gambia, and Mongolia, there is an incompatibility rule that one cannot be both minister and Member of Parliament. The cabinet system in the USA is more alike to disparate collection of individuals who are beholden together only by loyalty to a particular individual, however, earlier to this century, this was not the practice. In Bangladesh a cabinet is being formed with Parliament members with a provision of having maximum 20% cabinet members from the professionals and technocrats.

The debate over the size of the cabinet is considerable. It is argued that large cabinets allow powerful stakeholders to influence policymaking as Campbell (1996) argued ‘’a large and broadly representative cabinet at least gives dissenters a sense that their stances have received consideration in the secrecy of cabinet deliberation’’. Campbell (1996) identified 7 general opposition to the reduction of cabinet size. These are, first: it requires creation of super ministries, which can run into constitutional or legal obstacle. Second: in the countries with government of political coalition get it easier to distribute 25 posts than 14. Third: the reduction of cabinet may reduce the scope of Prime Ministerial patronage. Fourth: a trade off can achieve a good coordination within super ministries with coordination at the cabinet level. Fifth: the larger ministries may lead to the emergence of independent power bases for the super ministers and heighten the political stakes in case of conflict. Sixth: the reduction in the number of ministers in the cabinet reduces the chief executive’s ability to construct supportive coalitions. Finally, super ministries reduce visibility of junior ministers and hence the capacity of the cabinet to identify their talents or weaknesses. 

Opponents of larger cabinets argue that first: it loses general image of the highest decision making body of the country that comprises of a large number of ministers that a country can hardly afford. Second: it may be helpful to entrenched corruption accommodating larger number of stakeholders in the cabinet, as witnessed during 1990 in Bangladesh, Benzir- Sharif regime in Pakistan. One may recall available evidence that there was stalemate in the activities of the government as a result of clique among the members of cabinets in 1979-1990 periods. Third: with a gap created for reason of clique among politicians, the bureaucrats mostly take advantage of handling the administration to isolate people from the politicians. Fourth: the large cabinet offer opportunity for creating an inner or ‘’kitchen’’ cabinet-an inner core of the most powerful ministers, friends and family members of the prime minister, leaders of the coalition parties in government, including the head of the government. Such kitchen cabinets have been experienced as a symptom of the weakness of the center. The very existence of the kitchen cabinet may result in the creation of unofficial and informal meetings of excluded and resentful ministers, ultimately resulting in creating chaotic politics within the government. For example, chaotic politics among the cabinet members during 1979-81 period may be identified as one of the causes of the undesirable death of the BNP’s founder president Zia. Subsequently after his death, the elected president Justice Sattar officially and publicly had handed over power, on the ground of corruption and chaos within the party, to military dictator Ershad who systematically damaged the democratic institutions. The kitchen cabinet has distinguished ancestry and had been frequently used during wartimes (Manning et al 1999). Fifth: larger cabinets become expensive in the foreign aid syndrome developing and corrupt countries. For example, countries like Bangladesh where salaries of the government employees are paid from public borrowings and foreign sources. In such context, Bangladesh cannot afford huge number of ministers more than thrice of the OECD average of less than 20 ministers. 

Currently, most cabinets in the OECD countries have around 20 ministers; by contrast, the average size of the cabinets was just over 18 during 1987-95 in the European and African countries. The highest average during that period was 32 in Canada and smallest was Switzerland, just below 8. Following some four decades of expansion after 1945, there has been light trend toward further reduction in the cabinet size of the OECD in the past decade. The Australian government reduced the number of government departments from 28 to 18 in July1987 and cabinet portfolios 16. The cabinet was further reduced to 14 in 1996. Similarly, Canada radically reduced the size of its cabinet in 1993. The Hungarian cabinet was reduced from 20 in 1987 to 15 in 1999. These are proven to be the beginning of downsizing the government from the top for right sizing of public sector. Because, reducing the role of public sector enlarges the role of private sector that is private institutions of the society. Downsizing of public sector means that less money is taken and spent by the government and more money left in the hands of the people, to be spent in the market place, broadly defined. Less borrowing by the government means that there is less crowding out in the market for money, and, therefore, more capital available for private borrowing and job creating investment. Currently, popular terms for the conceptual process of reducing the size, scope, role, and cost of government-shrinking government, some would say- are rethinking, dis-inventing, reinventing, reengineering, and privatizing.

The result of the study conducted by António Afonso and João Tovar Jalles (2012) on 108 countries on the Economic Performance, Government Size, and Institutional Quality from 1970-2008, employing different proxies for government size and institutional quality reveal several conclusions regarding the effects on economic growth of the size of the government: i) there is a significant negative effect of the size of government on growth; ii) institutional quality has a significant positive impact on the level of real GDP per capita; iii) government consumption is consistently detrimental to output growth irrespective of the country sample considered; iv) moreover, the negative effect of government size on GDP per capita is stronger at lower levels of institutional quality, and the positive effect of institutional quality on GDP per capita is stronger at smaller levels of government size. In addition, the negative effect on growth stemming from the government size variables is more attenuated for the case of Scandinavian legal origins, while the negative effect of government size on GDP per capita growth is stronger at lower levels of civil liberties and political rights.

James S. Guesh (1997) study on Government Size and Economic Growth in Developing Countries: A Political-Economy Framework: A model which differentiates the effects of government on growth across political and economic institutions is developed and tested using annual time-series data for fifty-nine middle-income developing countries over the period 1960–85. The results suggest that growth in government size has adverse effects on economic growth in developing countries, but the adverse effects are three times as great in countries with nondemocratic socialist systems as in countries with democratic market systems. Thus, greater government size takes not only a toll on economic growth, but the type of political and an economic system present in a country affects the magnitude of the toll. In light of what we have discovered, it appears that an appropriate policy prescription for economic growth and development should include a reduction in government size and the promotion of economic and political liberties.

Patrick J. Caragata (1998) on From Welfare State to Optimal Size of Government: A Paradigm Shift for Public Policy study suggested a new paradigm that culture of public control, or regulatory and intrusive management, that has grown up under the welfare state must be ended and replaced with the culture of public service that respects taxpayers as the shareholders of government. The greater the numbers demanding benefits from government, the greater is the welfare dependency of the population, and the greater the level of government control. The greater the level of control, the less acceptable and the more wasteful are govern-ment services likely to be. Reducing taxes helps to encourage less wasteful spending and greater personal responsibility. The new paradigm of the optimal size of government offers politicians the basis for addressing ‘democracy’s discontent’ by reducing the culture of dependency arising from the intrusive welfare state and promoting self-development and learning as the basis for national re-invigoration and enhanced international competitiveness.

Stephen Kirchner (1968) in his research monograph Why Does Government Grow concluded that The absolute size of government is less important than the constitutional, legal and other constraints under which governments function. Growth in government is of concern largely because it is symptomatic of a relaxation of the constraints that have traditionally bound it. The relaxation of some of these constraints is welcome, for example, the expansion in the potential tax base associated with the growth of formal and more extensive markets and reduced household production. As markets and other voluntary interactions become more extensive and complex, the demands on government increase, but government effectiveness decreases as knowledge in society also becomes more specialized and dispersed. This argues against the increased centralization power and decision-making that often accompany growth in government. To be effective advocates of limited government, classical liberals need to acknowledge and better understand the forces driving the long-run growth in government. While classical liberals view government as being less efficient than markets in most contexts, governments may grow in part because they are successful in finding greater efficiencies in their activities. This in turn can be expected to undermine the negative correlation between government size and economic growth and weaken critiques of big government based mainly on efficiency arguments. Classical liberals have traditionally argued for policies that would improve the efficiency of specific government tax and spending programs, but such policies need to be located in a broader framework of advocacy for the rules and institutions that support limited government.

Until recently, the operation of the Peoples’ Republic of Bangladesh have been running with 231 office organizations under 36 ministries. Soon after the independence, number of ministries were 21 in 1972, 13 in 1975, 33 in 1977 under military dictator, 19 in 1982 also under military dictator, 35 in 1995 under BNP-Jamat lead coalition, 36 in 2000 under Awami League-JSD & JP coalition, strikingly 72 in 2001 lead by BNP-Jamat. Since independence, different governments have formed 16 committees and commissions to reform bureaucracy and public services within the country. However, the situation has not changed under the Grand Alliance since 2009 showing significant increase in the size of the government in terms of size of cabinet, expenditure and number of civil servants and departments. 

An analysis of the 231 office organizations reveal that 48 are under the supervision of the Ministry of Finance, 20 Law and Justice, 16 Health and Family Welfare, 11 Home Affairs, and 10 in Education. Ministries of Establishment, Defense, and Cabinet Division each have 9 offices under their supervision with the Prime Minister being the in-charge for all of these 27 offices. Ministries those have 7 offices under them are Communications, Information, Housing and Public Works, Shipping and Agriculture. Labor & manpower and Commerce are two Ministries who supervise 6 offices each. The Prime Minister being the in-charge of Power and Energy Ministry has 5 offices under them. Ministries each of those have 4 offices under them are LGERD, Industries, Fisheries and Livestock, Land, including Environment and Forest. 5 Ministries, such as, Disaster and Relief, Religious Affairs, Planning, Youth and Sports and Culture each have 3 offices under their supervision. There are only 2 offices each work under the Ministry of Post & Telecommunications and Women & Children Affairs. There are 8 Ministries running with 1 office under them are Foreign Affairs, Food, Textiles, Hill Tracts, Civil Aviation & Tourism, Science and Technology, Social Welfare, Water Resources, and the Prime Minister’s Office. In addition the Parliament Secretariat and Election Commission each have 2 offices and 1 office work under Bangladesh Public Service Commission.

On the cost and effect of the Expanding Size of Government of Bangladesh since Independence Jasim (2014) reports that the number of ministries has doubled in Bangladesh since independence - from 21 in 1972 to 42 in 2014. The divisions under different ministries have expanded in two decades— from 49 in 1994 to 59 now. Likewise, the number of autonomous bodies has increased from 199 to 247 during this period of past twenty years. Departments and directorates of Government have risen, in numbers, to 275 now, from 221 in 1994 and 181 in 1982. The overall numbers of ‘civil’ or ‘public’ servants and public sector employments have thus virtually trebled since independence, rising from 4,54,450 in 1971 to 7,79,000 in 1982, 9,46,749 in 1992, 1,000,983 in 2001, 119,557 in 2005, and 1,760,864 in 2014. The aggregate number of ‘civil servants,’ as of now, reflects an annual compounded rate of growth by about 3.0 per cent against an average population growth rate in the same period at about 2.25 per cent. Figures, noted above, may, however, require some adjustments, on a more detailed scrutiny of statistics.

But one thing stands out clear: the size of Government, in terms of numbers of those employed in ministries and their divisions, autonomous bodies and departments and directorates, has expanded, outpacing the country’s average annual population growth rate, on a compounded basis, over the last 44 years since independence. The figures of those engaged in defence services, officers and support-staff for a good number of projects under the annual development programme (ADP) and temporary workers employed in contingency posts or covered under ‘master roll’ of departments and directorates etc., have been excluded here. If these are included, then the picture will be ‘bigger’ about the size of Government. According to knowledgeable circles, the size of Government has a “strong bearing” on cost of running it. The burden of this cost, as such circles noted, does ultimately fall on the people who bear the load of direct and indirect taxes, fees and other government charges. Trends of compensation costs for both serving and retired government employees show that the bill on account of pay and allowances as well as pension and retirement benefits has been bulging steadily. It has increased not only in absolute terms but also as relative ratios to the government’s revenue expenditure and gross domestic product (GDP) at current prices. 

Jasim (2014) talked to a number of analysts of public expenditures, economists, former civil servants and other competent experts to obtain their views on, what appeared to be, on the basis of available statistics and data, an unending expansion of size of Government in the country and its wider ramifications. Their views covered a wide range of areas, centering the moot issue-size of Government. Most of them made one common observation: time is ripe now to give a serious thought to right-sizing-meaning neither down-sizing or over-sizing-Government.

The advantages of greater use of today’s digital technology and modern management practices, styles and methods do also heighten the need to taking such developments into consideration while making a meaningful exercise to this effect, they suggested. The expansion on growth of Government, according to them, must not be stimulated by pure political considerations, like increasing the number of ministries to accommodate more intra-party groups and to give new ministerial positions to keep some influential happy, spreading Government’s wings unnecessarily to absorb the politically favoured ones in jobs in civil service or creating jobs for dispensation by political leaders without examining, on dispassionate grounds, the need for the same. 

A number of analysts and observers with whom this Jasim (2014) talked to, noted that the number of ministries in Bangladesh “is already large” in Bangladesh, compared to the situation in many other countries like Thailand, Malaysia, the Philippines, Sri Lanka, South Korea, Japan, the UK and many more. “What counts most in this contest is the quality of output, not more functioning of a ministry”, one of them observed. When this correspondent drew his attention to the claim by some quarters that the cost of running the government in Bangladesh is not far out of line with other comparator countries in fiscal terms, he observed that this factor must not be taken “as a source of any comfort” in the Bangladesh context where recurring expenditures on account of pay and allowances as well as retirement and pension benefits for serving and retired public officials increased by about 120% in last two decades and a half alone. 

The number of employees under government revenue budget has increased by 83 per cent to 1.26 million over the last three decades since the early 1980s, leaving aside the first post-Independence period. This growth, according to most of analysts and experts with whom this correspondent talked to, is rather disproportionate to the public services that the administration delivers. And this overstaffing eats up a significant chunk of government revenues coming from taxpayers’ money without yielding the expected quantitative and qualitative outcome, they said. Government expenditure in the last fiscal also increased to Tk 248.67 billion—up nearly 69 times over the 1983 mark. 

In FY 2014, the number of approved posts for the ministry of home affairs was 281,122, against which and some postings were made for 258,451. The ministry of primary and mass education has approved posts for 215,072. Some 189,544 have been posted. In FY 1983, the ministry of education was the biggest ministry in terms of manpower followed by the ministry of home affairs. The ministry of primary and mass education was then part of the ministry of education. The ministry of education had 185,587 posts in FY 1983 while the that of home affairs had 118,974. Meanwhile, the departments and directorates also rose, in to 275 in number in FY 2014 from 181 in FY 1983. Experts like economists and former bureaucrats are of the view that the fiscal space is shrinking as a result of a substantial growth of expenditure in the ‘non-development’ areas. Fiscal space, they said, will shrink further after implementation of the next new national pay scale. It is set to be announced next month. We are managing a central bank with nearly 90 general managers in comparison South Korean central bank is running with 6 general managers in a most efficient manner. In Bangladesh, now nearly 500 bureaucrats do not have position in their cadre service; many are sitting at State Owned Enterprises doing nothing. Contractual employment in the Government is de-motivating eligible down level promotion seekers. 

Expert commission need to set up for manpower planning and crafting organization for the size of Cabinet for Bangladesh to Structure of Government the Shape Bangladesh on the Spirit of Liberation War. The Meritocracy should get priority both in politics and bureaucracy. All managers in politics and bureaucracy must meet the literacy criteria. Current system of Five Year Plan is not functioning. To make the planning and budget document effective, Bangladesh should formulate long term business plan considering all variables by setting national goal with a provision of revision every two years. Budget should be considered as integral part Five Year Plan which has not been practiced. The Planning and budget process should comply the requirements of constitutional provisions [7 (1); 7 (2)]. The Five year Plan and Annual Budget should emphasis higher allocation to the development expenditure (70%) and less (30%) to the revenue expenditure. In the revenue model direct collection need be higher ratio (55%) than indirect tax (45%). Generation of Black money within the economy tend to increase if indirect tax collection is not collected. Application of ICT is essential to collect the desired level of revenue collection. All government officials must be ICT literate, if any one left must be given time line to recover his/her ICT weakness. 

City Corporation and municipality revenue management requires automation to meet growing demand of urbanization within the country. Education, Primary and secondary Health Care, Electricity, Road Infrastructure, Railway, Sea Port and River Ways and Information Technology investment will bring long-term benefit. The 7th Five Year Business Plan document should emphasis highest and largest investment to Build Bangladesh as middle-income country by 2021. The Interim-government should review the current size of Bangladesh government and propose the structure and size of the government for the elected government of country.