Today John Quiggin published a post on ‘probity and economic liberalism’, arguments from which have also been appearing in the thread to this post of mine.
In response to the argument that economic liberalism reduces the scope for wrong-doing, Quiggin offers evidence which I think is in itself pretty much irrelevant: that various governments that introduced some liberal policies also had scandals. But as social scientists often point out, correlation is not causation. All governments eventually have scandals of some sort, and by Quiggin’s standard every ideology stands condemned.
The Latham argument I agreed with was that to the extent government either withdraws from activities or sets neutral rules of the game the scope for political favours is reduced. Because classical/neo-liberalism provides no ideological justification for industry policy and advocates cutting taxes over most forms of government spending it seems to me that it must, to the extent it is successful, have a prophylactic effect on political favours.
Don Arthur came up with an argument as to why this might not entirely be so:
It seems to me that shifting from direct government provision to outsourcing would create new opportunities for cronyism, corruption etc.
I can see this potential problem with outsourcing (though the problems with it here have been more to do with contract design and risk management than impropriety), but outsourcing has mixed reviews from a classical liberal perspective. Just recently, for example, the CIS published Supping with the Devil?: Government Contracts and the Non-Profit Sector, noting disadvantages for non-profits (and government, for that matter) in these arrangements. Outsourcing is not the preferred classical liberal way of delivering goverment-subsidised services. That remains voucher systems, wherever it is possible to use consumer choice.
So overall I think, to the extent classical/economic/neo-liberalism had some influence it would have reduced opportunities for political favours. On the other hand, despite the massive theoretical scope for political favours created by the pervasive modern state, I don’t think this is actually a major problem. The reason the corporate welfare state is bloating is not that any of the Labor Cabinet are crooks. They actually believe they are doing the right thing. Which is worse I am not sure.