Right sizing government for middle-income Bangladesh

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 civilisation, 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 monopolised the allocation of resources and other economic decisions, societies have not been successful in attaining relatively high level of economic affluence. Economic progress is limited when governments constitute zero per cent of the economy and when it is at or near 100 per cent as well. The experience of the old Soviet Union is revealing, as were the cases of East and West Germany during the Cold War era, or of North and South Korea today.
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 recognise that growth in governments can weaken the rule of law and undermine the voluntary relationships that constitute civil society. 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).
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. There is a robust negative correlation between government size and economic growth, although establishing the direction of causality is a more complex issue (Andreas Bergh and Magnus Henrekson, 2010). Economic growth may slow as countries reach a more advanced stage of economic development that also sees an increase in demand for government, but without a causal connection. Growth in government can also drive a search for greater efficiencies on the part of reform-oriented politicians, making government growth more sustainable and increasing the efficient size of government. The expected negative relationship between government and economic growth will be weakened to the extent that governments successfully adopt market-oriented policies designed to ease the revenue and other constraints on their expansion. As we shall see, the Henry tax review process and recommendations can be interpreted in this light. These efficiency gains have led some social democrats to claim that growth in government has been a 'free lunch.'
Classical liberals have traditionally been concerned with growth in the size of government because of its potentially adverse implications for economic efficiency and living standards. However, they also recognise that growth in government 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. This broader framework needs to be based on an understanding of the powerful forces driving growth in government. This paper will hopefully promote a better understanding of these forces and some of their implications.
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. An important exception to this overall trend was the nineteenth century, during which the government's share of national income declined from its Napoleonic Wars peak to levels of more than a century before. The period after 1815 was an era of relative international peace and increased globalisation. The world economy was in some ways more integrated in the late nineteenth century than at any time since, given the general absence of border controls and the considerable international mobility of labour and capital. However, we will see that globalisation has mixed implications for the size of government.
The brief trend to smaller government 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 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).
Growth in the size and scope of government has been a common feature of most developed economies since the beginning of the twentieth century. The recent global financial crisis has provided renewed impetus to the size and role of government, consistent with the historical experience with war and economic crises. While small relative to many comparable countries, the size and scope of government in Australia has increased over time on a number of the metrics: the tax share of GDP, legislative outputs, the size of the federal executive, and the number and scope of federal government departments and agencies. Explanations for the growth in government can be broadly divided into demand- and supply-side models, as well as exogenous explanations that reference factors such as technology, demography, specific historical events, and ideology. The various hypotheses that have been advanced to explain government growth are often unable to yield predictions about the optimal or equilibrium size of government. By the same token, theories of government size struggle to explain long-run trends in government growth.
Empirical testing of the various theories is complicated by the potential for observational equivalence among the various hypotheses, which need not be mutually exclusive. As Durevall and Henrekson suggest, the search for a 'grand explanation' of growth in government may be 'futile' (Dick Durevall and Magnus Henrekson). However, many of the historical drivers of growth in government such as demographic factors are themselves bounded and growth in government is constrained by factors such as the efficiency costs of taxation. Governments like those in the United States, the United Kingdom, the European Union, and Japan are increasingly pushing the limits of these fiscal and other constraints, although it remains to be seen whether this leads to acute fiscal crisis, fiscal reform, and smaller government or secular stagnation based on muddling through under big government. While many governments have almost certainly exceeded their optimal or efficient size, the long-run equilibrium size of government in developed countries such as Australia, if indeed there is one, remains unclear.
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 specialised and dispersed. This argues against the increased centralisation of 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.
Theories of government growth: The brief review of the stylised facts suggests that any theory of government growth faces a heavy explanatory burden. A complete theory would need to answer the following questions: Why did government growth take off throughout the Western world around 1900. Why did government continue to grow 110 years later?  Is there an optimal (that is, economic growth, efficiency or welfare-maximising) size of government? Is there an equilibrium size of government (that is, stable sizes of government on which countries will tend converge)? If there is an optimal or equilibrium size of government, why aren't we there yet? Or are we?
It is generally assumed that the efficient size of government that maximises economic growth or welfare is some positive share of GDP. Government has a role to play in the provision of public goods, lowering transaction costs and solving collective action problems that might otherwise stand in the way of the private sector capturing potential gains from trade. However, modern governments typically take on functions that go well beyond these basic functions by reallocating resources, redistributing income and wealth, and promoting some private activities, while suppressing others. Technically, the government share of GDP could exceed 100 per cent if government transfers are re-taxed and re-transferred multiple times, although the efficiency costs of such repeated fiscal churning would be considerable. The efficient size of government will always be a matter for dispute, but very few would be prepared to advocate unlimited government. It is just as incumbent on the advocates of big (or bigger) government to identify the limits to government growth as it is for classical liberals. Otherwise, there is a risk of overshooting what even big government advocates might view as appropriate. It is thus useful to think in terms of the economically efficient (or optimal) size of government and what a long-run equilibrium size of government might look like, even if we cannot identify these conditions very precisely. The optimal size of government is distinct from the concept of optimal taxation, which seeks to identify the tax structure that will minimise the economic cost of raising revenue taking the overall revenue-raising task as given. As Brennan and Buchanan note, most conventional analysis of taxation presumes that governments require 'some exogenously determined amount of revenue per period, with the analysis having as its purpose the identification of that taxing arrangement that will generate such revenue most effectively (Geoffrey Brennan and James M. Buchanan 1980). The optimal size of government is usually discussed in terms of the revenue share of GDP, which approximates the economy-wide average tax rate. Yet a given average tax share of GDP could be consistent with a wide range of tax structures with very different implications for overall economic efficiency.
It would make sense to address the issues of optimal government size and optimal taxation jointly, but in practice, they are mostly treated separately in public policy debates. For example, the Henry tax review did not address the size of government, taking the expenditure side of the budget and its likely future growth as given. As Brennan and Buchanan note, "the policy stance that emerges from the conventional treatment, and that is now taken for granted in virtually all professional discussion of tax policy, leads inexorably to broader tax bases and correspondingly larger potential tax revenues (Geoffrey Brennan and James M. Buchanan 1980). An important contribution that classical liberals can make to public policy debates is to tie the issue of optimal taxation more closely to the issue of the optimal size of government, stressing that the latter issue is the conceptually prior and more important one.
Expansion in the size of government may drive a search for greater efficiency in revenue collection but also market-oriented reform more generally, easing the revenue and other resource constraints on the size of government. A more efficient tax structure could conceivably increase the optimal size of government by lowering the economic cost of the overall revenue take. There is evidence to suggest that more efficient tax systems are associated with larger governments, with causality running from tax structure to government size, although it could also be that larger governments adopt more efficient tax systems because these efficiency gains are increasing in the amount of revenue raised (Gary Becker and Casey Mulligan 2003). For example, the change in Australia's tax mix with the introduction of a goods and services tax (GST) in 2000 may have induced an increase in government spending by easing the government's revenue constraint. The resources and terms of trade boom since 2003 has had a similar effect in the absence of a change in tax regime, although proposals for a new resources rent tax can also be seen as an attempt to further ease the government's revenue constraint. As Becker and Mulligan note, analysis of the economic gains from tax reform often takes government spending as given and ignores the increased welfare costs arising from the induced expansion in the size of government that may follow from a more efficient tax system. Once the economic costs of induced government spending are taken into account, the supposed efficiency of even lump-sum taxes is called into question.
The Armey curve: Borrowing a graphical technique popularised by Arthur Laffer, Representative Richard Armey, an economist by training, developed what he termed the Armey Curve (Ken Henry (2009).  In a state of anarchy, output per capita is low. Similarly, where all input and output decisions are made by government, output per capita is likewise low. Where there is a mix of private and government decisions on the allocation of resources, however, output often is larger. The output-enhancing features of the government dominate when government is very small, and expansion in governmental size is associated with expansion in output.
At some point, however, further expansion of the government no longer leads to output expansion, as the growth-reducing aspects of the government grow larger, and the growth enhancing features of the government diminish. Further expansion of the government contributes to economic stagnation and decline. Why is this so? In a world without government, there is no rule of law, and no protection of property rights. Bullies and strong people can steal the assets of weaker persons with impunity. There is little incentive to save and invest because the threat of expropriation is real and constant. Moreover, without some collective action, there is no protection from bigger bullies, namely foreign nations, or pirates on the high seas. Collective action also facilitates the creation of roads that improve transportation and lower trading costs. Government can also create a reliable medium of exchange, further developing the gains from trade. Thus, the establishment and early growth of government is associated with rising levels of income and positive rates of economic growth.
As governments grow, the law of diminishing returns begins operating. While the construction of roads initially assists output expansion, the construction of secondary roads and upgrading primary roads start to have less positive impact per dollar spent. Moreover, the taxes and/or borrowing levied to finance government impose increasing burdens. Low tax rates become higher. New taxes, such as income taxes, are added to low consumption levies, with increasingly adverse effects on human economic behaviour. Tariffs are raised, thwarting trade. New government spending no longer enhances economic growth. When government is small, political actions at income redistribution via tax policy or through payments to the poor are modest in magnitude. As transfer payments and progressive taxation grow with increasingly large government, the negative effects of governmental spending magnify. In small amounts, welfare payments help the poor and do not dramatically influence behaviour. As the payments grow larger and more comprehensive, they lead to pronounced work disincentive effects. Thus, it is to be expected that as government absorbs an increasingly large percentage of national output, incremental spending will actually have an adverse effect on output. The Armey curve does not suggest that "all government is bad." To the contrary, some government serves the public good. But like most good things, too much of it is harmful. Just as drinking one glass of wine daily may be good for the drinker's health but drinking 10 glasses is bad, so government in moderation is good for the economy while in excess it is bad. Milton Friedman, comparing the United States and Hong Kong, put it well recently:
Government has an essential role to play in a free and open society. Its average contribution is positive; but I believe that the marginal contribution of going from 15 per cent of the national income to 50 per cent has been negative. (Commonwealth of Australia, Australia to 2050: Future Challenges, Canberra: January 2010).
Professor Friedman is suggesting that the threshold where government's role in economic growth is probably somewhere between 15 and 50 per cent of the national income or output.
Buchanan's taxonomy: Buchanan suggests a division of theories of government growth into two broad perspectives: 'government by the people' (sometimes referred to as citizen-over-state) and 'government against the people' (or state-over-citizen) (James Buchanan 1977). The classical theory of democracy is consistent with the former perspective, which views government as demand-driven, and to that extent, welfare-enhancing. The second perspective suggests that government is supply-driven, serves its own interests, and to that extent is welfare-reducing, at least in aggregate. Public choice theory is often associated with the latter perspective, but rational choice models of collective decision-making straddle both perspectives. Other theories of government growth do not fit neatly into Buchanan's taxonomy. These include deterministic or path dependency theories, as well as what we will call zeitgeist theories. The following sub-sections review some of these theories and their explanatory limitations.
Citizen-over-state: One of the most enduring theories of government growth in the citizen-over-state tradition is 'Wagner's law of increasing state activity,' named after the German socialist economist Adolf Wagner. Wagner wrote in the late 1800s and early 1900s and effectively anticipated the growth in government that followed over the next century. Wagner's law has no definitive formulation, but the basic thesis argues that the demand for government increases with economic development (as a proxy by real GDP per capita) and related factors such as industrialisation and urbanisation (Alan Peacock and Alex Scott 2000). The more complex and impersonal society becomes, the greater the demand for collective provision of some goods and services.
In empirical studies, Wagner's law is often interpreted as a national income elasticity of growth in government greater than one, thereby accounting for growth in the government share of national income over time as real GDP per capita increases. Despite extensive empirical testing, Wagner's law remains underspecified theoretically. Lindert has characterised 'the notion that income growth will raise taxes and government spending, including social spending [as] the most durable black box in the whole rise-of-the-state literature (Peter Lindert 1996). Tests of Wagner's law have focused on the relationship between government spending or taxation and national income in both cross-sectional and time series settings (see for example, Ram 1987; Easterly and Rebelo 1993; Oxley 1994). Potential endogeneity between government spending, revenue, and economic growth has been a significant complication for empirical work. Durevall and Henrekson's recent review of the literature finds that 35 per cent of studies obtain unqualified support for Wagner's law, 35 per cent fail to find support, while 30 per cent find support conditioning on other variables or specific categories of government spending (Dick Durevall and Magnus Henrekson 2010).
State-over-citizen: The state-over-citizen tradition is perhaps best exemplified by Franz Oppenheimer's 1908 The State, a work of political sociology roughly contemporary with that of Wagner (Franz Oppenheimer 1975). Oppenheimer had an influence on American libertarianism via the writings of Albert Jay Nock (Albert Jay Nock 1989). Oppenheimer saw the evolution of the state as the product of coercion and predation, distinguishing between the economic and political means of sustaining a living, or more colourfully, between 'work and robbery (Franz Oppenheimer 1975). While this is a compelling perspective on the initial rise of the state, it is less informative on the long-run drivers of growth in government in modern constitutional democracies. Mancur Olson maintained that as groups become larger, the disconnection between the interests of the individual and the collective would increase, with small but powerful distributional coalitions coming to dominate the majority interest, undermining economic growth (Mancur Olson 1971). Olson made an important contribution to the rejection of the traditional view in the political science discipline that interest groups were a benign influence in a democracy. Olson used his model mainly to explain differences in economic performance between countries rather than the generalised growth of government observed in developed economies. For example, Olson thought that the destruction of incumbent interest groups in Germany, France and Japan during World War II explained their economic out performance in the early post-War period compared to the United States, the United Kingdom and Australia. While this was superficially plausible at the time of writing in the 1960s to early 1980s, subsequent developments have not been kind to Olson's interpretation: Germany, France and Japan have chronically underperformed the Anglo-American economies in recent decades. Later in his career, Olson came to embrace institutional explanations for cross-country differences in economic performance (Mancur Olson 1996).
Deterministic and path dependency theories: Deterministic theories of government growth do not fit neatly into Buchanan's for-the-people/against-the-people taxonomy. In this perspective, growth in government is attributable to exogenous factors such as technology, productivity, globalisation, geography, demography, or urbanisation. The historical and economic determinism of Karl Marx maintained that the evolution of the state was a function of the underlying forces of production, and that the state ultimately 'withers away' once it has served its historical purpose. While the governments inspired by Marxism have for the most part withered, they have done so for reasons other than what Marx suggested and have certainly not been replaced with a stateless society. Taking his cue from Marx, Schumpeter foresaw an evolutionary process by which liberal capitalism would inevitably give way to democratic socialism, in part because the successes of capitalism would give rise to an intellectual class hostile to it (Joseph Schumpeter 1954). Olson's theories, already discussed, had a similarly deterministic 'logic.'
Zeitgeist explanations: Ideas and ideology may be important in driving long-run growth in the size of government. Survey evidence and opinion polls can measure trends in attitudes to government (Herbert McClosky and John Zaller 1984). However, this only pushes the question one step back: what drives these changes in opinion and ideas? There is an obvious endogeneity problem with zeitgeist explanations. Do ideas drive growth in big government or do collectivist ideas emerge as a rationalisation of growth in the state? Bilateral causality is also possible. The liberalism of the nineteenth century gave way to an upsurge in socialist ideas that dominated the next century until the classical liberal revival of the late twentieth century, but it is hard to say whether these developments in ideas were causal or merely symptomatic of other trends, including trends in the size of government. Zeitgeist explanations are thus to some extent also deterministic theories in the absence of some explanation of what drives the development and propagation of ideas.  Marx would argue that ideas are mere expressions of underlying economic forces. Schumpeter perhaps comes closest to fully indigenising a model of growing intellectual hostility to capitalism, which might in turn help explain growth in government (Joseph Schumpeter, 1954). Ideology is an important factor in Higgs's crisis-driven model of government growth, but he is compelled to treat ideology as exogenously determined in the absence of a better model (Robert Higgs, 1987). Colin Clark published an article in Economic Journal in 1945 arguing that a tax share of national income above 25% was inflationary and therefore unsustainable. In his capacity as editor of the journal, John Maynard Keynes wrote to Clark:
In Great Britain after the war I should guess that your figure of 25 per cent as the maximum tolerable proportion of taxation may be exceedingly near to the truth. I should not be at all surprised if we did not find a further confirmation in our post-war experience of your empirical law (Colin Clark 1964).
It is remarkable that during the rest of the twentieth century, governments continued to expand to shares of GDP that were inconceivable even to Keynes, the most famous exponent of government intervention among modern economists. The Clark-Keynes correspondence provides anecdotal support for the view that ideas lag rather than lead growth in government. Hayek argued that the growth of socialist ideas in the post-War period was partly attributable to a relative lack of intellectual engagement by classical liberals with the wider public that deals in ideas (Friedrich A. Hayek 2007). Hayek maintained that support for socialism was an intellectual error that could be corrected; he probably did more than any other single figure in the post-War classical liberal revival to expose this error.
Bureaucracy theory: Goods and services provided by the government do not arise out of thin air, but rather they must be created by a government agency. The supply of government output, then, may be a function not only of citizen demand (as the previous theories suggest), but also of the demand of government bureaucrats. Niskanen's (1971) theory of bureaucracy postulates that government bureaucrats maximise the size of their agencies' budgets in accordance with their own preferences and are able to do so because of the unique monopoly position of the bureaucrat. Because the bureaucrat provides output in response to his or her own personal preferences (e.g., the desire for salary, prestige, power), it is possible that the size of the bureaucrat's budget will be greater than the budget required to meet the demands of the citizenry. An important point is that bureaucracy theory does not deny the citizen demand models of government discussed in the previous section, but rather it suggests that bureaucrats can generate budgets that are in excess of what citizen demand warrants. The ability of a bureaucrat to acquire a budget that is greater than the efficient level is dependent on several institutional assumptions (Niskanen, 1971, 2001). First, unlike private sector production, the public sector does not produce a specific number of units, but rather supplies a level of activity. As a result, this creates a monitoring problem for oversight agencies: It is difficult, if not impossible, for monitors to accurately judge the efficiency of production when no tangible or countable unit of output is available. Second, the monopoly nature of most bureaus shields them from competitive pressures necessary for efficiency and also denies funding agencies (Congress, the executive branch) comparable information on which to judge the efficiency of the bureau. Third, only the bureau knows its true cost schedule because bureau funding is provided by agents external to the bureau. This provides an opportunity for bureaucrats to overstate their costs in order to receive a larger budget. Finally, the bureaucrat can make take-it-or-leave-it budget proposals to the funding agency.
Niskanen (1971) shows that the bureaucrat will maximise a budget subject to the constraint that the budget must cover the costs of producing the good or service. The implication of the model is that the bureau's budget (and output) is expanded beyond the point where the marginal public benefits of the good or service equals the bureau's marginal costs of providing the good or service (Stephen Kirchner 2010). Although the model presents clear reasoning on how a bureau can expand output and costs beyond the efficient level, in reality many bureaus cannot expand output beyond the level demanded by the citizenry. Examples of this at the local level include school districts and garbage collection: School districts cannot educate more students than those who are already attending school, and garbage collectors cannot haul more garbage than is available for disposal. Even in these cases, however, a bureau may expand its budget beyond the efficient level-not by providing output beyond the efficient amount but by providing the services at a higher cost than necessary.
There has been ample literature that has compared the costs of public and private organisations that provide similar services. The activities or firms studied include, but are not limited to, hospitals (Clarkson, 1972), refuse collection (Bennett and Johnson, 1979, and Kemper and Quigley, 1976), water utilities (Morgan, 1977) and fire protection (Ahlbrandt, 1973). Mueller (2003, Chap. 16) provides a summary of 70 studies that examined the cost of public versus private sector provision of identical services. In all but five studies cited, the cost of public provision is significantly greater than private provision, thus lending support for the bureaucracy theory of government. However, the cost difference between private and public organisations may simply be a result of a lack of competitive pressure rather than direct attempts by bureaucrats to maximise their budget. In addition, Mueller (2003) suggests that many of the assumptions necessary for the bureaucracy theory to hold may be too strong and actually weaken the ability of the bureaucrat to manipulate price and output. For example, the ability of a bureau to present a take-it-or-leave-it budget proposal may be lessened if the funding agency or an oversight agency is aware of the advantage such a position affords the bureau. Thus, the funding agency may request that the bureau present several cost and output scenarios; if the bureau must present a cost schedule, it becomes more likely that the bureau will announce its true costs (Sam Peltzman1980). Also, several agencies exist, such as the U.S. General Accounting Office that is set-up for the sole purpose of detecting excessive costs and inefficiencies in government bureaus. The possibility of an audit and the negative attention such an action brings creates an incentive for bureaucrats to limit their pricing power and, at least somewhat, promote an efficient organisation. Although the constraints on bureaucracy seem reasonable, they are somewhat limited given the number of local, state, and federal agencies that exist relative to the number of funding and oversight agencies. However, although the literature has presented strong evidence that bureaucracy may partly explain government size, much less work has been done on explaining how bureaucracy theory may explain government growth. One explanation put forth by Mueller (2003) is that the ability of a bureau to misrepresent its cost and/or output schedule is likely to be directly correlated with the bureau's size. Thus, larger bureaus can better manipulate their budgets relative to smaller bureaus, and any manipulation of the bureau's budget will increase the size of the bureau, which in turn increases the bureau's ability to manipulate the budget. Despite the limits of bureaucracy theory, it remains a plausible explanation for the scope of government seen today. The common inefficiencies of large organisations, be they private or public, are not unknown by the general public, who often work in such organisations. In addition, it is not uncommon for the media to report waste or fraud that has occurred at large private and public organisations. The bureaucracy theory fits arguably well with the real-world experiences of many people.
Monopoly government and leviathan: The idea that representative governments behave as monopolists was first suggested by Breton (1974). The party in control of the legislature has an objective function that includes the probability of re-election, personal pecuniary gain, and the pursuit of personal ideals. While providing basic public goods, such as police and fire protection (in the case of a local government), the monopoly government can obtain its objectives by bundling narrowly defined issues that benefit individual members of the government along with the more popular public-good services provided. This idea stems from the neoclassical view of the monopolist, where a private monopolist can increase his profit by bundling other products that he does not monopolise with his monopolist product. Consumers will then buy the monopolist's package as long as their consumer surplus on the bundled products exceeds the cost of the individual packages.
Political determinants of government size: The size and scope of a government is a recurring theme both in public and scientific discourse. Most of these debates centre around the proper division of labour between the market on one side and the state on the other. Politicians, journalists, interest group leaders and also scientists often disagree with respect to how much the state should be involved in or interfere with economic matters. One opinion states that the state should restrict itself to its classic and basic tasks of domestic and foreign security because its interference with the economy would only lead to the distortion of market forces and thus to economic inefficiencies. On the other hand, proponents of a strong state argue that such an involvement is necessary to counteract the malfunctions and externalities a completely free market would create.
No matter which position is taken, one basic, although rather implicit, assumption of both normative prescriptions is that the level of government size can be, and indeed is, to a large extent purposely changed by government. The main focus of this thesis will be to explore the validity of this assumption. Generally, left parties like social-democratic and labour parties are associated with a preference for more interventionist policies and a greater skepticism towards market-mechanisms than Christian-democratic or even conservative or liberal parties. Thus, if this assumption is correct, party ideology should be one of the major driving forces of government size. This hypothesis will be statistically tested on pooled time-series cross-section (TSCS) data for 16 industrialised democratic countries over a period of 30 years. The study is based on the existing literature that examines the relationship between partisan governments and government size, but at the same time it aims at improving on previous research on theoretical as well as methodological grounds.
Most importantly, it takes into account two factors which potentially mediate the effects of government ideology on government size. Both have their origin in structural features of the political system. The first factor is veto players whose agreement is necessary for policy change (Tsebelis, 1995, 2002). The number of veto players is at least partly determined by the characteristics of political institutions. Depending on election system, regime type, and other institutions of the political system, the number of veto players varies across countries. This has consequences for the relationship between partisan government and government size. It is reasoned that veto players blur partisan effects on policy output since incumbent parties have to make compromises with other actors in the political system (Schmidt, 2001).
The second constraining factor is interest organisations. Depending on the structure of the interest group system and its relations to state institutions, interest associations can have substantial influence on policy outputs. How this influence is transmitted can range from simple pressure on politicians and bureaucrats to fully-fledged "policy concertation" (Lehmbruch, 1984: 62). The latter describes the cooperative formulation and implementation of policies by the state and powerful interest associations on the system-level. In such a situation, the incumbent government does not only have to engage in compromises with veto players but also with organisationally strong business confederations and trade unions. The paper argues that this is a further hindrance to government in directly realising its preferences regarding government size.
Theoretically, the analysis takes the perspective of the leading government party, for which both veto players and corporatist interest groups are context factors. It is hypothesised that the impact of its ideological stance is most pronounced in political systems where it does not face such political constraints on its discretion. Methodologically, the relationship between party ideology and government size is seen as being conditional on the number of veto players and the degree of corporatism in the interest group system. In regression analysis, conditional effects are appropriately modelled by interaction terms. Although this seems straightforward, the exploration of these interacting effects has been largely neglected in previous research on government size.
Especially the constraining effect of political institutions has often been acknowledged, but modelled as an independent term in the analysis with a hypothesised negative effect. While this negative relationship has often found empirical support, it is mainly due to the enduring growth of government size for the time periods usually examined. As the public sector was trimmed in the eighties and nineties, a negative impact actually means that institutional constraints furthered this retrenchment. But counter-majoritarian institutions are supposed to hinder policy change in any direction. Thus, from a theoretical perspective a hypothesis about an independent effect of veto players is inappropriate. Since corporatist organisations are assumed to have a similar mediating impact on the effect of government ideology, modelling these factors through interaction terms results in a closer theory-model fit.
The rise and fall of the welfare state paradigm: As understood by Thomas Kuhn (1962/1970) in his study of scientific revolutions, paradigms are framework of concepts and assumptions that organise and explain experience. Over time, anomalies accumulate that become too difficult for the reigning paradigm to resolve; eventually it breaks down and is replaced by a new paradigm. 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 liberalisation 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.
The welfare state was seen as a political and social panacea by the post-war generation (the 'baby-boomers') who were the first beneficiaries of the full range of its services in health, education and social security, as well as by an older generation that benefited in particular from the old-age pension. Even as it was being stretched far beyond its original purpose and problem-solving capabilities, it became closely identified with democracy itself. But then it started to undermine welfare by weakening the values and protective power of the central institutions of civil society: the family, the churches, and the voluntary associations.  This problem has led Sandel (1996:3) to identify the two principal causes of what he calls Democracy's Discontent:
One is the fear that, individually, and collectively, we are losing control of the forces that govern our lives. The other is the sense that, from family to neighbourhood to nation, the moral fabric of community is unravelling around us. These two fears for the loss of self-government and the erosion of community, together define the anxiety of the age. It is anxiety that the prevailing political agenda has failed to answer or even address.
Sandel (1996:351) ends his book by observing that 'the hope of our time rests … with those who can summon the conviction and restraint to make sense of our condition and repair civic life on which democracy depends'.
Yet despite his valuable insights, Sandel fails to see the connection between large, intrusive government and the loss of autonomy and the erosion of community. As taxes rise and the government gets bigger, it tends to crowd out the institutions of civil society by pre-empting their roles and undermining individual self-reliance. This argument was made by Alexis de Tocqueville (1835/1945:116) over 150 years ago, in an astonishing premonition not only of the rise of the welfare state but also of the problems that have brought it into question:
The more [government] stands in the place of associations, the more will individuals, losing the notion of combining together, require its assistance: these are causes and effects that unceasingly create each other … The morals and the intelligence of a democratic people would be as much endangered as its business and manufactures if the government ever wholly usurped the place of private companies.
Government has a role to play in assisting those in genuine need. But should as many as a fifth of New Zealanders of working age, and nearly a third of New Zealand's children, be dependent on state welfare (Cox, 1998:27).
Paradigm shift: There are numerous signs that the tide of big government is receding. Interest is growing in the high compliance costs of the 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 the 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 government is that, if it grows beyond a certain point, the public sector reduces welfare rather than increases 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 defence and a judicial system protect private property and individual rights. Other publicly provided goods, such as infrastructure, also enhance private productivity. Thus, up to the some point, the government expenditure acts as a positive externality on private economic activity … Beyond some optimal size of the government, increased taxation acts as a negative externality on the private sector. (Scully, 1996a:4-5)
The new paradigm therefore centres on the question: what is the optimal size of government? Martin Feldstein (1996:26) has recently argued that 'the central public finance question facing any country is the appropriate level of spending and therefore of taxes'. A considerable literature has emerged that attempts to answer that question. Clark (1945), inspired by Keynes, suggested that where the objective is to minimise inflation and stabilise the exchange rate, the optimal effective tax rate is likely to be around 25 per cent of national income (equivalent to about 21 per cent of GDP in New Zealand). More recently, Peden (1991:168-9) has found that over the period 1929-86 US government expenditure up to 17 per cent of GNP improved the productivity performance of the economy, but expenditures above that level reduced 'the growth of productivity'.
In its 1997 World Development Report, the World Bank (1997:168-71) emphasises the value of an 'effective state' that facilitates rather than impedes higher levels of economic performance. Its cross-country study examining the impact of 14 independent variables on the growth in GDP per head concludes that the size of government (measured by government consumption's share of GDP) has an important and consistently negative impact on the standard of living (though it did not search for an optimal level of tax or expenditure relative to GDP). Tanzi and Schuknecht (1997) compare the economic performance (growth rates, gross fixed capital formation, inflation, unemployment, and debt) and social performance (life expectancy, infant mortality, education and income distribution) of 17 small, medium and large OECD countries. They conclude that 'there is no evidence' that countries with big governments out-perform the countries with medium and small governments. When government expenditure raises much above 30 per cent of GDP, there are diminishing returns to the social gain from public spending (Tanzi & Schuknecht, 1997:167).
Finally, a recent OECD report has concluded that up to one-third of the growth deceleration in the OECD (from around 5 per cent in 1965-73 to around 2 per cent in 1989-95) would be explained by higher taxes. In some European countries, tax burdens increased much more dramatically than the OECD average, which would imply correspondingly larger effects on their growth rates. (Leibfritz, Thornton & Bibbee, 1997:49).
Why do government expenditures affect economic growth: 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 defence 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. 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.
The relationship between size of government and economic growth: 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 government continues to grow as a share of the economy, expenditures are channelled into less-productive and later to counterproductive activities, causing the rate of economic growth to diminish and eventually decline (Barro 1990). 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 contracts, and a stable monetary regime, there is no reason to believe that it will promote economic growth. 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. 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.
Government expenditures and economic growth in the United States: 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. 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 the 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: Total government expenditures amounted to less than 25 per cent 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 per cent of GDP. Countries in this category averaged a GDP growth rate of 6.6 per cent during these years. When the size of government was between 25 per cent and 30 per cent of GDP during a year, the average growth rate fell to 4.7 per cent. The year-to-year growth declined to 3.8 per cent when government expenditures consumed between 30 per cent and 40 per cent 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 that at the beginning of the 1960s, the total expenditures of the Japanese government were only 17.5 per cent of GDP and they averaged only 22.0 per cent of GDP during the decade registering growth rate of 10.6 per cent in the 1960s. Over the next three decades, the Japanese government grew steadily; by 1996 government spending had soared to 36.9 per cent of GDP and growth rate moved in the opposite direction, falling to 5.4 per cent in the 1970s, 4.8 per cent in the 1980s and sagging to 2.2 per cent in the 1990s.
Evidence from OECD nations with shrinking government: 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 grew from 28 per cent in 1960 to 52.3 per cent in 1986. This situation was reversed during the 1987-96 period. As a share of GDP, government expenditures declined from the 52.3 per cent level of 1986 to 37.7 per cent in 1996, a reduction of 14.6 percentage points. From 1960 to 1977 government expenditures increased from 28 per cent to 43.7 percent, and Ireland's real GDP growth rate was 4.3 percent. It declined to 3.4 per cent during 1977-86, as the government further expanded to 52.3 per cent 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 per cent 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 per cent in 1992 to 42.3 per cent 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. Its government's share of GDP rose from 32.2 per cent in 1960 to 47.2 per cent in 1982. During this period, the UK's GDP growth rate was 2.2 per cent and there was widespread reference to the "British disease." Between 1982 and 1989, the government's share of GDP declined by 6.5 percentage points to 40.7 percent. Responding, the UK's rate of GDP growth increased from 2.2 per cent to 3.7 percent. While shrinking government has been rare in the past few decades, evidence from places where the 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.
Size of government in high-growth nations: The data in Gwartney et al (1998) study   for OECD countries suggests that smaller government is correlated with faster rates of economic growth. 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 per cent of GDP. Non-investment government expenditures in South Korea showed a steady decline from just over 15 per cent of GDP to just over 10 per cent 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 per cent 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 per cent 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 per cent 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 per cent of GDP.
The search for the right size of the cabinet: The term cabinet is the most easily recognised generic description of this body, but it might create some confusion between cabinets as a collective political body and cabinets. In France, a group of advisers working for a minister, comprising friends, political allies, and politically sympathetic civil servants deal 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 type 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' 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 and Russian cabinets work mainly as spectators and or clearing house. Third, cabinet as arena for reviewing, debating ministerial initiatives, and for legitimising 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 France, 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 like a 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 per cent 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 seven 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 talent or weaknesses.  
Opponents of larger cabinets argue that first: it loses general image of the highest decision-making body of the country that comprises 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 offers 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 centre. 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.   
By comparison, 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 slashed 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, disinvesting, reinventing, reengineering, and privatising.
The Bangladesh scenario: Until recently, the operation of the Peoples' Republic of Bangladesh has been running with 231 office organisations under 36 ministries. Soon after the independence, the number of ministries was 21 in 1972, 13 in 1975, 33 in 1977 under military dictator, 19 in 1982 also under military dictator, 35 in 1995 under BNP-Jamaat-led coalition, 36 in 2000 under Awami League-JSD and JP coalition, strikingly 72 in 2001 led by BNP-Jamaat. 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. It looks whatever examples created earlier rulers in expanding the government size and cabinet, the successive governments tried to exceed earlier examples with no demarcation to the economic rationale.
An analysis of the 231 office organisations 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, Defence, and Cabinet Division each have 9 offices under their supervision with the Prime Minister being the in-charge of all of these 27 offices. Ministries that have 7 offices under them are Communications, Information, Housing and Public Works, Shipping and Agriculture. Labour and manpower and Commerce are two Ministries, which supervise 6 offices each. The Prime Minister being in-charge of Power and Energy Ministry has 5 offices under her. The ministries, which have 4 offices under them, are LGRD, Industries, Fisheries and Livestock, Land, including Environment and Forest. Five 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 one 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 one office work under Bangladesh Public Service Commission.
Expanding size of the bureaucracy: 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 into 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 the government have risen, in numbers, to 275 now, from 221 in 1994 and 181 in 1982. The overall number of 'civil' or 'public' servants and public sector employment 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. The advantages of using today's digital technology and modern management practices, styles and methods do also heighten the need to taking such development into consideration while making a meaningful exercise to this effect, they suggested. The expansion of the 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 the 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 this writer spoke to noted that the number of ministries in Bangladesh "is already large", compared to those of 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 writer drew his attention to the claim by some quarters that the cost of running the government in Bangladesh is not higher than 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 per cent in the last two decades and a half alone.
We are managing a central bank with nearly 90 general managers while 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 and state owned enterprises are de-motivating the eligible down level promotion seekers.    
Shaping Bangladesh from foreign loan syndrome economy to self reliant country in South Asia: An expert commission needs to be set up for manpower planning and crafting organisation for the size of cabinet for Bangladesh to Shape Bangladesh in the spirit of Liberation War. The meritocracy should get priority both in politics and bureaucracy. All managers in politics and bureaucracy must meet the ICT 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. The government should decide budget calendar from the beginning of the Bengali New Year. Budget should be considered an integral part of Five Year Plan, which has not been practiced in the last 44 years.   The planning and budget process should comply the requirements of constitutional provisions [7 (1); 7 (2)]. The Five Year Plan and annual budget should make higher allocation to the development expenditure (70 per cent) and less (30 per cent) to the revenue expenditure. In the revenue model direct collection needs be higher ratio (55 per cent) than indirect tax (45 per cent). Generation of black money within the economy tends 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 the growing demand urbanisation 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 Plan document should ensure the highest and largest investment to build Bangladesh as a middle income country by 2021. This is a political decision to be taken at the top tier to Make Bangladesh a Middle Income Country by 2021.
Jamaluddin Ahmed PhD FCA is General Secretary, Bangladesh Economic Association, and a member of the Board of Directors of Bangladesh Bank. Email: [email protected]