State of profusion: governments just keep growing

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Hello and welcome to the Intelligence from the Economist. I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. Mackenzie Scott is most certainly not acting like your usual billionaire philanthropist. She's just shoveling money out the door and faster and with fewer strings attached than anyone has before. We ask what that's meant for the recipients of all that cash. And in Morocco, officials really do try to enforce a ban on premarital sex, in part by insisting hotels only rent rooms to married couples. Like many Moroccans, hard up hotel owners desperately want the rule changed. Others simply work around it. But first.

We know big government does not have all the answers. We know there's not a program for every problem.

In his 1996 State of the Union address, American President Bill Clinton pitched his administration's fiscal restraint. We know and we have worked to.

Give the American people a smaller, less bureaucratic government in Washington. And we have to give the American people one that lives within its means.

The message proved popular and Mr. Clinton handily won re election later that year.

The era of big government is over.

But it wasn't over in Every year from 1996 to 2019, government spending grew steadily relative to GDP. Last year it jumped. And this week, President Joe Biden signed into law a trillion dollar infrastructure bill.

For most of the 20th century led the world by significant margin because we invested in ourselves. But somewhere along the way, we stopped investing in ourselves. We risk losing our edge as a nation.

But a growing central government isn't just an American trend.

So state spending over the past year and a half has really, really gone up a lot. It's gone up by 10 to $20 trillion globally, depending on how you measure it. It's the most extraordinary expansion of state capacity on record.

Callum Williams is a senior economics writer at the Economist.

The increase in spending over the past 18 months has been really impressive, but it's in fact not a change from the historical norm, because the historical norm is, and has been for many centuries, for government to get bigger and bigger.

Many centuries. How far back are we talking here?

So governments have been getting bigger and bigger really, since the 18th and 19th centuries. That's when it kind of started where their taxing and spending capacities expanded massively. So by the end of the 19th century, governments across Europe accounted for about 10% of GDP and then about 20% by 1920. Then came the world wars.

Money. So far, we've hardly even begun to pay for it.

That means taxes and bonds and bonds and taxes.

During both the first and the Second World War, spending vastly increased. But then the crucial point was when the wars ended, spending didn't return all the way back to its pre war level. Instead, what you saw over the remainder of the 20th century was that government spending and governmental power over the economy tended to continue to increase. And that also means that the purpose of government has changed over time too.

In what way? How has the purpose of government changed?

What you see generally over the long run of history is that governments exert more power over the economy. So in the 19th century they start to regulate factories, factory working hours and food standards. In the 20th century, you get the birth of the welfare state and and of socialised health care. It gets a bit more complicated towards the end of the 20th century, because on the one hand, you do have the kind of quote unquote neoliberal turn of Thatcher.

This government has rolled back the frontiers of the state and will roll them back still further. So popular is our policy that it's being taken up all over the world.

And Reagan, all the way along, the.

Choice has been the same.

More taxes, more spending, more regulation, more.

Deficits, or the other choice, less of all four and a lot more growth opportunity and a bright economic future for.

My generation and yours, who do a lot to privatize nationalized industries and break up monopolies and that kind of thing. But on the other hand, you have the spread of health and safety law from the 1960s onwards, you have more governments setting minimum wages, you have a huge spread of occupational licensing. So the kind of net effect is really that by the end of the 20th century, government is actually really bigger than it's ever been. And that trend has continued up until today.

Why is that, though? What's driving the growth in spending, in regulation?

So part of the argument why regulations grow is partly to do with the incentives that bureaucrats face. So in the same way that it's kind of more prestigious for a scientist to propose a new theory than it is to prove someone else's theory wrong. It's more prestigious for someone in government to introduce a new social program than it is for them to take one away. So there's partly these incentives at play that mean that governments always get bigger. It's partly to do with globalization. I think, too, there's more things that need to be codified, particularly in terms of trade, investment, immigration, and all that kind of stuff. But it's not the case that in every single dimension, governments are larger than they were. I mean, there's a funny example from the UK about how until the mid-80s, the UK government ran a chain of hotels, and then they were privatized in the mid-80s. So there are clearly ways in which the government has stepped away. But the argument that I think I'm convinced by is that the kind of overall aggregate economic effect of government in every era, in a sense, is unprecedented.

It's always getting larger, but government's not working in isolation. Right. What about the voters are persistently larger governments, something that the voters really want, have demanded.

Yeah. So that's another really important part of why government gets bigger. So it is generally accepted as true that as a person gets richer, they tend to demand relatively more by way of education and healthcare. So when you become twice as wealthy, you don't buy twice as much food, but you do decide to do more education and go for more elaborate healthcare treatments, that sort of thing. There's also an important history here, particularly to do with the 20th century and the Second World War, where the enormous sacrifices that people both on the front line and in the home front made basically changed the debate. And people kind of realized when the war ended that they felt entitled, and rightly so, entitled to socialized healthcare, a proper welfare state, and so on. So that sort of political movement has only been going in one direction also.

And from the sound of it, it'll continue in one direction into the future.

Government spending is going to get larger and larger. So for one thing, you've got an aging population, so you have a lot more people that are demanding much more complex health care. You've got Covid, obviously, which is contact tracing, vaccines, testing, all that kind of stuff. I mean, that is not going to be wound down anytime soon. And then the other massive thing is climate change. So there's going to be much more government involvement in the economy over the 2000s and 2000s. But that doesn't mean that there's not room for improvements in how government is run. So for instance, there are some suggestions from various economists to kind of have sunset clauses on regulations. So if a regulation has been in place for 10 years, it will be automatically abolished unless the relevant agency can demonstrate that that regulation is still doing a useful job. Of course, the other way of doing this is to make sure that the denominator grows, so GDP grows, so people get even richer than the government gets bigger. And so that means all sorts of things to do with improving productivity and that kind of thing. But what is kind of obvious and makes it an interesting topic for future kind of the next few decades is like not about whether the state is going to grow because it certainly will grow more. But the most important debates to come are going to be about the state's nature rather than its size.

Thanks very much for joining us, Callum.

Thank you.

It seems that the philanthropist Mackenzie Scott subscribes to the philosophy of charity as laid out by the Red Hot Chili Peppers. Give it away, Give it away, Give it away now. Ms. Scott became an accidental billionaire after her blockbuster divorce settlement with Jeff Bezos, the boss of Amazon. Like other mega rich folks such as Mark Zuckerberg and Bill Gates, she signed the Giving Pledge and a promise to give the majority of her wealth away. But unlike those other billionaires, her philanthropic mission is revolutionary, both in terms of the amount she's giving and the way she's giving it.

Over the course of the pandemic, Mackenzie Scott has become one of the most generous philanthropists in history. She's announced $8.6 billion of gifts in the 12 months to June this year. That's widely thought to be the most anyone has ever given to offer operating charities in such a short period.

Avantika Chilkati is the Economist's international correspondent.

What's really interesting is not just the amount she's giving, but the way in which she's giving it. She's donating to a bunch of organizations and she's just leaving them to get on with their work.

And how is what she's doing different from the way other megadonors do it?

So most megadonors that are the people you'll have heard of as famous philanthropists, like the Gates's Ford Foundation, Carnegie, they basically have taken a technocratic approach. These are rich people who set up a vast foundation. They hire a bunch of clever people and they spend lots of time figuring out who might be a good grantee. They get nonprofits to go through a grueling application process. They then fund specific projects. And they spend a lot of time and money monitoring how those projects do, trying to figure out the impact their money has. And what's really interesting about Mackenzie Scott is that she's leveled a much needed challenge to this very bureaucratic, very top down model that we've all accepted for decades. There's a lot of secrecy around what she's done, but I've spoken to a bunch of grantees and from what they say, there are no rules about what people actually spend the money they receive from her. On all she's asked for is a simple and brief report once a year, just letting her know what the organization is up to. There's no template for that report. There's no attempt from her and her team to advise the organization. Her big priority is just getting money out of the door.

And given that secrecy, do we have a sense for how she decides on who's receiving all this money?

Yeah. So Mackenzie Scott has put out three blog posts laying out what she's doing. So it's not very much. Most of it's sort of listed with poetry and her thoughts. But if you speak to the grantees, you get the sense that she's relying on outside advisors rather than setting up a foundation and her own bureaucracy. She's using groups like the Bridgespan Group. It's a non profit consultancy that was spun out of Bain and Co. And they've come up with a plan together on how she can best deploy her money. What they've landed on is an approach that basically sprays funds across a load of relatively small organizations. The most comprehensive data we have is from Bloomberg News which sent a survey to the recipients of all 786 gifts. They got responses from two hundred and seventy organizations. They found that half of those that got money from Mackenzie Scott have fewer than 50 employees. For nearly 90% of them, her gift is the largest that they have ever received. Contrast that for example, with the Gates Foundation. The Economist data team ran a big analysis of the Gates Foundation's grants database and they figured out that since conception some two decades ago, they've handed out about 30% of their total grants to just 10 big international groups working specifically mostly on global health. So the World Health Organization or gavi, the Vaccine Alliance. There's a very different approach from those big foundations to what Mackenzie Scott's doing.

And how are those windfalls affecting the charities.

So it's been really interesting speaking to some of the grantees. So I spoke to a guy called Jorge Valencia. He's the executive director of The Point foundation, which helps lgbtq, lesbian, gay, bisexual, transgender and queer students into higher education. And Basically, back in June 2020, he started getting calls and emails from consultants who are doing their due diligence on his organization. That's pretty regular. It happens all the time. But then just a few weeks later, he got a call from the consultant saying, hey, by the way, Mackenzie Scott wants to give you a big gift. Mr. Valencia still won't say how much money she gave, but he said that that quick turnaround is pretty exceptional. And in the midst of pandemic, it's allowed the Point foundation to more than double the number of young people it helps. This year. The word he used was that this was a godsend. Another person I spoke to is Jacob Harold, who's from a group called Candidate Candid. Does sort of data and analysis on the philanthropic sector. And it's actually a non profit itself. So one day Mackenzie Scott came calling with a donation for their organization, too.

It's gratifying in a different way because you know it is based on your reputation as opposed to you went in and charmed the right person.

It's not about a particular relationship.

It's not about access that you have. It's about the work that you've done and how that's visible to the rest of the world. So that's one way that I would say it's gratifying and in some ways empowering.

So as she's been shaking up the way donating is done, do you think other billionaire donors might follow in her footsteps?

So it's really easy to think that this is sort of a new solution and this is a magic formula for responsible philanthropy. The truth is, it's too early to say. Right. Because there's lots of things that Mackenzie Scott has foregone in pursuit of discretion. She's foregone transparency. There's a lot of secrecy around who her advisors are. So if you're a nonprofit leader right now and you really want to get on her radar, there's really no way to contact her, aside from basically commenting on her blog. There's so many con artists pretending to dole out cash on her behalf that Mackenzie Scott's Twitter bio actually directs people to a Federal Bureau of Investigation complaints page. So there's obvious problems with this model as well. And because she's giving as an individual and not through a foundation, there's no reporting requirement. And as a result, we don't really have a sense of the decision making process. So we can't say if it's the start of a trend. What's definitely true is that it's got people questioning whether the technocratic approach is correct.

And will she follow the trend herself. Do you think this is a strategy she'll stick with?

There's absolutely no way to know. I mean, she's just getting started with her philanthropy. That's the thing to keep in mind. There's a way in which perhaps this is just what she's doing until she sets up a foundation, which we can't tell. But even as she announced her first round of grants last year, she said she wants to keep at it until the safe is empty. So she's got a long way to go. The source of her wealth is a 4% stake in Amazon she received as part of the divorce settlement. And the truth is, even with all of her giving, her safe is fuller now than it was two years ago when she began shoveling money out the door.

Ivantika, thank you very much for your time.

Thanks for having me, Jason.

If you're a soon to be married couple looking to book a honeymoon, you might consider the warm welcome and scenic delights of Morocco. If you're a couple not planning on getting married, you might think twice in case your visit lands you in a less than scenic jail cell.

Morocco has a penal code which bans premarital sex. And when it comes to hotels, that means the receptionists are supposed to take on the role of private detectives. They have to verify marriage certificates before handing over room keys to couples.

Nicholas Pelham is the Economist's Middle east correspondent.

But hard up hoteliers are saying it's chasing away business. And Morocco's ban on extramarital sex simply has to come to an end.

And that puts extra pressure on a hotel industry that I suppose is already under pressure.

Morocco is heavily reliant on its tourism for over 10% of its GDP of its economic production. And that has crashed, unsurprisingly because of COVID Tourist figures are down more than 80% across the country. And so many hoteliers were turning to domestic tourism. There is demand. They've been trying to encourage it. But hoteliers are reporting that when people call up, most of the questions they're getting are about whether they can stay as a couple if they're unmarried. And they're just having to turn some much needed custom away. I spoke to one hotel owner, she runs a resort up in the reef mountains and she just says that she could easily fill the hotel if only they lift the law. And instead she's just turning people away. It's incredibly frustrating.

And so how strict is this law? What is the letter of the law?

Morocco has a penal code. Article 490 of that code says that any unmarried couple caught in a compromising position can be liable for up to a year in jail. And this sort of is enforced by the police in Morocco. It gives the Interior Ministry enormous power. They check hotel records sort of once a week. Individual police officers can use the law to extort bribes. So travel websites do suggest workarounds. And one proposes donning a wedding ring and says that the offer of an additional payment can carry some weight. Another advises what they call the two room method. The website reads, rent single rooms, then scurry across the corridor after dark. But the less legally tenuous solution hoteliers would like to see is that Article 490 gets repealed altogether. There are campaign groups that are pressing for this. Perhaps the most prominent is called Moroccan Outlaws. And one of its founders is Ghazalayn Mamouni, who's a lawyer in Casablanca. And she's been trying to end this law.

We're not asking for privileges for people who have sex outside wedlock. We are not encouraging sex outside wedlock. We're not asking, you know, for any privilege or whatever for them. We're just asking that they don't go to prison anymore. The society already condemns it, you know, very hardly. The religion condemns it very hardly. We don't need to get the justice involved in this.

And how willing do you think the government might be to repeal the law?

There has been a change of government in Morocco. The main party in the ruling coalition was the Islamist party, which had held power for eight years and that crashed in elections in September. They lost 90% of their seats. And you now have a new government which is trying to present a more liberal face to voters. And they're trying to very much differentiate themselves from the Islamism of the past government, when leaders would squelch at any policy deemed haram or contrary to Islamic law. That said, this government has left out of the coalition the only party that publicly calls for the abolition of 490. So there are still real concerns as to whether this government has the muscle and the inclination to both take on residual Islamists, but also, crucially, the Interior Ministry that are able to wield so much power by prying into the private lives of every Moroccan.

Moroccans who are increasingly impatient with this law, who will continue to try to skirt around it, I guess.

Absolutely. And they can just look at changes that are taking place elsewhere in the region. In some of the most conservative parts of the Islamic world, Iranian authorities, for the most part, turned a blind eye to cohabiting couples. It's increasingly common in Iran. In the United Arab Emirates, they've decriminalized extramarital sex about a year ago. And even in Saudi Arabia, hotels have now stopped asking couples to show marriage certificates. So Moroccans really feel that they're behind the curve. They want their government to catch up with the rest of Middle east and North Africa.

Nicholas, thank you very much for your time.

Jason, thank you for having me.

That's all for this episode of the Intelligence. The show's editors this week are Kim Gitelson and Chris Impey, and our sound engineer is Will Rowe. Our senior producers are Stevie Hertz, Duncan Barber, Sam Colbert and Sam Westrin. Our producers are William Warren, Jason Hoskin and Alize Jean Baptiste. And assistant producer Abesoye Ocendairo. With extra production help this week from Emily Elias and John Jo Devlin. We'll all see you back here on Monday.