Free some of that office space.

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Trump's Contempt Could Lead to Better Government

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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Donald Trump begins his presidential term without having filled a vast majority of vacancies in his administration. That could be a disaster in the making -- or it could be the beginning of a new era, in which Americans find out they can do just as well without so much federal government. 

My Bloomberg View colleague Jonathan Bernstein points out that Trump has only proposed candidates for 28 of 690 positions requiring Senate confirmation. A number of federal departments and agencies have only one incoming Trump appointee, and that's not always the top person, which means some will be leaderless early in the administration, when the incoming president has the chance to do the most. This sounds scary, but only if one believes that the 1.4 million U.S. federal government employees are mostly essential to the country's well-being.

The bureaucrats are good at making that case. Rick Perry, Trump's nominee for energy secretary, once wanted to abolish the department he's been tapped to run, along with the departments of commerce and education. Now, he says he regrets it "after being briefed on so many of the vital functions of the Department of Energy." But perhaps Trump and his few appointees shouldn't listen to that siren song. 

In 2004, ex-Soviet Georgia's legendary reformer, Kakha Bendukidze -- like Trump, a businessman who developed an interest in reshaping his native country -- started out with a bloated, corrupt bureaucracy. A libertarian who, as an influential entrepreneur in Russia, helped push through the country's successful 13 percent flat income tax, he didn't quite understand what most of the ministries and agencies were for, so he found it easy to abolish them. Under his guidance, the government got rid of all 18 independent government agencies, merging them into ministries,  and then reduced the number of ministries to 13 from 18. In the first year of Bendukidze's reforms, 35 percent of ministerial employees were laid off -- just 40,000 people in Georgia, but the equivalent of slashing the U.S. federal bureaucracy by almost half a million people. The Bendukidze cuts were accompanied by a radical simplification of regulations and taxes. Georgia had 21 taxes when he came in. Soon only seven were left.

The country's economy responded to the changes with an almost surreal boom. The economy grew 5.9 percent in 2004, 9.6 percent in 2005 and 9.4 percent in 2006.

Georgia, of course, is a tiny country of just 4.5 million -- the size of a small U.S. state. It also never had a functioning state bureaucracy with accountable institutions. But such radical reforms as Bendukidze masterminded are not the exclusive province of small, relatively easy-to-govern states. 

In 2010, Pakistan, a large, messy country with a population some 60 percent that of the United States, passed a constitutional amendment that devolved many federal powers to the provinces. Amendment 18 resulted in the abolition of 17 federal ministries within two years. These included the ministries of education, health care, social welfare, environment, and labor. Provincial governments were told to take officials from these federal departments as needed. Only relatively small coordinating offices remained on the federal level to write national standards and coordinate nationwide programs.

The transition was far from smooth: Many argued it went too fast, and provincial governments weren't prepared to take on the additional functions. Vacuums of authority and regulation ensued.

And yet Pakistan began to do better economically. Economic growth, at 3.6 percent in 2010, accelerated to more than 4 percent and is expected to hit 5 percent this year. Inflation, meanwhile, slowed from more than 10 percent in 2010 to 2.9 percent in 2016.

Pakistan, of course, is even poorer than Georgia: It has a per capita gross domestic product of $1,427, just 2 percent of the U.S. level. But, like Georgia, it is also far more volatile. Weak central government is more dangerous in such countries because it results in coups and uprisings. Leaner, however, is not the same as weaker, as both countries have shown.

In a rich country such as the U.S., the central bureaucracy is harder to reform, and especially to cut, than in a poor one -- one reason the federal bureaucracy grew 17 percent under George W. Bush and 10 percent under Barack Obama. The money to fund it is there, and the bureaucrats themselves are far better qualified, so they're both more productive and better at demonstrating their indispensability. Sometimes, however, even a rich country feels the bite of an economic crisis and goes into austerity mode. That was the case with the U.K., where the number of public sector employees peaked at 6.44 million in the fall of 2009. It has since gone down by almost exactly 1 million people.

While those cuts -- from which health and education were ringfenced -- went on, the U.K. didn't do badly economically.

Sources: U.K. Office for National Statistics, OECD

In fact, it did very well. And so did most of the laid-off public servants: They were good, solid professionals, after all. The private sector absorbed all of them; private sector employment has increased by about 4 million people since the fall of 2009. French presidential candidate Francois Fillon has promised to slash France's huge public sector by 500,000 workers; nobody would seriously suggest France would become a worse country for the loss.

The U.S. government doesn't employ one in five Americans, as the French state does. And American states already possess sizable authority in many policy areas. A rapid devolution of  many more of its federal powers to the states would probably create considerable friction. Moreover, the U.S. constitution has a big say about what is or isn't within the purview of state authorities. It will be difficult for a large-scale devolution to withstand constitutional challenge.

But the U.S. still has far greater scope to scale back than the bureaucrats would have us believe. Some public servants may get hired on to do their old jobs in consultancies that win government contracts. That's not necessarily more efficient, but private firms have more to lose if they do a bad job and expectations are higher, which could lead to more ambitious and less wasteful government.

I very much doubt that this sort of rational down-scaling is what Trump has in mind as he demonstrates contempt for the federal bureaucracy by not prioritizing its leadership. But his ignorance could be an advantage; he could be just the person to show America that it could be run with a much smaller army of government employees -- and show the employees themselves that they could do more with their qualifications.

(Corrects the year associated with Georgia's 9.6 percent rate of economic growth in the fifth paragraph.)

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor responsible for this story:
Therese Raphael at traphael4@bloomberg.net