In his WSJ column today (unfortunately, it’s subscriber-only material), Daniel Henninger makes a good case that high public employment is what strangles economic vitality.
Egypt has a moribund economy, but the very comparable nation of Turkey is doing well. Why? Henninger points to this fact: in Egypt, 35 percent of the labor force works for the government, while in Turkey it’s only 13 percent. Government employment is almost always low in output (sometimes even negative, as government workers sometimes impede production elsewhere) and high in cost (since there is no competition).
Henninger also makes a good observation about higher education. Referring to the nations of the middle-east and North Africa, he writes “Their universities fed graduates into a nonproductive but high-benefit public economy. Many Tunisian rioters were unemployed college graduates.” The same is true in Egypt. The idea that putting young people through college will necessarily provide a country an economic boost (more “human capital” in the labor force, supposedly) is once again refuted by reality. Economic growth comes from the coordination of all resources. For government officials to think that they’ll get growth just because they lure lots of people into college and slap credentials on them is every bit as crazy as thinking that, as in the old Soviet Union, economic growth would occur because they produced as much steel as possible.
Henninger concludes, “The first great lesson being learned in the 21st century is that neither the state nor the stork can bring jobs to life in a modern economy. Good luck to Egypt and all other nations on the wrong end of this learning curve.”
That includes us.
