Review

Author(s): John Dearlove

Review by: John Dearlove
Source: The Economic Journal, Vol. 90, No. 358 (Jun., 1980), pp. 409-411
Published by: Wiley on behalf of the Royal Economic Society
Stable URL: http://www.jstor.org/stable/2231810
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 I980] CAN GOVERNMENT GO BANKRUPT? 409

Can Government Go Bankrupt? By RICHARD ROSE and GuY PETERS. (London:

Macmillan, I978. Pp. XiX+283. /7.95.)
The Politics of Economic Decline. Economic Management and Political Behaviour in
Britain Since I964. ByJAMES E. ALT. (Cambridge: Cambridge University
Press, I979. Pp. Viii+ 296. ?I2.50.)

Economic growth in capitalist democracies has been the solvent of many poten-
tial conflicts. Moreover, in making governing easy, growth has also presented
political scientists with a superficially simple analytic task. The governmental-
market relation - the intermeshing of politics and economics - in being 'solved'
politically could be ignored academically, .and political scientists were able to
retreat into the cosy consideration of secondary questions bearing on pressure
groups and parties, local governments and legislatures. Good and easy times
were not to last. The pressing reality of Britain's poor economic performance not
only exploded the basis of consensus politics but also posed a challenge to
political scientists, forcing them to confront the connection between economics
and politics. Rose and Peters and James Alt are American political scientists
who have responded to this challenge with books that are now part of a growing
literature on the gloomy condition of contemporary Britain. Rose and Peters
recognise that 'it is no longer meaningful to think of separate political and
economic systems'. Although Alt argues in similar vein, he maintains that
'the precise relationship between economics and politics has always proved a
little difficult to pin down'. He regards the last decade as 'an uncommon
opportunity to look at the connection between economics and political
behaviour' and sees his book as a 'study of empirical political economy'.
Rose and Peters have written a controversial and intensely political book.
They go beyond description and analysis. They warn of 'the dangers that face
the British welfare state, if government continues to grow in future, as in the
past' and they offer an all too familiar solution to the problem of governing in
the hard times of the I970S. Baldly expre-ssed, the book revolves around what
the authors see as the political implications of their grotesquely 'simple equa-
tion: The National Product = The Costs of Public Policy + Take Home Pay'.
The problem of de-industrialisation is touched on, but Rose and Peters focus
on the political dimension of the English sickness and advise politicians on how
to maintain their authority. The authors argue that government cannot
'continue on a business-as-usual basis if the economy no longer produces the
goods as in the past' because 'past commitments to future spending threaten to
overload government, requiring it to spend more money than can be provided
by the fruits of economic growth'. In this situation, and crisply embodying the
logic of their 'simple equation', Rose and Peters argue that government 'must
. .. put the brakes on public spending or else cut the take-home pay of its
citizens'. If it decides to cut rather than protect take-home pay it faces the
prospect of political bankruptcy with 'indifferent' citizens 'avoiding and evad-
ing taxes' to the point when the authority and effectiveness of government is
itself weakened. But, wait, 'bankruptcy is not inevitable'.
Growth is the ideal solution but a 'government cannot make the national

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 4IO THE ECONOMIC JOURNAL [JUNE

product grow simply by passing laws'. Politicians may do nothing or they may
buy time, but 'the closer political bankruptcy comes, the greater the pressures
upon politicians to declare a clear and public choice between making public
policy sacrosanct or protecting take-home pay'. In a brief and cavalier section,
which refers to neither the ideas of the Cambridge economic policy group nor
to the substance of the Labour Movement's alternative economic strategy,
Rose and Peters pour scorn on the first option. In line with New Conservative
thinking they strongly advocate a policy of 'protecting real take-home pay by
limiting the growth of spending on public policies', although just where this
leaves the two-fifths of the work force whose take-home pay is public expenditure
is never made clear. Rose and Peters recognise that in order to 'put the brakes
on spending in a big way' politicians 'must limit the growth of policies that are
highly popular or essential' and must roll back the state by refusing to 'endorse
many wants as the price of protecting established benefits'. But they are surely
naive in not doubting the political feasibility of their policy package. In making
the point that 'masses of individuals will accept low material living standards
without rebelling against government' they do much to undermine a key
element of their own thesis, namely that reducing take-home pay will lead to
indifference, bankruptcy, and the problem of political authority.
Alt approaches the politics of the last decade through a detailed consider-
ation of a mass of survey data and so deals with 'the public response to the
economic decline of the i960s and I970s'. He recognises that 'political science
has long been concerned with the relationship between management and
development of the economy on the one hand and political attitudes and
behaviour of the electorate on the other,' but he argues that 'there has been
little written about the impact of recent economic developments in Britain on
political attitudes and behaviour'. In the body of the text there is a welter of
detail on popular perceptions, expectations, and policy preferences, but in the
concluding section Alt draws out the political implications of his material. He
points to the decline in instrumental voting between I966 and I974, and notes
the general weakening of attachment to both the major parties. 'The story
of the mid I970S is the story of a politics of declining expectations': it is 'a
politics of quiet disillusion'. Although Alt recognises that there are grounds
for expecting a continuing drift to extremes he nevertheless concludes by
asserting that 'it is more probable that the politics of indifference will continue
to grow'.
Both these studies present us with important material and ideas, but they
stumble in their attempt to fuse the political and economic dimensions of the
contemporary crisis because they have no theory capable of ordering the facts
which they set down, and they fail to even consider the Marxist tradition of
writing on capitalist crisis and the state. Alt simply considers that there are
'two sides' to the connection between economics and politics: 'one side deals
with the behaviour of government in economic management, and the other with
the behaviour of the public as it is affected by, and reacts to, economic change.'
Rose and Peters go further in recognising that 'economics sets limits within
which politicians can make effective choices', but by failing to see that key

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 I980] ROBINSON: HOUSING ECONOMICS 4II

facets of those limits are integral to a certain kind of economy they tend to
reify them, and so retreat into the comfortable stuff of political science by asking
'what's wrong with democratic government everywhere?'

JOHN DEARLOVE
University of Sussex

Housing Economics and Public Policy. By RAY ROBINSON. (London: Macmillan,

I979. Pp. ix+ I66. fIo.oo hardback, C4.95 paperback. ISBN o 333 I7785 I,
0333 2II973.)

There are broadly two types of book dealing with the economics of housing
policy. First and most common is the polemic, intent upon presenting a case
from the standpoint of either the Right or the Left. Such books are concerned
with 'failure' or 'success' and with the merits or shortcomings of both the
objectives and the instruments of policy. In recent years there has begun to
appear a second type of book, which attempts to analyse housing questions
in terms of conventional economic models. Ray Robinson's contribution
belongs in this second category. The appearance of this type of volume is
both an acknowledgement and an indication of the importance of housing
market analysis and of the assumption (rather belatedly in Britain) of its
natural status alongside all the other specialist areas of public policy analysis
in academic economics.
The book is in three parts. First there is a brief review of housing market
concepts and institutions followed by an even briefer description of the British
housing stock. Part two provides a survey of housing market models based on
a review of the academic literature. This is followed by two chapters which
take a closer look at the analysis of the supply of and demand for housing.
Finally there is an examination of four policy areas, namely rent control,
slums and urban renewal, local authority housing, and the taxation or sub-
sid'ising of housing.
The presentation is necessarily very compact and the author does well to
cover the ground he does in only I40 pages of text. There are times when
he clearly has to struggle against a constraint on the number of words, with
the result that the discussion becomes simply a fairly uncritical account of
the literature. Doubtless this partly accounts also for the omission of certain
topics such as the relationship between housing quality and demand, life-cycle
effects on demand, and the economics of tenure selection.
A further limitation on the scope of the book necessarily arises out of the
approach which is adopted of concentrating on the most popular areas for
publication. In housing, as in other areas, the problems which give rise to
publications tend to be those most tractable to current techniques of analysis
and the application of conventional models. Thus inflation does not get
mentioned as an issue either in its own right or in its effects on other questions
in demand analysis and urban renewal. Similarly, questions of access (financial,
social, and geographical) to housing and the specifically urban and local

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