We are in an age of reinvention, for countries as much as for companies

'Big ideas in politics, as in other things, often come from the big country across the Atlantic'
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The Independent Online

Last week, during one of Al Gore's interminable speeches on the stump, he came out with a striking sentence. "I am," he said, "the small government candidate." It was a response to the Republican charge that he represented the party of big government, something he felt he had to counter. But it is interesting in that both candidates are selling themselves on the idea that governments should do less, not more. To British ears, accustomed to politicians saying they will do more, not less - the "Prescott promises billions for transport" headline - this sounds a little odd.

Last week, during one of Al Gore's interminable speeches on the stump, he came out with a striking sentence. "I am," he said, "the small government candidate." It was a response to the Republican charge that he represented the party of big government, something he felt he had to counter. But it is interesting in that both candidates are selling themselves on the idea that governments should do less, not more. To British ears, accustomed to politicians saying they will do more, not less - the "Prescott promises billions for transport" headline - this sounds a little odd.

Our political rhetoric still presents government as a problem-solver, not a problem-creator. But big ideas in politics, as in other things, often come from the big country across the Atlantic. Might next week's US election, the first this century of any major developed country, set the tone for the rest of the developed world? Just as the past century saw relentless growth in the size of government, might the new century see an equally relentless retreat?

Of course, a lot turns on the election itself. Both candidates may say they favour small government, but George W Bush is more likely to practice it. Texas, where he is governor, has, in relative terms, the smallest state government in the US. He also plans to hand back a larger proportion of the projected fiscal surplus in tax cuts - half as opposed to a third by Gore. And those cuts are more general in nature than Gore's: while Gore is handing back the money in nitty-gritty specific ways, Bush plans cuts in income tax and the abolition of estate duty.

There is one other crucial difference. Under the Bush plan, individuals would be able to opt out of part of their social-security payments provided they set aside money in private pension schemes, and the social-security fund itself might be invested, in part, in private-sector securities.

But you have to look at all presidential plans with a slightly sceptical eye. Not only is the power of the US administration much more limited than the power of, say, the British or French government; all these plans turn on there being a big surplus. At some stage, there will be a turn-down in US economic growth, and if that were serious, the surplus would quickly disappear. Nevertheless, once tax cuts are in place, it is very hard to reverse them. We have experience here of the difficulty that a government gets into with relatively modest increases in taxation - we will learn of the Chancellor's response to that pressure next week in the pre-Budget statement.

In the US, increasing taxes is even harder, for while many British citizens pay lip-service to the notion that it is worth paying higher taxes for better public services, in the States, that line of argument does not cut much ice. So both candidates are forced towards a vision of government that does less itself but regulates more - a government that seeks to fulfil the demands that voters put upon it by regulating rather than taxing and spending.

If Bush gets in, as on balance seems more likely, expect this shift of emphasis to take place quite swiftly. For a start, were the US to abolish estate duty, it would be very difficult politically to reimpose that particular tax in the foreseeable future. The numbers are against it as the proportion of older voters will grow inexorably for another 40-50 years.

If revenues are cut away, spending eventually has to follow. The most immediate area for cutting spending is social security. Moving part of the responsibility for social security away from the state and towards individuals would be a powerful instance of the shift from tax'n'spend to individual provision - but individual provision within a framework of legal obligation.

If Gore gets in, this shift would be more gradual, for it is hard to see him as a great reformer. There is enough of the residual tax'n'spend mentality in his mentality to stop that. He may say that he is against big government and he would, to some extent, be trapped by his rhetoric. But I would not expect the size of government to shrink much. His potential contribution to the rest of the developed world would be the popularising of the notion of paying down debt. Insofar as it is possible to predict, it would seem that the US national debt would decline more swiftly under Gore than under Bush, if only because the latter promises bigger tax cuts.

As this happens, though, expect there to be considerable knock-on effects on the rest of the world. It is almost impossible for us to conceive of governments without any debt: national debt seems as inevitable an accompaniment of government as taxation. The line that "if we spend less on interest we have more for public services", has a considerable resonance here - both Tony Blair and Gordon Brown play this line - but no big developed countries in the world have really made paying back debt an important strategic aim. When debt is paid back, it is more a by-product of an unexpected surge in revenues than a chosen policy option.

If, however, the US gets anyway near eliminating its national debt over the next decade, then there will be profound pressure on other countries to follow suit. The advantages of being a debtless country in a world of ageing populations is enormous; or, put round the other way, being a heavily indebted country in such a situation is a catastrophe.

So the implications for the rest of the world are different, depending on the outcome of the election - even if Bush did don a Gore mask on The Tonight Show with Jay Leno. The common theme with both candidates is that the US government will change its role. The difference is of degree.

We are in an age of reinvention. We are reinventing the ways companies organise themselves, for we can see the rewards go to the speedy rather than the mighty. We are rethinking the ways in which both products and services are sold. We are realising that the key resource is human capital rather than financial or physical capital. It would be astounding were government to be an island of immobility in the midst of such a sea of change.

But there is as yet no model for the government of the future. I don't think we will get that from either Messrs Bush or Gore. But I think we may get a hint of the direction in which governments will move during the lifetime of the next US administration. Once America moves, the rest of us will have little option but to follow.

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