The issue of state dependence is likely to become an important topic for discussion in the coming weeks and months. From public statements made, it would appear that this is an issue that the government wants to address and the Opposition appears to be willing to discuss the topic. The political debate will centre on who is creating or has created state dependence, but that is of no relevance to this week’s contribution.

What is important is that from what has been said so far, both sides of the local political spectrum appear to be against strengthening the culture of state dependence. This stance has a very important economic dimension.

In the past, the culture of state dependence has contributed to an increase in public expenditure, and in certain areas as a disincentive to work and to private sector initiative. Taken to the extreme, it can be stated that a culture of state dependence, slowly but steadily, will grind the economy to a halt.

State support for individuals and businesses is a positive thing as long as this encourages initiative and independence

It is as bad as an overbearing presence of the state in the operation of the economy as it leads to the same result. The only difference is that a culture of state dependence is driven by private individuals and private businesses while an overbearing presence of the state in the economy is driven by a political outlook. Both of them will serve as hindrance to the creation of wealth. This explains why those who are or have been in government appear to be against a culture of state dependence.

It may be worth asking what constitutes this culture of state dependence. It partly comes from the expectation of individuals and businesses that the state must look after them from the cradle to the grave.

So, from a social perspective, this would mean free health and education for all, increasing the range and depth of social services to meet the specific needs of particular segments of society, and so on. From an economic perspective this would mean providing public sector jobs when the private sector is failing to provide them, increasing government expenditure to stimulate internal demand, and such like policies.

In brief it means waiting for the government to act before the private sector does anything, rather than investing in identifying and exploiting new opportunities. From the individual perspective, it means expecting the government to bail me out whenever I find myself in trouble, while during the good times, I appropriate for myself as much as I can of public resources.

The economic consequence of all this is easy to understand. We would have an element of waste in public expenditure as resources would be allocated to persons or businesses that would not really need them, if they show a minimum of initiative to fend for themselves. This misallocation of resources leads to an opportunity cost to the economy as a whole.

On this basis one starts to call into question various elements of public expenditure, such as the stipends paid to students, certain expenditures in the health sector and certain social benefits.

I mean that we need to analyse objectively the full economic and social cost and benefits of such expenditures. Which of those terms, that are considered as merit goods or public goods, really deserve such an appellation?

The debate on the state dependence opens up a debate on what economists refer to as welfare economics.

This is an aspect to which I have referred to in the past. It calls into discussion the supposed contradiction between equity and efficiency. Probably the best answer (but, admittedly, a highly theoretical one) would be that state support for individuals and businesses is a positive thing as long as this encourages initiative and independence.

This is probably what today’s liberal society expects – but let’s leave this discussion to another day.