What Is a Limited Government?
A limited government places limits on approved force through clearly defined and assigned powers. There are fewer rules about what people and businesses can and cannot do in countries with limited governments. Many countries have written constitutions outlining what the government can and can’t do.
It is the opposite of a limited government to have one that gets involved in things and rules people. The truth is that most countries, even those that seem to have a lot of freedom and liberty, actually have some level of government control and interference.
How to Understand a Limited Government
The philosophers of the Enlightenment in the 1600s came up with the idea of limited government, but the theory behind it is much older. It is also linked to the free market and classical liberalism, though economists and politicians disagree on the precise limits the government should have.
At its most basic, a limited government is one whose main job is to keep people and their property safe, and it only collects enough taxes to pay for services that help it do this. This view says that a limited government could tax people to pay for things like police and national defense, but it wouldn’t care about what citizens believe or how they act morally.
According to a different view, a limited government only uses the defined powers given by its law. A split of powers and a system of checks and balances are also parts of it. For instance, the U.S. government can only do what the law allows it to do legally.
History of Small Governments
The modern idea of limited government comes from the classical liberal philosophy in Europe. In contrast to the kingdoms and theocratic governments that ruled Europe at the time, this practice emphasized people’s rights.
Written in 1215, the Magna Carta is one of the oldest written accounts of a limited government. The paper limited the English king’s power by giving the country’s nobles control over the throne. However, the treaty only protected a small part of what is now the United Kingdom.
Writing the United States Constitution in 1787, which separated the powers of the federal and state governments, made the idea of a limited government even more vital. It also split the federal government into three parts: the parliamentary, the legal, and the executive. The goal is to make it hard for one person or group with a vested interest to control the whole government.
The Bill of Rights, made up of the first ten amendments to the U.S. Constitution and was passed in 1791, also lists some things the government can’t do. These rights limit the federal government by not letting it use its power in specific ways.
People often use “limited government” and “free market,” but they differ. There have been many times when business-friendly authoritarian governments were in power.
The economy and small governments
Regarding economic strategy, limited governments avoid trade and business as little as possible. They frequently refer to concepts like “laissez-faire” economics, which Adam Smith first explained in his book “An Inquiry into the Nature and Causes of the Wealth of Nations” (1776). In this case, the strictest form of limited government would let supply and demand run the economy. This means that the government would not set prices or affect how businesses run.
People who hold this view think that a small government can help the economy grow and make people happy by limiting the government’s role in business. This idea, which became part of the Austrian school of economics, says that when the government gets involved, it can change markets and lower competition, leading to shortages or high prices.
Some people disagree with this view and think the government should get involved in the economy to help specific businesses or reduce wealth differences. People studying modern economics often link this point of view to John Maynard Keynes, who said that government spending can make the economy grow.
Issues With Small Governments
Many modern political thinkers agree that the government should have some limits on its power, but they have very different ideas about what those limits should be. Many critics contend that the government should be able to resolve group action issues beyond the scope of market forces.
One typical example is the rules businesses must follow when polluting the water or air. People can go after polluted businesses in court, but this isn’t an option for many potential victims, especially those who can’t use the legal system. The Environmental Protection Agency should instead punish these businesses on behalf of the people.
The safety of essential businesses is another one. Many governments support farming or manufacturing in their countries with subsidies or taxes, even though goods would be cheaper on the world market.
Protectionism can help businesses that are important for security or strategy, but it can also help groups with political interests. From this point of view, it is more affordable to support these businesses than not having them, especially during big crises like war or famine.
limited government or small government
A government can also be too small. People often use the terms “limited government” and “small government” to refer to the idea that governments should have as few employees as possible and charge as few taxes as possible. There is a link between these ideas, but a small government might not have the power to protect the general good.
As an example, let’s pretend that there is a country whose taxes are too low to pay its leaders a fair wage. To make money, some managers may use bribery or graft, which hurts the economy even more than increased taxes.
A study from the World Bank shows that wages in the public sector are a big part of fighting corruption. The Bank concluded that, when paired with the right policies, raising pay could help cut down on corruption in some cases.
Examples of Governments With Few Powers
A Canadian study and education group called the Fraser Institute has ranked countries yearly since 1996 based on how much their policies and structures support economic freedom. It looks at the size of the government (top marginal tax rates, public spending), the legal system (protecting property rights, judicial independence), sound money (inflation), the ability to trade freely with other countries (tariffs, trade barriers), and the control of businesses, credit markets, and labor markets.
Hong Kong
The 2021 Fraser Index placed Hong Kong as the best place in the world to live, work, and do business, mainly because it has few hurdles to trade and foreign investment. There are also low tax rates and few rights for workers in Hong Kong.
Notably, the Fraser Index gives much more weight to economic than political freedom. The figures for 2021 were based on 2019, which was also a year of harsh crackdowns in Hong Kong, including random arrests and deportations. The Fraser Institute still puts Hong Kong at the top of the list for economic freedom.
Honduras
The Fraser Index put Honduras second in government size, just behind neighboring Guatemala. Meanwhile, it placed 70th in terms of economic freedom. Honorable Mention: Honduras’s monetary policy and minor economic involvement got high marks, making up for its weak legal system.
New Zealand
The Fraser scores said New Zealand had the third-freest economy in the world but the 92nd-smallest government. The country got good grades for its legal system, letting people deal freely, and laws that are good for business. The country did worse on the size of its government, primarily because of all the money it spends and gives out.
What does the idea of limited government have to do with federalism?
Federalism is a type of government that gives local or state governments some powers. Different cities and towns may have their assembly, courts, tax authorities, and other government duties in a federalist system. They might also be able to break away from the national government in some situations.
What does the Constitution say about the idea of limited government?
The law of the United States splits the government into three parts, each with its own rules and powers. To make new rules and laws, all three must work together. People who wrote the Constitution thought it was rare for one person or group to control all three bodies. With this split, people thought the government wouldn’t be able to get too involved.
Who Came Up With the Idea of Limited Government?
Although the Magna Carta first mentioned the idea of limited government, it wasn’t until the 17th and 18th centuries that Enlightenment thinkers refined it. John Locke came up with the idea that people must agree for the government to have power. Many people say that Baron de Montesquieu came up with the idea of dividing the government into three parts and that Adam Smith came up with the idea that the government shouldn’t get involved in business. The American and French Revolutions both used many of these ideas.
What are the countries with the least amount of government?
The Cato and Fraser Institute put out the yearly Human Freedom Index Report for 2021. It was said that Switzerland had the most restricted government of any country in the world. One hundred points is the best score, and these were in the top ten:
- Switzerland: 9.11
- New Zealand: 9.01
- Denmark: 8.98
- Estonia: 8.91
- Ireland: 8.90
- Finland: 8.85
- Canada: 8.85
- Australia: 8.84
- Sweden: 8.83
- Luxembourg: 8.80
In Short
Legal limits on the power of political leaders, especially when it comes to protecting people’s rights, are what the idea of limited government means. Additionally, this idea is significant in economic matters, as government involvement can mess up markets and businesses.
Conclusion
- A governmental system with limited government means that the government can’t do certain things.
- The Enlightenment brought the idea of limited government to Europe, but it has been around since at least the Magna Carta (1215).
- Many current political systems have written down legal rights that the government, police, or troops can’t break.
- Conservative economists and classical liberals often agree on the need for limited government in economic policy.
- There are different ideas about how firm the limits on government should be, but most thinkers agree on the idea of limited government.
