Although democracy is widely seen as a good form of government (compared to the alternatives) it is not without it's flaws. In theory, the politicians are elected by the people, and hence will want to maximise the benefit to those people to ensure their continued election (although they can of course look to just make 51% of people quite happy, and 49% of people extremally miserable). However this doesn't appear to be a strong enough incentive to provide efficiency with the government - you see numerous examples of frivilous spending+wastage, you have the issue of politicians typically being the ones who set their own wages, and they frequently don't act in the best interests of the country.
With this in mind, I have a solution: Change the politicians incentives so they really want the country to do better. How to do this? Introduce a bit of 'privatism' into the government. Link the politicians salaries to the economy's GDP itself, and link their pensions either to the GDP or alternatively the stock market.
Firstly the salary - it would need to be linked to GDP, but to vary much more than GDP itself, since a -3% fall in GDP is usually seen as far more severe than would be reflected in a -3% fall in salary. So for example you could have the base salary (as a % of total GDP), and then a performance related amount based on the real growth in the economy (e.g. you could have a 3% real growth cause the salary to be 9% higher than normal, while -3% growth would cause it to fall by 9%).
Secondly, and more importantly, the pension - this would probably need to be worth more than the salary itself, or at least as much, since this would provide an incentive for the politician to maximise the long term growth of the economy, rather than manufacturing a massive boom for the years they're in office, followed by a massive crash straight after. The pensions could either be like normal private ones and be affected by the stock market's performance, or could go further and be based around GDP, as with the salary.
You'd also need an independent source (ideally an international one) to compile the statistics, so they couldn't be altered to suit the politicians.
What would this do? Well hopefully it would make it much more likely that politicians act in the country's best interests. It'd also allow the more 'compassionate' decisions, such as increasing redistributive taxes, to be done for such reasons, rather than the risk of being done to buy votes, since the politicians inacting such legislation would be hurting themselves (as a result of the negative impact on GDP, and hence their salary+pension) in order to reduce inequality. It'd also hopefully reduce the dependance on debt, with politicans being slightly more reluctant to fuel massive spending increases with debt, since their pension would be the main benefit of their wage package, and massive debt may make things nice in the short term, but will come back to bite long term. This in turn should help ensure government spends within it's means, and possibly even looks at cutting back overall spending when necessary. Furthermore, by setting the salary at a fixed %, it would mean that changes to income taxes would affect the politicians (assuming that the % was unalterable, or at the least difficult to alter), further reinforcing the above.