The Betrayal of Liberal Economics by Amos Witztum

Author:Amos Witztum
Language: eng
Format: epub
ISBN: 9783030106683
Publisher: Springer International Publishing

The two wars give a push to this level of spending which could be construed as some form of a ratchet effect but the reality is that even in the years most devoted to the promotion of competitive practices, the level of government spending as a share of GDP rose to around 40%. In other words, as the economy moved from a historical age of empire and monopolistic powers to an age of ruthless pursuit of competitive practices (Thatcher’s years), government share in the economy increased. Clearly, the overall level of government expenditure includes a great deal of transfer payments which may not be considered as part of the direct involvement of the government in economic interactions. However, even transfer payments are a sign that there are domains of economic activities which are not governed by competition or the markets. Transfer payments will normally be associated with the failure which some individuals face in extracting their subsistence from the national economy by competitive means. But even if we wish to focus on the rates of direct involvement and assume this rate to be a fraction of the overall expenditure, there is still a considerable increase in that level during the period in which GDP per capita has risen dramatically.

A similar picture will emerge for the USA, and if this is the case for those economies where the idea of competitive decentralised decision-making is most popular and deeply rooted, one can imagine the situation in other economies. If we look more specifically at government consumption (not including investment or direct transfers)—namely, more direct government involvement in the markets—we will find that in general those countries where government is relatively large do better than those where it is small:

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