The small government myth. Debunked?

[Mexicano]

A common idea among libertarians, and austrian economists is that a small government ( and government spending ) is better for the economy.
Under the assumption that government tends to be an inefficient economic actor, this idea is compelling.
But does real-world data support this idea?
On the lower end of the scale, we have the following countries :
Ethiopia 13.8
Guatemala 13.54
Nigeria 13.3
Bangladesh 12.97
Equatorial Guinea 12.66
Iran 12.38
Haiti 10.84
Venezuela 10.55
Sudan 9.65
Yemen 9.29

On the upper end, we have the following countries:
Kiribati 127.57
Micronesia, Fed. States of 72.84
Marshall Islands 67.12
France 59.05
Greece 56.87
Austria 55.98
Italy 55.45
Finland 55.31
Belgium 54.91
Dominica 54.29
Kuwait 52.4
Lesotho 52.38
Germany 51.25
Denmark 50.81
Spain 50.6
But that is just a snapshot. Examining US history government spending remained below 20% before 1960 with two exceptional periods : world war I and II.
This begs the question: was the long period of growth of the U.S during its early history related to government or was it fueled by other factors such as a huge land mass, the large fertile basin of the Mississippi river that made the US the largest agricultural exporter and a constant flux of immigrants.
These seem to be exceptional conditions that hardly apply to the modern world where industrial products and energy play a larger role in production and where machines make most of the industrial work.

https://www.imf.org/external/datamapper/exp@FPP/USA/FRA/JPN/GBR/SWE/ESP/ITA/ZAF/IND?fbclid=IwAR1Lj6RwGglPuunfQ5xmG4vYFxKxCXKFoFOeEO3B3QUKhXcDZC_g_5IxXII

 

[Oddball]

The IMF?!?....Seriously?

Central bankster monopolists pimping for bigger gubmint?....Say it ain't so!

 

[Mexicano]

The IMF?!?....Seriously?

Central bankster monopolists pimping for bigger gubmint?....Say it ain't so!

That's just raw data, you can find the same data on any other site ( wikipedia, world bank , UN), the fact that the data is sourced from the IMF site is irrelevant to the argument.

 

[Oddball]

That's just raw data, you can find the same data on any other site ( wikipedia, world bank , UN), the fact that the data is sourced from the IMF site is irrelevant to the argument.

It's "raw data"spun by central banksters and other globalist oligarchs to achieve the desired outcome.

GIGO

 

[johngaltshrugged]

Private enterprise drives the most prosperous economies & have vastly outperformed any other economic system known.
Private enterprise thrives under minimal regulations/obstacles.
When a true free market is thriving, the population thrives with it.

The govt does not produce anything & doesn't provide anything without first taking it from someone else.
Govt spending & stimulus is money taken from others that often is not spent in the way most beneficial to growing an economy.
They are a parasite on society & therefore should only be allowed to do a very few duties.

FDR's New Deal was a major flop at the time. It extended a recession into a Great Depression that only ended with WWII.
Since then, it has been claimed it was a success but that is not only revisionist history, it's also an outright lie.

 

[task0778]

Correlation does not prove causation. I think those countries on the low end of the scale are economic failures based on a number of other factors besides their gov't. And I doubt the accuracy of those numbers, which are provided by the individual countries and are probably not that close to reality. The other side of the coin are the big gov't European countries that tax the crap out of everybody, including the low end of the income ladder. So, let's see what happens if and when a politician or political party runs on the promise to institute a VAT tax on everybody, and an income tax on top of that for everybody.

was the long period of growth of the U.S during its early history related to government or was it fueled by other factors such as a huge land mass, the large fertile basin of the Mississippi river that made the US the largest agricultural exporter and a constant flux of immigrants.

Our gov't was relatively quite small in those days, and a lot less intrusive than today.

 

[Oddball]

Correlation does not prove causation. I think those countries on the low end of the scale are economic failures based on a number of other factors besides their gov't. And I doubt the accuracy of those numbers, which are provided by the individual countries and are probably not that close to reality. The other side of the coin are the big gov't European countries that tax the crap out of everybody, including the low end of the income ladder. So, let's see what happens if and when a politician or political party runs on the promise to institute a VAT tax on everybody, and an income tax on top of that for everybody.




Our gov't was relatively quite small in those days, and a lot less intrusive than today.

Funny how those nondescript "other factors' are salient when it supports the argument, but not so much when they don't, innit?

 

[Mexicano]

Correlation does not prove causation. I think those countries on the low end of the scale are economic failures based on a number of other factors besides their gov't. And I doubt the accuracy of those numbers, which are provided by the individual countries and are probably not that close to reality. The other side of the coin are the big gov't European countries that tax the crap out of everybody, including the low end of the income ladder. So, let's see what happens if and when a politician or political party runs on the promise to institute a VAT tax on everybody, and an income tax on top of that for everybody.




Our gov't was relatively quite small in those days, and a lot less intrusive than today.

True, correlation does not prove causation. But inverse correlation makes really difficult to prove causation: you may hypothesize that lack of water makes plants thrive.
But, if all your plants that go without water simply die (inverse correlation) you'll have a very hard time proving your hypothesis.

 

[Kilroy2]

A common idea among libertarians, and austrian economists is that a small government ( and government spending ) is better for the economy.
Under the assumption that government tends to be an inefficient economic actor, this idea is compelling.
But does real-world data support this idea?
On the lower end of the scale, we have the following countries :
Ethiopia 13.8
Guatemala 13.54
Nigeria 13.3
Bangladesh 12.97
Equatorial Guinea 12.66
Iran 12.38
Haiti 10.84
Venezuela 10.55
Sudan 9.65
Yemen 9.29

On the upper end, we have the following countries:
Kiribati 127.57
Micronesia, Fed. States of 72.84
Marshall Islands 67.12
France 59.05
Greece 56.87
Austria 55.98
Italy 55.45
Finland 55.31
Belgium 54.91
Dominica 54.29
Kuwait 52.4
Lesotho 52.38
Germany 51.25
Denmark 50.81
Spain 50.6
But that is just a snapshot. Examining US history government spending remained below 20% before 1960 with two exceptional periods : world war I and II.
This begs the question: was the long period of growth of the U.S during its early history related to government or was it fueled by other factors such as a huge land mass, the large fertile basin of the Mississippi river that made the US the largest agricultural exporter and a constant flux of immigrants.
These seem to be exceptional conditions that hardly apply to the modern world where industrial products and energy play a larger role in production and where machines make most of the industrial work.

https://www.imf.org/external/datamapper/exp@FPP/USA/FRA/JPN/GBR/SWE/ESP/ITA/ZAF/IND?fbclid=IwAR1Lj6RwGglPuunfQ5xmG4vYFxKxCXKFoFOeEO3B3QUKhXcDZC_g_5IxXII

well it is kind of hard to compare the US in the early years to what it is now. There are just to many factors. even in the beginning the government was in debt due to wars that threaten the US as a nation. But the budget can be balanced at a later date.

I prefer a government to spend money that is geared towards helping the general population that pays taxes. Yes to much spending creates a tax burden but it is because they spend to much in relation to what is being taken in. It then becomes a matter of balancing the two in a effective method. Circumstances arise and I support the idea that deficits should be used to ward off economic or foreign threats. As long as they have a plan to pay off the debt that was accumulated at a later date.

Personally I blame the President who are just looking to get elected and will do what will get them elected rather than what is feasible.

 

[task0778]

True, correlation does not prove causation. But inverse correlation makes really difficult to prove causation

With this issue there isn't going to be any proof. Plenty of theories and competing opinions but no proof. Which means the idea that smaller gov't is better for an economy is not debunked but also not necessarily true on all cases either. It seems to me that the total lack of good governance in Venezuela that allows rampant corruption is not helping economic growth, so a gov't that is too small leads to less effective growth in the long run. And it should be obvious that overregulating and overtaxing everything can also be somewhat debilitating. So, you kinda want to hit the sweet spot between too much and too little and adapt to the economic conditions that warrant changes in policy.

 

[Mexicano]

With this issue there isn't going to be any proof. Plenty of theories and competing opinions but no proof. Which means the idea that smaller gov't is better for an economy is not debunked but also not necessarily true on all cases either. It seems to me that the total lack of good governance in Venezuela that allows rampant corruption is not helping economic growth, so a gov't that is too small leads to less effective growth in the long run. And it should be obvious that overregulating and overtaxing everything can also be somewhat debilitating. So, you kinda want to hit the sweet spot between too much and too little and adapt to the economic conditions that warrant changes in policy.

Prosperity is a multi-dimensional outcome: low corruption helps, trade surplus helps even more, an industrial policy also helps... government size in general, seems to be inversely correlated; even with a large government the US has had periods of high growth. Lacking any hard evidence of pursuing prosperity through that single policy seems folly.
That said, cutting spending on activities that are frankly wasteful seems a sensitive measure. The largest spending in the US is on healthcare, the whole system seems to be the worse combination: private insurance, private hospitals, and public subsidies making it the most expensive in the world.

 

[Harpy Eagle]

A common idea among libertarians, and austrian economists is that a small government ( and government spending ) is better for the economy.
Under the assumption that government tends to be an inefficient economic actor, this idea is compelling.

There also needs to be freedom in the country. Notice that is missing from all on your list

 

[Mexicano]

Funny how those nondescript "other factors' are salient when it supports the argument, but not so much when they don't, innit?

Those other factors were clearly stated: a large land mass, huge fertile basins and inmigration.
Plotting the data from 1930 to correlate government spending with growth rate with a quadratic equation ( the best fit) yields a low correlation and signals the best results are achieved with a government spending close to 20% of gdp.
As I said in another post the low correlation indicates government spending is not the main driving force behind growth.
Also , in the instances where government spending went below 8.5% of gdp there was a recession. That should at least set a limit on how small the government can get.

 

[Mexicano]

There also needs to be freedom in the country. Notice that is missing from all on your list

There is also a low correlation. China has one of the lowest ranks of economic freedom but has been the fastest growing economy for the past 4 decades.
Jamaica, UK,, France, Mexico and Peru are in the same group with very different growth rates.

Index of Economic Freedom: All Country Scores | The Heritage Foundation

Explore the Index of Economic Freedom to gauge global impacts of liberty and free markets. Discover the powerful link between economic freedom and progress. The 30th edition, once again, illustrates key factors shaping our world's landscape. From @Heritage

www.heritage.org

 

[Oddball]

Those other factors were clearly stated: a large land mass, huge fertile basins and inmigration.
Plotting the data from 1930 to correlate government spending with growth rate with a quadratic equation ( the best fit) yields a low correlation and signals the best results are achieved with a government spending close to 20% of gdp.
As I said in another post the low correlation indicates government spending is not the main driving force behind growth.
Also , in the instances where government spending went below 8.5% of gdp there was a recession. That should at least set a limit on how small the government can get.

Yeah, and?

You can have a small and horrifyingly despotic gubmint that kills economic development, despite a wealth of resource riches under your feet.

Correlation ≠ causation.