3 ms·

IDK why this got downvoted. State spending and economic growth are inversely proportional. The bigger the government, the less economic growth there is.

dredmorbius 7y ago
Citation / data requested. This is a bald assertion and there are a tremendous amount of confounding factors. Globally, the fastest growing GDPs are associated with some of the weakest economies (Lybia, in 2018, for what it's worth). GDP growth is highly dependent on present GDP/capita (e.g., average income) levels. If you're starting high, you'll have little growth. Within a given country, given fiscal stimulus during recessions, you'll see increased government spending as a share of GDP precisely when GDP is lowest. Not because high government spending as a share of GDP causes reduced growth, but because it is a direct response to that growth. If you'd want to make a supportable claim, you'd have to account for at least these, and quite probably other factors. The countries with stable, high per-capita, and generally growing GDP have not only a large share of government spending as a share of GDP, but numerous other factors: stable institutions, low corruption, generally a membership within the NATO or a similar alliance (ASEAN, ANZAC), which translates to protected trade routes and access to global oil shipments (a huge factor in GDP), and more. Which may account for some of the reception shown to answers to complex problems which are clear, simple, and wrong.
- MrBuddyCasino 7y ago
  Stable, high per-capita, and fast growing GDP countries with low gov spending: Switzerland, Singapore, USA. Stable, high per-capita, and slowly growing GDP countries with high gov spending: most other first world countries Just google "impact of government spending on economic growth", you'll get lots of hits.
jariel 7y ago
Actually this is definitely false, in a very provable way. This is the formula for the GDP: GDP = C + I + G + (Ex - Im) Consumption + Investment + Gov. Spending + (Exports - Imports) Every dollar spent by the government is a dollar added to the GDP, which is the primary measure of economic growth. Just because the government does something, does not mean it's bad or good. Generally, governments create a lot of value, and the surpluses not measured in GDP can be immense. Consider if the government didn't build any roads - everything was toll-based - it'd be a mess, and a huge strategic drag on the GDP. Because there's not 'market oriented' way to measure what government does (well, no easy way). what we do is just count 'a dollar spend = a dollar GDP'. In the private side we measure Consumption. So what this means is that if the government borrows and spends billions on 'whatever' - the economy literally grows by the dollar amount they spent. Assuming that 'whatever' is value creating in some way, it can be a good thing which is why Keynesian theory types suggest that the government should indeed do that during economic downturns in the private sector. Obviously, the big problem is that it's really hard to 'value' what the government does, but it's not black magic either. There are ways to do it, it's just hard.
nickik 7y ago
I'm a libertarian but this is simply not true. There is a clear connection between overall economic freedom and economic growth. However stats like Denmark can have a big state, but still have a fair amount of economic freedom.

dredmorbius 7y ago

Citation / data requested. This is a bald assertion and there are a tremendous amount of confounding factors. Globally, the fastest growing GDPs are associated with some of the weakest economies (Lybia, in 2018, for what it's worth). GDP growth is highly dependent on present GDP/capita (e.g., average income) levels. If you're starting high, you'll have little growth. Within a given country, given fiscal stimulus during recessions, you'll see increased government spending as a share of GDP precisely when GDP is lowest. Not because high government spending as a share of GDP causes reduced growth, but because it is a direct response to that growth. If you'd want to make a supportable claim, you'd have to account for at least these, and quite probably other factors. The countries with stable, high per-capita, and generally growing GDP have not only a large share of government spending as a share of GDP, but numerous other factors: stable institutions, low corruption, generally a membership within the NATO or a similar alliance (ASEAN, ANZAC), which translates to protected trade routes and access to global oil shipments (a huge factor in GDP), and more. Which may account for some of the reception shown to answers to complex problems which are clear, simple, and wrong.

MrBuddyCasino 7y ago
Stable, high per-capita, and fast growing GDP countries with low gov spending: Switzerland, Singapore, USA. Stable, high per-capita, and slowly growing GDP countries with high gov spending: most other first world countries Just google "impact of government spending on economic growth", you'll get lots of hits.

jariel 7y ago

Actually this is definitely false, in a very provable way. This is the formula for the GDP: GDP = C + I + G + (Ex - Im) Consumption + Investment + Gov. Spending + (Exports - Imports) Every dollar spent by the government is a dollar added to the GDP, which is the primary measure of economic growth. Just because the government does something, does not mean it's bad or good. Generally, governments create a lot of value, and the surpluses not measured in GDP can be immense. Consider if the government didn't build any roads - everything was toll-based - it'd be a mess, and a huge strategic drag on the GDP. Because there's not 'market oriented' way to measure what government does (well, no easy way). what we do is just count 'a dollar spend = a dollar GDP'. In the private side we measure Consumption. So what this means is that if the government borrows and spends billions on 'whatever' - the economy literally grows by the dollar amount they spent. Assuming that 'whatever' is value creating in some way, it can be a good thing which is why Keynesian theory types suggest that the government should indeed do that during economic downturns in the private sector. Obviously, the big problem is that it's really hard to 'value' what the government does, but it's not black magic either. There are ways to do it, it's just hard.

nickik 7y ago

I'm a libertarian but this is simply not true. There is a clear connection between overall economic freedom and economic growth. However stats like Denmark can have a big state, but still have a fair amount of economic freedom.