Wednesday, 5 March 2008

The non-march of neo-liberalism

The period of neo-liberalism from the 1980s onwards was marked by a reduction in the size of government and an increase in the role of the private sector in countries around the world. So goes the usual description of economic changes in the last three decades. And the evidence says?

According the widely used data at the Penn World tables (, there was not much of a triumphant march of neo-liberalism over the trembling public sector. Excluding Eastern Europe and the former Soviet Union, 56% of countries had a larger share of GDP consumption by government at the end of the 1980s compared with the start. The US showed almost no change during the Reagan era and Australia's government consumption grew, although the UK government's shrank. Developing countries frequently increased the size of their government expenditure despite structural adjustment, perhaps because of increased interest repayments.

Over the whole period 1980 to 2000, almost half of countries increased their government expenditure, transition countries excluded. With the transition countries included in the 1990s, 38% of countries increased their government consumption expenditure.

I suspect that it is a similar story for all government expenditure, that is, consumption plus investment. It may even be that the Anglo-Saxon economies were less enthusiastic government slicers than the rest of the world. Unfortunately, the information on total government expenditure for the last thirty years does not seem to be readily available on the Internet. All that fuss the main supra-governmental bodies made about government expenditure for decades, and the information is not readily available on their websites. Maybe I overlooked things...

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