A Place to Stand

This is part of an article on New Zealand's adoption of free market reforms but this particular line jumped out at me.

If we look back through history, growth in government has been a modern phenomenon. Beginning in the 1850s and lasting until the 1920s or ’30s, the government’s share of GDP in most of the world’s industrialized economies was about six percent. From that period onwards—and particularly since the 1950s—we’ve seen a massive explosion in government share of GDP, in some places as much as 35-45 percent. (In the case of Sweden, of course, it reached 65 percent,

What has been done clearly can be done & therefore such levels are achievable. I personally would be happy with 15% but that may just be because I am a child of this age.

In Britain at the moment government spending is just over 50% of GNP (60% in Scotland) though 1/4 of that is money raised by borrowing rather than tax. It strikes me that a society that can borrow 12.5% of GNP in a period of flatlined growth would have no difficulty whatsoever in borrowing 6% fairly permanently if our growth matched China's. That, somewhat improbably, means we could do with no taxation at all! Actually if we raise about £20 bn (1.5% of GNP) on bandwidth licencing & other sorts of rental assets that can only easily be done by government & there is a continuing increase in money supply to keep prices at a constant rate zero taxes become not unreasonable.

HT to Jerry Pournelle

If we assume technology has been growing at an exponential rate, as all the evidence shows, this increase in state parasitism accounts for the fact that real rates in wealth increase are not expanding exponentially.


++++++++++++++++B+rad DeLong'+s estimate of historical+ +wo+rld growth:+

Year/ Population millions /GDP per person/ annual growth
5000 BC / 5 / 130 /--
1000 BC / 50 / 160 / 0.21%
1 AD / 170 / 135 / 0.20%
1000 AD / 265 / 165 / 0.14%
1500 AD / 425 / 175 / 0.24%
1800 AD / 900 / 250 / 0.71%
1900 AD / 1625 / 850 / 4.3%
1950 AD / 2515 / 2030 / 5.17%
1975 AD / 4080 /4640 / 10.38%
2000 AD / 6120 / 8175 / 7.4%

This is a my pocket calculator working of the growth rates & is higher than normally believed though the trend is the same. I assume the difference is in the amount of growth worldwide soaked up by increasing population. There is a clear correlation between the rate of rise slowing & then declining & the post 1930 increase in government. There may even be a correlation between the post 1500 rate of growth & the end of feudalism & governments being under the rule of first centralising monarchies & then the rule of law rather than local aristocrats/warlords but that is more speculative.

Labels: ecnomic growth, Fixing the economy, Government parasitism