The Economist Magazine 26th November 2021
“Keep your eye on one thing and one thing only: how much government is spending,” Milton Friedman once said. Today his eyes would be popping. Governments have spent $17trn on the pandemic, including loans and guar antees, for a combined total of 16% of global gdp. On current forecasts , government spending will be gre ater as a share of gdp in 2026 than it was in 2006 in every major advanced economy. America is about to put $1.8trn into expanding its welfare state; Europe is doling out a €750bn ($850bn) investment fund; and Japan is promising a “new capitalism”, with even more government largesse.
In the coming decades the state’s economic footprint will expand yet further. Fourfifths of the world econom y is now subject to a netzero emissions target, a goal that in Britain is projected to raise the governmentdebttogdp ratio by 21 percentage points by 2050 as the state subsidises decarbonisation and growth slows. And many countries have ageing populations that will demand vastly more spending on health care and pensions.
It would be easy for classical liberals such as this newspaper to despair at government’ s relentless march. As the state has grown during the pandemic, its failures ha ve been on full display. Early in the crisis America’s publichealth authorities hindered private labs developing their own tests for the virus; this year they took until October to approve r apid tests that could have been a vailable before the summer . F or months Europe’s vaccine rollout was too slow. China once celebrated its response to the virus as a victory for a strong state model. Now its zerocovid strategy exemplifies the inflexibility of uncheck ed c entralised power . One of the scandals in which British politics is mired is over whether its leaders took advantage of the crisis to award lucrative contracts to their pals.
The longterm threat of a big state is that such bureaucracy, institutional failure and corruption become routine and widespread, making people poorer and limiting individual freedom. But these dangers are mixed with an opportunity. To understand how, consider why government grows. The Economist Magazine 26th November 2021