The size of the state is not holding back growth
His bottom line (35 minutes in) was that the state is too big and that in order to restore growth, we need to cut back the size of the state:
”The state is too large. The state – the size it is – means we have low growth baked in”.
The share of government expenditure in GDP is a rough gauge of the size of the state. Here, using IMF data, I’ve plotted the UK versus Germany, France and Sweden between 2007 and 2011.
What you see is that the UK comes bottom, ie we have the smallest state.
And now let’s look at growth over the same period.
Again the UK comes bottom for performance since the global recession.
What this shows is that a relatively large state is not, in itself, a bar to growth.
The idea promoted by Moulton and others that the size of the UK state is holding back the wider economy is constructed on a foundation of ideology, not evidence.Tagged in: government expenditure, imf, Jon Moulton
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