European Public Spending Revisited

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"European Public Spending Revisited"

As astute reader RY pointed out to me yesterday and Jacob Weisberg wrote in comments, this post on Weisberg and European public sectors as a percent of GDP is too hard on him. Looking at spending as a percent of GDP rather than taxes is arguably the better metric, and certainly a metric which makes his claim that “government that constitutes half of a country’s economy” is commonplace “in Western Europe” seem less wrong.

In their excellent report “Comparing Public Spending and Priorities Across OECD Countries”, my CAP colleagues Sabina Dewan and Michael Ettlinger have the following chart of government spending in the OECD, drawn from OECD data:


So as we can see, three countries in Western Europe (Sweden, France, Denmark, and Austria) seem to maintain 50 percent of GDP as spending, along with one country in Central or Eastern Europe (Hungary). Among Western European countries, two (Spain and Ireland) are below 40 percent with the rest in the middle. So I think it’s definitely inaccurate to state that this level of public spending is as widespread in Europe as Weisberg implied, but it’s not unheard of either. The initial discussion would have benefitted from specific numbers.

Of course one also might ask how relevant this particular metric. I would say that looking at the spending share of GDP in some ways understates the extent of state involvement in the French economy, where you have a lot of planning and government ownership stakes in private firms and so forth. Conversely, it definitely overstates the extent of state involvement in the Danish economy which normally ranks very high on conservative “economic freedom” indexes despite high tax and spending levels.

In terms of the idea that the level of government spending “produces a very different society over time” I think looking at the chart it’s hard to take seriously the notion that Norwegian society is closer to Greece than to Sweden, that Spanish society more closely resembles Japanese society than Portugese society, or that American society is more like Slovakia than like Canada.

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