A NOTE ON THE METHODOLOGY FOLLOWED

Between 1870 and 1996 the share of public spending in gross domestic product (GDP) for the group of industrial countries for which data are available rose by a factor of more than 4. In the first part of this study we have shown that this growth was promoted by the interaction of particular events (wars, depressions) with changing views that came to assume that many social or economic problems could be solved by greater governmental intervention, especially through higher public spending. Higher public spending was believed to bring higher social welfare.

As a consequence of these events and views, there was an expansion of the government role in: (a) education, with the result that in most countries free or at least inexpensive public schools at all educational levels, became the norm; (b) health; (c) the provision of public pensions, which eventually created a situation where most aged individuals were receiving or expected to receive government-provided pensions; (d) public assistance to the unemployed and to various other groups; (e) subsidies to enterprises; and so on. The expansion in public spending may have promoted greater public welfare in many ways. For example: it increased the literacy rate and human capital in general; it reduced infant mortality and increased general health, thus leading to higher life expectancy; and it provided an important safety net for those who became unemployed, incapacitated, or indigent.