THE SCOPE FOR REFORM

We have suggested in the preceding text that, by around 1960, when public spending was, on average, below 30 percent of GDP, most industrialized countries had reached adequate levels of social welfare. Public spending on essential services in health and education or in infrastructure and basic social security systems provided the most basic public services. The contribution that public spending had made to the achievement of high levels of socioeconomic indicators was very significant. However, we could not find much evidence that the large growth of government spending over the post-1960 years contributed much to the further achievement of identifiable social and economic objectives. In fact, some of these objectives seemed to change in the wrong direction. At the same time, today's newly industrialized countries show relatively high levels of desirable economic and social indicators even though their public spending is only about 20 percent of GDP. The governments of these countries may not be doing everything that the governments of the industrial countries do, but they carry out the essential tasks quite effectively and leave it to the private sector to fill the gap. In other words, they focus their attention more on the “core activities” of the government and less on the more recent, redistributive activities. They assume that to a large extent what they do not do is either nonessential or it will be done by the private sector.