In previous chapters, we showed that the growth in public spending over the past century resulted from a considerable expansion of relatively new activities in which governments became involved. During this period, citizens requested a larger role of the government in the economy, while institutional constraints and intellectual resistances on public spending were progressively weakened. For some time, the growth in public spending from a very low level generated significant gains in social and economic welfare. For the period after 1960, however, when the rapid increase in public spending became largely of a redistributive kind, the earlier link between the growth in government spending and improvements in social and economic objectives seems to have been broken. In our analysis, we have found that the industrial countries with small governments and, to some extent, the newly industrialized countries with low public spending, were able to achieve levels of socioeconomic indicators similar to those achieved by countries with much higher levels of public spending. This has led us to the conclusion that there must be considerable scope for redefining the role of the state in industrialized countries so as to decrease public spending without sacrificing much in terms of social and economic objectives. In other words, we believe that it is possible to reduce public spending without necessarily changing the fundamental objectives of the government.

In the following chapters we will argue that there is considerable scope for government reform and, borrowing from countries experiences, we will outline a rough blueprint for such reforms.