INTRODUCTION

The 1960s was a period of great optimism in the ability of governments to solve economic and social problems, especially through higher public spending. As a consequence, governments were continually asked to take additional responsibilities. In the previous chapter, we found that progress in the achievement of various social and economic objectives has been relatively limited since 1960 despite the considerable increase in public expenditure in all industrialized countries. Progress had been much greater before 1960. In some sense, it could be argued that the growth in public spending after 1960 was less socially and economically productive than before. With the benefit of hindsight, many would now say that the optimism of the 1960s about the benefits that could be derived from higher public spending was a bit naive. Some would go as far as to decry the rise in tax levels and in public spending and argue that much of the public spending in recent decades has been a waste.

This chapter will argue that countries which contained the growth of that spending performed equally well or even better, in most of the areas that governmental action attempts to influence, than countries with relatively big governments. To pursue this analysis, the countries in the sample will be divided in three groups, depending on the level of public expenditure in 1990. Belgium, Italy, the Netherlands, Norway, and Sweden, where public spending exceeds 50 percent of GDP, constitute the group of “big governments” or big spenders.