Popular narrative holds that rich, developed countries are characterized by small states and minimal intervention in the economy.However, this belief is More a myth than a reality supported by scientific evidence.
Through a detailed analysis of various economies around the world, it is evident that Large states are not only common in developed nations, but play a crucial role in their growth and stability.
One of the most widespread myths is that developed countries have small states.. Scientific evidence shows the opposite. The most advanced economies, such as Sweden, Germany and Spainhave a public expenditure that ranges between 46% and 49% of their Gross Domestic Product (GDP), one of the most used indicators to measure the size of the state. In contrast, poor countries, such as Nigeria, Ethiopia and Bangladeshhave significantly lower public spending, around 13% to 14% of GDP. These data, extracted from a reliable and comparable source such as the International Monetary Fund (IMF)highlights the positive correlation between state size and economic development.
The causal relationship between the level of government spending and economic growth is complex and bidirectional. On the one hand, higher spending in critical areas such as education and public health can boost economic growth. On the other hand, richer countries have the capacity to invest more in their state, creating a virtuous circle of development. Academic research using econometric techniques, such as that of Nyasha and Odhiambo (2019), confirms this bidirectionality, highlighting that both government spending promotes growth and growth enables higher government spending.
Reduction of the Argentine State: A path to development?
In Argentina, According to IMF data, The size of the State was 37% of GDP in 2022 (latest data available), a size similar to that of the USA (36%), Israel (37%) and Australia (38%), but lower than most European countries, such as Norway (39%), the Netherlands (44%), the United Kingdom (44%) or Denmark (45%). The recent evolution of the size of the Argentine state has been influenced by significant economic and political events. The convertibility crisis and the recovery of GDP post-2002, the nationalization of the AFJP in 2006/2008, and the stagnation of GDP together with energy subsidies and debt payments post-2011, are some of the factors that explain the changes in public spending. These variations illustrate how the internal context can influence fiscal policies and the size of the state.
The proposal to drastically reduce the size of the state, as suggested by Milei’s strategy, not only lacks scientific support, but could have adverse short- and long-term effects on Argentina’s ailing economy. There is no scientific evidence to show that going from public spending of 37% to 25% of GDP improves economic growth. In fact, a reduction in the size of the state could result in lower growth and greater inequality, exacerbating disparities between public and private education, and negatively affecting essential sectors such as health and infrastructure. Is the May pact a covert agreement to privatize the retirement and pension system again? To tax public universities? The governors who sign this declaration: What public expenses are they proposing to cut to reduce the size of the state to 25%?
Conclusion
Examples of China, South Korea and Japanthe last major countries to develop, show that A robust and active state is essential to implement effective development strategiesThe discussion should not focus on whether the state should exist or not, but on how to improve it and make it more efficient to foster growth and reduce inequality.
The destruction of the state, as promoted by some political currents, would lead us to underdevelopment. Instead of reducing its size, the focus should be on strengthening and improving public institutions so that they can play their central role in economic and social development. The scientific evidence is clear: a large and effective state is an indispensable component of any successful development strategy.
UNC Professor and CONICET Researcher
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
