Tuesday, July 5, 2011

The UK is almost as socialist as Sweden is!

A chart above taken from the Economist's recent article on the Swedish economy, fittingly entitled "The North Star", shows that the size of the UK's public sector as measured by the share of public spending in GDP is virtually indistinguishable from that in Sweden and much higher than in Poland (not on chart - in 2010, public spending represented only about 45% of GDP).

The message? First, there has been an unbelievable convergence of economic models in the past 10 years: liberal countries became more socialist, while socialist countries became more liberal. Second, a larger role of the state in the economy has not prevented the world's economy (both developed and developing countries) from growing faster than in previous decades, the global crisis notwithstanding. Finally, it seems that modern societies, which live not only on GDP, but increasingly care about well-being and standards of living going beyond GDP, need relatively significant public intervention to fulfill the new social needs. Large public sector (which doesn't mean that it necessarily needs to be inefficient) is likely to stay.

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