Public spending

According to a Eurobarometer / TNS Opinion, only 50% of the French people have a good opinion of their government whereas 46% have a bad opinion (4% are undecided). In Germany, the government gathers 73% favorable opinion and 23% unfavorable opinions (4% were undecided). Yet, in 2013 public spending in Germany reach 45.4% of GDP against 57.2% in France. A huge difference – 12 points – which does not contribute to the improvement of our public sector. That is a good reason to reduce spending.

The crisis of the world economy since 2008 has encouraged various governments to increase the share of public spending. This increase was a general phenomenon among the OECD countries and contributed to an unprecedented debt hike. An IREF study comparing the development of key economic indicators over the recent period (1997-2011) for some 30 OECD member countries makes it possible to update the link between public spending and economic growth in the light of the first impact of deficit spending between 2008 and 2009.

Reforming is a path for reelection: German Chancellor Angela Merkel privatized, deregulated, capitalized. She did not reflate nor accepted deficits : she reduced taxes. For sure, there are some lessons to learn for France.

WP 2013-05. Executive Summary Although it is generally agreed that government size has a negative impact on economic growth, it is also manifest that the intensity of this causal relationship…

“A nation with a small but strong government which gives people the space they need”: this what Dutch King Wilhem-Alexander wants for his people. And it has become a domestic policy on September 17th, 2013. The King has a life-time in front of him to consider the social, economic and political evolutions of society. Unlike an elected President, he does not have only a handful of years poisoned by the lurking idea of reelection for another handful of years to propose or back policies. That is why, in this view, the King can speak freely and without pressure of any kind. Thus the Dutch King declared in front of the Parliament that the welfare state was gone, over, finished. This 20th century concept is no longer relevant in our mordern society. John Galt on the throne of the Netherlands? Not yet, but that is a good step forward.

This little county on the shores of the Baltic Sea will become the 18th member of the Eurozone. That is well deserved since Latvia meets all of the Maastricht criteria.…

The French Government supporting private companies thanks a system of financial assistance: what an economic heresy! Yet, over the last thirty years, it has become the creed for French Governments, whether conservative of leftist. Four figures are to be pointed out:

Welcome to the clubs! Why should they join? The crisis is not over and doubts about the virtues of the EU and the euro abound. It may therefore seem surprising…

“If I have less money, I shouldn’t spend less but tax more”. That is exactly what the French President François Hollande and his Government are doing. Economic principles are obviously upside down. That is the result of socialist economic policies denying reality: the French budget was established on the assumption that taxpayers would continue to spend money as if there were no crisis and as if tax revenues were some kind of annuity. This error can be lethal for French taxpayers.

Over 30 to 35% og GDP, except in Scandinavian countries, taxpayers refuse to cover public spending over a 70% threshold. Governemts that have high public spending are entrapped in deficit and debt. Stimulus policies failed. True economic stimulus can be found by less regulation and less public intervention.

OECD data are used for population, GDP, employment, working time, investment, trade, spending, revenues and debt.

Read study : Relance et Croissance