++Addition++Randall Parker weighs in, specifically on Iraq at the top.
When I tried to find national governmental expenditures as a percentage of total GDP by country, I was surprised to find that nothing came up. So here are the percentages for countries for which '07 data was available (in the case of Mongolia, the data is from '06 without adjustment). Governmental expenditures and total economic activity are both in exchange rate terms. I've sent the data table to Nation Master as well:
|Country||GE as % GDP|
|11. Czech Republic||58.8|
|12. Sao Tome||58.3|
|31. Cyprus (no Turk-adm)||52.6|
|51. New Zealand||46.6|
|55. Papua New Guinea||44.9|
|65. West Bank/Gaza||43.4|
|71. Saudi Arabia||40.4|
|72. Congo, Republic||39.2|
|87. Cape Verde||34.4|
|89. South Africa||33.9|
|101. Dominican Rep.||31.0|
|106. Sri Lanka||29.5|
|107. South Korea||29.3|
|113. Burkina Faso||27.7|
|127. Equatorial Guinea||23.9|
|129. Congo, Dem. Rep. of||22.9|
|131. El Salvador||22.5|
|134. British Virgin Islands||21.5|
|135. Cote d'Ivoire||21.4|
|150. Hong Kong||17.0|
|153. Costa Rica||16.5|
Here is a visual representation of the table. Other than the relatively high ratios in Europe, no patterns immediately become apparent. Iraq, still a major US focus, has a larger governmental 'engine' than even communist Cuba, while a feeble 'central' government tucked into eastern Afghanistan receives its paltry revenues mostly through customs, as well as more than $100 million a year through donors. In a country where nearly one-third of GDP is tied up in the drug trade, income taxes are virtually impossible to collect.
There is a modestly positive correlation of .25 with per capita wealth. To the extent that is of any importance, it is another reason why those on the left should favor policies that boost average IQ and by extension national wealth. Over time, as the economy grows, the government grows as well, generally at a slightly greater rate, then? But if European countries are removed from the analysis, the relationship loses statistical significance (p=.34).
A weak (though with p<.02) inverse correlation of .19 exists between government expenditures as a percent of GDP and total population size as well. Since we're looking at nearly the entire world, conjecture with that kind of relationship as the basis is guesswork. But larger countries might experience some benefit through economies of scale. Western European nations tend towards the top, while East Asian nations cluster towards the bottom. I'm surprised by how little (centralized) government spending there is in countries like Japan, China, Singapore, and Taiwan relative to their respective total economies. One obvious reason, though, are the lack of governmental welfare systems in these countries (with pensions, medical coverage, etc mostly provided by employers) compared to the expansive systems of Western Europe. The US' budget appears deceptively small as these figures are for national (federal) governments. Over 40% of our public spending is done at the state and local levels, unique in magnitude to the rest of the world, as far as I know (correct me if I'm wrong). Still, even if total US expenditures are aggregated and compared with only the national figures of other countries, as a percentage of total GDP, US government expenditures--at 34.6%--are still diminutive relative to the rest of Europe. Only Albania, Russia (I wonder how entities like Gazprom are treated for budget purposes?), and Poland have government expenditures that are smaller relative to total GDP than the US does. As economically ubiquitous as our government seems to be, it's relatively sparse by Western standards.
On its face, there doesn't appear to be much to validate the libertarian view that minimizing the size of the federal government, and suffering the consequent economic distortions its continued growth will otherwise cause, should be the primary goal of a society wanting economic prosperity (and a high quality of life). Ceteris paribus perhaps, but there are clearly a host of other demographic and cultural variables that are more important. Who would rather operate a business--or live--in Haiti instead of in Denmark?
Parenthetically, follow AE on twitter @AudaciousEpigon.