Wednesday, March 12, 2008

Government spending as a percentage of GDP by country

++Addition2++See an updated version of the same here.

++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:

CountryGE as % GDP
1. Iraq87.3

2. Cuba

81.4
3. Slovakia66.2
4. Timor65.5
5. Romania65.5
6. Moldova63.4
7. France61.1
8. Seychelles60.3
9. Hungary59.1
10. Guyana58.8
11. Czech Republic58.8
12. Sao Tome58.3
13. Sweden58.1
14. Denmark58.1
15. Iceland58.1
16. Malta57.9
17. Qatar57.2
18. Kuwait56.1
19. Belgium56.0
20. Norway55.8
21. Uzbekistan55.6
22. Colombia55.3
23. Italy55.3
24. Netherlands54.7
25. Austria54.3
26. Finland54.2
27. Portugal54.1
28. Lesotho53.8
29. Libya53.0
30. Belarus52.9
31. Cyprus (no Turk-adm)52.6
32. Ukraine52.1
33. Yemen50.9
34. Greece50.7
35. Brunei50.5
36. Georgia50.4
37. UK50.0
38. Bosnia/Herzegovina50.0
39. Bulgaria49.9
40. Swaziland49.9
41. Germany48.8
42. Malawi48.2
43. Canada48.2
44. Latvia47.7
45. Jordan47.6
46. Egypt47.5
47. Spain47.3
48. Slovenia47.1
49. Ghana47.0
50. Croatia46.8
51. New Zealand46.6
52. Oman46.5
53. Estonia45.8
54. Zambia45.4
55. Papua New Guinea44.9
56. Angola44.8
57. Namibia44.2
58. Azerbaijan43.9
59. Lithuania43.9
60. Jamaica43.9
61. Lebanon43.7
62. Zimbabwe43.7
63. Israel43.6
64. Australia43.6
65. West Bank/Gaza43.4
66. Algeria43.1
67. Uruguay43.0
68. Serbia42.8
69. Ireland41.5
70. Venezuela41.1
71. Saudi Arabia40.4
72. Congo, Republic39.2
73. Burundi39.1
74. Turkey39.1
75. Bahrain38.6
76. Switzerland37.8
77. Mozambique37.7
78. Luxembourg37.5
79. Kazakhstan37.2
80. Vietnam36.9
81. Rwanda36.7
82. Trinidad/Tobago36.3
83. Botswana35.9
84. Macedonia35.9
85. Syria35.5
86. Peru35.3
87. Cape Verde34.4
88. Eritrea34.1
89. South Africa33.9
90. Kenya33.6
91. Tajikistan33.4
92. Mongolia33.3
93. Indonesia33.2
94. Malaysia32.8
95. Gambia32.4
96. Belize32.1
97. Senegal31.5
98. Bolivia31.3
99. UAE31.3
100. Kyrgyzstan31.1
101. Dominican Rep.31.0
102. Iran31.0
103. Japan30.9
104. Gabon30.7
105. Morocco30.7
106. Sri Lanka29.5
107. South Korea29.3
108. Chile29.1
109. Madagascar28.3
110. Panama28.0
111. Pakistan28.0
112. Albania27.9
113. Burkina Faso27.7
114. Uganda27.6
115. Tunisia27.4
116. Mexico26.7
117. Paraguay26.4
118. Nepal26.3
119. Nicaragua26.0
120. Ecuador25.8
121. Honduras25.6
122. Aruba25.6
123. Togo25.3
124. Benin24.8
125. Tanzania24.6
126. Nigeria24.1
127. Equatorial Guinea23.9
128. Sudan23.3
129. Congo, Dem. Rep. of22.9
130. Thailand22.8
131. El Salvador22.5
132. China22.0
133. Ethiopia21.8
134. British Virgin Islands21.5
135. Cote d'Ivoire21.4
136. Poland21.2
137. Taiwan21.2
138. Mauritius21.2
139. Laos21.0
140. Guinea21.0
141. Russia20.9
142. India20.4
143. Chad19.9
144. US19.9
145. Cameroon19.1
146. Argentina19.1
147. Armenia17.8
148. Philippines17.7
149. Brazil17.3
150. Hong Kong17.0
151. Guatemala16.7
152. CAR16.6
153. Costa Rica16.5
154. Haiti16.4
155. Singapore16.3
156. Bahamas16.0
157. Cambodia13.3
158. Bangladesh12.8
159. Turkmenistan9.6
160. Afghanistan9.2

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?

56 comments:

Rob said...

Is the 4.7% for the Netherlands a typo? Or do they do something like government-sponsored nongovernmental organizations?

Audacious Epigone said...

Rob,

It was a typo. Thanks for catching it and giving me a heads-up. It's fixed now.

August said...

An answer, of sorts, is here:
http://brianmicklethwait.signal100.com/podcast/HabitsofHighlyEffectiveCountries.pdf

You may want to listen to this interview too:
http://www.brianmicklethwait.com/index.php/weblog/leon_louw_talks_about_the_habits_of_highly_effective_countries/

Some very interesting conclusions- the most pertinent to your post is that a stable judicial system is very crucial. Businesses can figure out how to pay for anything if they know they can make a profit, but if the laws are going to change every two weeks, they can't even be sure they'll be owning what they have now.

Audacious Epigone said...

August,

Interesting. Venezuela is a clear example of how a capricious government is bad for economic growth.

Race clearly does seem to matter, though. Brian Micklethwait states that race doesn't matter since Botswana is pretty wealthy, even though that clearly is an example of resource wealth and foreign investment leading to prosperity that will not remain if the diamond market crashes.

Re: Leon Louw, my question is how to untangle IQ and freedom. The two correlate at the national level (using Lynn & Vanhanen and Heritage's economic freedom index) at a robust .70.

Fat Knowledge said...

Good stuff.

Interesting how Iraq and Afghanistan are on the two extremes.

Not much correlation in either direction with tax rate and countries that I admire.

Came across this graphic today and it kind of goes along with this post.

On an unrelated note, I just watched the video of Jeremiah Wright. Wow. I know you have been saying he is bad news, but I had no idea that he was that bad. Obama is going to need to explain why exactly he chose to go to this church for so many years. I certainly don't understand it.

nzconservative said...

One of the ironies about government spending as a percentage of GDP is that it is often higher when protectionism is low. |

In the past protectionism tended to serve as a sustitude for welfare, however now that most countries have relatively free markets, they have to provide a more comprehensive welfare system to protect workers from greater economic change.

Audacious Epigone said...

FK,

Thanks for that link.

The broader point I take is that the size of government just isn't as determining a factor in quality of life as many libertarian and entitlement state supporters assert that it is. August's links point not to government size per se, but to predictably and level of individual autonomy allowed.

Re: Jeremiah Wright. Seems to me Obama should rebuke Wright for political reasons. He probably hopes it will go away, and though Hillary may not go after him for it, surely either McCain or right-leaning 527s will in the general election. Would he lose black support in doing so? Highly doubtful. And it would assuage some white and Jewish voters who, if not already concerned about the relationship, will be once they find out about it.

NZ,

I see that in Asian countries at the low end, but can't make it out midway and at the top. I wonder if there is some measure that attempts to objectively look at protectionism by country or region and translate that into some kind of index.

August said...

I'm not sure you can untangle I.Q. and freedom. You need to have one to appreciate the argument for the other.

al fin said...

It's too late for Obama to distance himself from Wright. There is no way he can explain why he stayed with Wright so long, then somehow suddenly decided to leave Wright in the runup to the presidential election.

The strain of racist afrocentrism that runs through over 50% of the US black community is simply what it is. Obama cannot renounce it without losing black support, but he cannot embrace it publicly and still be elected US president.

Audacious Epigone said...

AF,

Some of his black support might peel off, but I doubt it'd be that significant.

In any case, the virtual silence on the matter is what works out best for him. Funny how we've heard more about John Hagee's endorsement of McCain, even though the relationship b/w the two is nowhere near as close or long-lasting as the Obama-Wright relationship is. The silence can't last, even if it remains muted through the rest of the Democratic nomination process.

Today I heard Rush Limbaugh go on for two segments about Jeremiah Wright and Obama's connection to him, apparently in retaliation for some attack made by Obama on the 'king of radio'.

Brad said...

I don't think the truth is PC enough to ever say about the race factor.

Audacious Epigone said...

Brad,

That's an understandable pessimism. But the force of the omertas on truth are being tested all the time, more and more, by people like you. Measured in days, maybe you're right. I'm more optimistic over the long-term, though (at least in terms of veracity being acceptable among the relatively erudite concerned citizens--there are plenty of other things I think neither of us are too optimistic about).

Anonymous said...

You have put together an interest chart, but I wonder if you could go in to how you came up with the percentages. I am using the CIA factbook, but I am coming up with different numbers. Thanks!

Anonymous said...

*interesting

Audacious Epigone said...

Anon,

Budget expenditures/GDP (official exchange rate). Both are under the "Economy" subsection.

For Iraq, it's 48.4b/55.4b = 87.3%.

Anonymous said...

So in the case of Chile, you are taking 31.36 billion divided by 160.8 billion? I am getting 19.5%. Or in the case of Mexico, you are taking 209.2 billion divided by 886.4 billion? I get 23.6%.

Audacious Epigone said...

Anon,

The CIA updates its figures whenever new information is made available, but doesn't make note that it is doing so, unless the year the estimation was made changed. So rising commodity prices and the dropping value (which effects exchange-rate numbers) of the dollar are making the numbers dated pretty quickly.

Looking through the discrepancies you pointed out, I didn't see any variances in budget expenditures. So maybe those tend to only be made annually, I'm not sure. If you go through the entire gamut of countries, I'd be interested to see how it correlates with my numbers (which I entered in mid-February). I'm sure it will be very strong, but not exact, so the thrust of the list will be pretty accurate but of course not precise the further forward in time we go.

Anonymous said...

The US number is for Federal government only. When you add the state/local, it is about 32%, according to this blog: http://carriedaway.blogs.com/carried_away/2005/04/us_government_s.html

Audacious Epigone said...

Anon,

Yes, for '08 the federal government reports that expenditures at the state and local levels actually comprise 40% of total spending in the US. I mentioned that in the body of the post.

Mark said...

I know it's 6 months on, and you mentioned that the factbook changes unexpectedly, but if you run Canada's number, it's now at 38% which is a far cry from the 48% in the table. Weird.

Anonymous said...

I was interested in Romania percentage of government spending. You state 65%, but if you run the figures (56bln spending of 166bln GDP) the percentage is 33.7%. How did you come up to 65%?

Audacious Epigone said...

Anon,

The CIA figures change a lot, to the extent that I almost regret the post. It's hard to put much faith in them. The declining dollar might explain some of the spread, depending on when each of the estimates is derived, but I can't imagine it accounts for a cutting in half of governmental spending as a % of GDP.

Normandy said...

Good for people to know.

Mark said...

Dear Sir: Your data is interesting and misleading. You just can't look at Governement spending as a percent of GDP. You need to look at the absolute dollars spent. Percentages are misleading.

What is worst to come is the new spending Government policy. They actually think our new Government can spend their way out of a recession. How Stupid this thought process is, but what do you expect from a idiot and bigot like Harry Reed and unethical A-hole like Nancy Pelosi. I hope Mr. Obama can bring real change that we can believe in.

Audacious Epigone said...

Mark,

Percentages are more useful for 'crosstab' comparisons. Just looking at absolute dollar amounts spent will create a ranking that is very similar to a ranking of real GDP. This list is now a couple of years old, created during the housing boom. I need to redo it to show where countries have moved such the bubble burst.

Ron in L.A. said...

This is the posting that got me hooked on your site, Audacious. As a libertarian/conservative type I want to point to stats to confirm that nations thrive whenever their government throttles back spending. Problem is the numbers aren't cooperating.

You've got totalitarian regimes at the top, followed by mixed-economy caretaker states in Europe, followed by most the rest of the world in no discernible pattern, working in a few tax-haven low government success stories like the Bahamas, Singapore, and Hong Kong, and then devolving to anarchic gang-ruled states where you wouldn't feel safe staying for one day.

It suggests that some government is good (U.S./Canada), way too much is bad (Iraq/Cuba), none at all is horrible (Afghanistan), and really high levels of government spending can result in some nice places to live (Denmark/France/Germany/Sweden).

We shouldn't be afraid of the facts, but I'm starting to have an identity crisis.

Audacious Epigone said...

Ron,

Assuming that the size of government alone is determinative of a nation's GDP and economic growth is going to lead you to come up short. To get some idea of how government spending, as a percentage of total economic output, inhibits (or helps) fuel further growth, it's necessary to take all sorts of other considerations into account like IQ, geographical location, the availability of natural resources, etc (the US is fortunate in all of these cases, although I think immigration patterns are having a depressive effect on IQ).

My feeling is that more productive countries allow for a more expansive functioning government to be parasitic to some extent without killing the host. Populations without the human and capital resources to support a large government are simply too destitute to do so.

Anonymous said...

I find your post interesting but I don't think one should expect to determine the best rate of govt expenditure from such a list. Do you know of a statistic where GDP per capita growth is correlated to govt spending as a percent of GDP? I have the statistic for the US from 1930 to today, adjusted to constant dollars and found a near linear relationship and a compound rate of GDP growth of about 2.5%. After WWII govt spending as a percent of GDP has been 20% +/- 4%.

What are European growth rates post WWII?

Audacious Epigone said...

Anon,

The list isn't meant to show some best rate of governmental expenditures as a percentage of GDP. When you tracked the US from the 30s to the present, you found a linear relationship between an increase in per capita government spending and an increase in per capita GDP? Am I reading that correctly?

Anonymous said...

wait a minute, this chart you posted is totally false. i just watched the news and none of your numbers make sense. espcially becasue you leave out local spending. you have to put that in, not just add a footnote at the end. this is because the U.S. does lots of spending in state and local, wheras other countries just do it at federal. The US currently spends 40 percent for FY coming up, and the EU nations approximately 47 percent FY coming up.

Your chart has EU nations up high and the US way down low. thats totally misleading. they are much much closer. you have to recalibrate your entire chart or at least the US and repost it.

its not enough just to mention state and local budgets in a footnote.

Anonymous said...

Does your figure for Canada include provincial govt spending? If not, it is too high. For 07-08 federal govt apending was 15% of GDP. See the URL below with chart which references it official govt source. Remember Canada spends almost nothing on defense which keeps percentage deceptively low!

http://www.admfincs.forces.gc.ca/fp-pf/msd-add/2007-2008/fg-gf-eng.asp

Robin said...

You have to include state/provincial spending. It's very important in Canada, the U.S., Switzerland, Japan. And you can't draw conclusions about the impact on economic growth without presenting some data about that. Iraq and Cuba are at the top of the list, while China, India, Hong Kong, Mauritius, Brazil, Singapore are among those with relatively small govt. who have grown quite well.

Nobody ever said that fiscal frugality was the sole key to economic vitality. But Krugman's recent suggestion that "big government" lessens recessions is at odds with what happened in Sweden (down 6.2% in the year ending Q2 09), the U.K., Iceland and many other big spenders.

Audacious Epigone said...

Robin,

Ideally, yes. But that information is very difficult to come by even within the OECD, let alone outside of it.

Robin said...

The Heritage foundation's economic freedom index has total government spending for non-OECD countries (OECD always shows "general government" not just central).

I prefer cato's index, actually, but it breaks government spending down by consumption, investment and transfers -- useful in many ways, but not in this simpler comparison.

For example, China is closer to 30% than 22% if local government is properly included. By 2009, I'd guess the U.S. is well above 40%, though that is partly because private GDP is down so much.

Anonymous said...

So where will the US rank when the government takes over health care?

Holmes said...

It would be interesting to compare the results here with total GDP and per capita GDP.

As to the libertarian types worrying about this graph- in the end, it is difficult to economically quantify self-determination and freedom from control. I tend to put a higher value on that.

Anonymous said...

It was rather interesting for me to read this post. Thank you for it. I like such topics and anything connected to this matter. I definitely want to read more on that blog soon.

Anonymous said...

The US has national spending of 19.9 but if you include state and local spending it is 35.79%. Total spending would be more representative of governments size.
http://www.usgovernmentspending.com

bathmate said...

I liked it.
Bathmate

Anonymous said...

Keep on posting such stories. I like to read articles like that. Just add some pics :)

Steve Roth said...

Well here's one obvious and revealing fact:

The U.S. government spends less as a percentage of GDP than any other large, prosperous country. So much for "profligate, out-of-control spending...

(You seem to suggest that you've pulled a ranking for total expenditures including state and local. Love to see it.)

Notice the company we're keeping:

13. Sweden 58.1
14. Denmark 58.1
19. Belgium 56.0
20. Norway 55.8
23. Italy 55.3
24. Netherlands 54.7
25. Austria 54.3
26. Finland 54.2
27. Portugal 54.1
34. Greece 50.7
37. UK 50.0
41. Germany 48.8
43. Canada 48.2
47. Spain 47.3
51. New Zealand 46.6
63. Israel 43.6
64. Australia 43.6
69. Ireland 41.5
76. Switzerland 37.8
78. Luxembourg 37.5
103. Japan 30.9
107. South Korea 29.3
137. Taiwan 21.2

143. Chad 19.9
144. US 19.9
145. Cameroon 19.1

Steve Roth said...

You got me curious. I just pulled the numbers for fed, state, local combined.

http://www.asymptosis.com/out-of-control-spending-not-so-much.html

Publius said...

No the fair comparison for the US must include state and local spending. We are a federation of 50 governments all of whom have significant budgets and taxation. As of this year, total government spending in the US (fed, state, local) has hit 45% of GDP.

Instead of simply measuring total % taxation, you should measure per-capita GDP left over after government spending.

Clearly there are differences between the US and Chad besides tax rates. And clearly there is no logic to cheerleading the highest possible government confiscation of production.

Anonymous said...

I think that the libertarians have a very good point (high government spending equals low wealth) and these statistics prove it. You shouldn't, however, look at current wealth. You should look at economic momentum and who's gaining it (Asia) and who's losing it (the West).

nomegustalapolitica said...

Your numbers are VERY wrong. And some conclusions at the comments too.

US gov. spending = 37% (not 19%)
Romania = 37% (not 65%)

The more the goverment spends, the less people spend.
Government is not economic when spending, and not efficient. And sure, not moral taking that money from people without any agreement.

The more the goverment spends, the less a contry grows.
You can find a rich country, growing fast --> that's just because of low public spending.
You can find a poor country growing fast --> low public spending.
Or you can find any kind of country growing slow, or not growing at all --> high public spending.

This is a BASIC PRINCIPLE in economics that u should know.

Anonymous said...

Total government spending in the United States is just less than 39% (see BEA GDP calculations). Your 19% number misses all the state and local spending that goes on in the US.

40% is a big number--think of that, the inefficiencies, the waste, and the politics involved with allocated 40%. No wonder our politicians go to WADC broke, and come back multi-millionaires.

Max said...

Very interesting data. It would be interesting to disaggregate government spending. Some comments critically address expansive governments as not being conducive to growth or high quality of life, while others argue that the opposite is the case. The data is mixed. Some literature addressing budget deficits argues that the deficit size per se doesn't matter. What matters is how countries fund their deficits. So, similarly, my question is what happens when you break down government spending into categories - education, defense, welfare policies. It makes a difference if the government spending is dominated by military spending vs spending on education. Would you expect to find a pattern?

Rick Taylor said...

I think Govt Spend/GDP is the core ratio. What all your data suggests; worldwide depression is nearing. One by one countries will default on their obligations.

When the countries with highest GDP's fail, uh oh. Watch California; its fate will determine the world's fate.

Debt/GDP is the other important ratio.

Succinctly, default is part of the process within the law of Special Relativity. Situational Gravity explains default better.

Resource management is the key variable in perpetuity. Over-leverage, too much credit kills perpetuity.

Cheers, RDST

Anonymous said...

This information is wrong, the total US government (at all levels) was 36.94% in 2008, 41.97% in 2009, and 43.09% in 2010:
http://www.usgovernmentspending.com/us_20th_century_chart.html

We are now officially a socialist country and we are moving closer to communism every year.

calgacus said...

Hi,

What was the source for these figures, or if you calculated themselves, what sources did you use to calculate them and how did you calculate them?

thanks,
Dunc

calgacus said...

Hi,

Can you tell me what source or sources you got all these figures from?

Or if you calculated them yourself what sources did you use for the figures you used in the calculations and how did you calculate them?

It's good to have figures on public spending as a % of GDP, but without knowing where they came from no-one can judge whether they're reliable or not.

Audacious Epigone said...

Calgacus,

All national level data are from the CIA World Factbook.

Anonymous said...

I know you got the united states all wrong. when fed, state, income tax, sales tax, gas tax, property tax are added it is more like 45% without even getting into the ponsai social security scheme and the spending of our grandchildrens money on war for oil and bank bailouts.

Anonymous said...

You cant just post numbers on the size of government and claim that it disproves the size of government being detrimental to economic growth. That is just mentaly lazy. Those countries with little government and little economic growth also have very little economic freedom as well as personel freedom.

singh7 said...

Reading this blog entry in 2012 is hilarious. Size of government doesn't matter to growth?? Just shows the arrogance that pervaded the world pre-recession. I'm not a libertarian btw.
oh,and hopefully you learned not to analyze global economy by such shallow analysis by now (unless you've been living under a rock).

Anonymous said...

I just wanted to add to this conversation that I think you have to take into account state and local spending for the United States..... Whats that? 17 people named Anonymous already mentioned that point? My bad.

The truth of the matter is there should be little correlation between these stats and health of a country because of the complexity of cultures, local systems, and history of the different regions of the globe. What works in one place would be a disaster elsewhere. Awesome blog tho.