Bigger Government Doesn’t Foster Economic Growth (Even If International Bodies Say It Does)

I must be perversely masochistic because I have the strange habit of reading reports issued by international bureaucracies such as the International Monetary Fund (IMF), World Bank, United Nations (UN), and Organisation for Economic Cooperation and Development (OECD).

But one tiny silver lining to this dark cloud is that it’s given me an opportunity to notice how these groups have settled on a common strategy of urging higher taxes for the ostensible purpose of promoting growth and development.

Seriously, this is their argument, though they always rely on euphemisms when asserting that politicians should get more money to spend.

- The OECD, for instance, has written that “Increased domestic resource mobilisation is widely accepted as crucial for countries to successfully meet the challenges of development and achieve higher living standards for their people.”

- The Paris-based bureaucrats of the OECD also asserted that “now is the time to consider reforms that generate long-term, stable resources for governments to finance development.”

- The IMF is banging on this drum as well, with news reports quoting the organisation’s top bureaucrat stating that “…economies need to strengthen their fiscal frameworks…by boosting…sources of revenues” while also reporting that “The IMF chief said taxation allows governments to mobilise their revenues.”

As you can see, these bureaucracies are singing from the same hymnal, but it’s a new version.

In the past, the Left agitated for higher taxes simply in hopes for having more redistribution.

And they’ve urged higher taxes because of spite and hostility against those with high incomes.

Some folks on the Left also have supported higher taxes on the theory that the economy’s performance is boosted when deficits are smaller.

But now, they are advocating higher taxes (oops, excuse me, I mean they are urging “resource mobilisation” to generate “stable resources” so there can be “financing for development” in order to “strengthen fiscal frameworks”) on the theory that bigger government is the way to get more growth.

No Supporting Evidence

You probably won’t be surprised to learn, however, that these reports from international bureaucracies never provide any evidence for this novel hypothesis. None. Zero. Zilch. Nada. The null set.

The bottom line is that small government and free markets is the recipe for growth and prosperity in all nations.

This piece was first published on The Foundation for Economic Education and has been republished here with permission.