Role of the state.

Role of the State Economic difficulties in the first part of the 1980s led countries to seek more efficient allocation and use of public resources. In many developing countries, financial resources became so scarce that even essential programmes had to be drastically cut. Developed countries with mixed economies were forced to reappraise the magnitude and composition of public expenditures. The welfare state was viewed critically on financial grounds. Thus, at mid-decade, the role of the State as an agent of social change was, in itself, undergoing a change.

The perception that in the near future conditions were unlikely to change led many societies to place a stronger emphasis on the role of the private sector. Less government interference became a popular and influential theme in various circles of countries with mixed economies. Initiative, entrepreneurship and the capacity for innovation were restored as central values that the State could help to flourish, rather than hamper through over-regulation.

The change in direction also affected socialist countries, albeit in a different manner. There, efforts were made to decentralize important economic decisions and to entrust units of production with more autonomy.

For the developed market economy countries as a whole, total government expenditures represent around 43 per cent of their gross national product. National figures range from 30 per cent in Switzerland, 35 per cent in Japan and 38 per cent in the United States to 64 per cent in the Netherlands and 67 pre cent in Sweden. Within the developing countries, there are also large differences in the proportion of government spending in the national income. At the beginning of the 1980s, the share was less than 15 per cent in countries such as Brazil and India and as high as 40 per cent or more in Jamaica, Malaysia and Morocco.

The difference between the developing and developed countries in proportions of government spending is partly due to the difference in composition of expenditure. For example, the social security system, which accounts for a very large proportion of government spending in the developed countries, is still in the rudimentary stage in the developing world. The major factors in government spending for the developing countries are economic services and capital expenditure, which constitute only a small share of government spending in the developed market economies.

Government expenditure in the centrally planned...