3.5.2 Levels of Government Spend and Taxation

There are deep economic disagreements, between individualists and collectivists, about levels of government spend and taxation (resolved politically)

There is some government spending in every economic system, as described earlier (3.2.3).  It should never be regarded as a ‘blank cheque’, because those who pay the most should be able to feel that the expenditure is justifiable.  Public money should not be wasted.

Its scope is hotly contested, and is negotiated politically, as described later (6.7.1).  There are economic arguments that the politicians can put forward, though, to support their arguments about levels of government spend and taxation – as described below:

●  It is possible for private individuals and companies to provide everything that a State might provide, with each person being responsible for paying their own way.  Individualists prefer such policies, arguing that private enterprise can supply people’s needs more efficiently than a government, and that this is the best way to maximise economic growth (3.5.2.1).

●  A collectivist model requires the collection of taxes to fund transfer payments and public services, so that the government can invest in public infrastructure and give everyone access to the services that they need.  This creates employment opportunities and increases the productivity of the workforce, benefiting the economy (3.5.2.2).

●  There is merit in both the individualist and collectivist approaches.  A compromise is needed, for government to function, and affordability must also be considered when setting levels of government spend (3.5.2.3).

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This page is intended to form part of Edition 4 of the Patterns of Power series of books.  An archived copy of it is held at https://www.patternsofpower.org/edition04/352a.htm.