Cowen and Crisis Reconsidered
The ratchet effect becomes much stronger in the twentieth century than
before. Furthermore most forms of governmental growth probably would
have occurred in the absence of war. The example of Sweden is
instructive. Sweden avoided both World Wars, and had a relatively mild
depression in the 1930s, but has one of the largest governments,
relative to the size of its economy, in the developed world. The war
hypothesis also does not explain all of the chronology of observed
growth. Many Western countries were well on a path towards larger
government before the First World War. And the 1970s were a significant
period for government growth in many nations, despite the prosperity and
relative calm of the 1960s.
Tyler’s words swiftly changed my mind. The Swedish case seemed devastating… so devastating I never bothered to check the data. Last night, however, GMU prodigy Nathaniel Bechhofer informed me that the key facts were right in Econlib’s own Concise Encyclopedia of Economics. Gordon Tullock’s article on “Government Spending” provides the shocking Swedish statistics:
Yes, Sweden stayed out of the actual fighting during the two world wars. But you’d never know it from their budget! Sweden spent almost as much avoiding the war as the combatants spent participating.
For the sake of comparison, check out the U.S. numbers for the same era. World War II led to a 25 percentage-point spike in government’s share of GNP in Sweden, versus 35 percentage-points for the U.S.: