The world is entering a new

era of big government

How should classical liberals respond?
Nov 20th 2021

“KEEP YOUR eye on one thing and one thing only: how much
government is spending,” Milton Friedman once said. Today
his eyes would be popping. Governments have spent $17trn
on the pandemic, including loans and guarantees, for a
combined total of 16% of global GDP. On current forecasts,
government spending will be greater as a share of GDP in
2026 than it was in 2006 in every major advanced economy.
America is about to put $1.8trn into expanding its welfare
state; Europe is doling out a €750bn ($850bn) investment
fund; and Japan is promising a “new capitalism”, with even
more government largesse.

In the coming decades the state’s economic footprint will

expand yet further. Four-fifths of the world economy is now
subject to a net-zero emissions target, a goal that in Britain
is projected to raise the government-debt-to-GDP ratio by 21
percentage points by 2050 as the state subsidises
decarbonisation and growth slows. And many countries have
ageing populations that will demand vastly more spending
on health care and pensions.