The Dim-Post

March 14, 2012

Chart of the day, not so much edition

Filed under: economics — danylmc @ 10:42 am

With all the rhetoric about how New Zealand government spending is out of control, thus an urgent need to tighten its belt, I thought I’d take a look at how we compare with the rest of the OECD. This shows government spending as a % of GDP, plotted against GDP per capita. New Zealand is the red data point.

So we’re in the bottom third – we currently spend less on government than most rich countries. The trend line is also pretty clear. Rich, successful economies tend to have large governments.

(Mexico and Chile are the low income, low government countries at the bottom. Switzerland, South Korea and Australia are the higher income, lower government nations. Annoying, oil rich Norway is the high income, medium government outlier.)

25 Comments »

  1. Doesn’t this just reinforce the trend of graphs that show, for example, our spend on health per capita is below average for the OECD but our health outcomes are above average for the OECD?

    Comment by Sanctuary — March 14, 2012 @ 10:52 am

  2. Typical leftist dirty trick – bringing facts to a debate.

    Comment by Scott — March 14, 2012 @ 10:58 am

  3. The trend line is also pretty clear.

    Not really?

    Comment by derp de derp — March 14, 2012 @ 10:58 am

  4. This reminds me of the best graph ever (or possibly the worst graph ever), where the WSJ tried to use Norway to prove the Laffer curve.

    Comment by pete — March 14, 2012 @ 11:00 am

  5. The trend line is also pretty clear.
    Not really?

    Agreed. The coefficient of correlation must be pretty low here; the best you could argue is that perhaps 20% of GDP per capita can be explained by TOTAL government spending – but even then it’s a lazy conclusion, which doesn’t take account of the relative mix of spending.

    Comment by Phil — March 14, 2012 @ 11:20 am

  6. I probably could look this up myself, but won’t. When you say “Switzerland, South Korea and Australia are the higher income, lower government nations”, does that take into account Switzerland’s and Australia’s federal nature? In other words, does “government spending” capture spending by all levels of government, or just the national one? Because that could change the picture a lot.

    Comment by Andrew Geddis — March 14, 2012 @ 11:32 am

  7. what jumps out ‘pretty clearly’ to me is that ‘GDP Per Capita’ and ‘Government Spending as a percentage of GDP’ don’t correlate with each other very much.

    Comment by kahikatea — March 14, 2012 @ 11:34 am

  8. would be useful to see the raw data or digital version of graph, any chance of putting it on google docs? Also sources would be nice, help us answer Andrews question. ie does it inlucde State/Territory and Local govt spending.
    Where is the US btw, do they match their rhetoric or does the Military Industrial Complex overtake their supposed low govt ideology.

    Comment by Luke — March 14, 2012 @ 11:40 am

  9. +1 AG

    Government type would be an interesting addition to this.
    Also, how long that government type has been in place and what aggregate effect it has had on GDP per cap over time, but that would be way too tricky.

    Comment by Gregor W — March 14, 2012 @ 11:41 am

  10. that graph should back up Redbaiter’s prejudices, what with NZ being red and the others all being blue.

    Comment by kahikatea — March 14, 2012 @ 12:20 pm

  11. Don’t know what Danyl’s using but here are some numbers that look close (note: from Heritage, who are not always careful with data). Eyeballing it, it looks like spending is all forms of government:

    http://www.heritage.org/index/explore?view=by-variables

    Comment by bradluen — March 14, 2012 @ 12:40 pm

  12. Luke: US military spending is “only” $700 billion a year (4.8% of GDP), meaning they still count as below-average govt spenders overall — which would be less bad if they weren’t also way, way below-average taxers.

    Comment by bradluen — March 14, 2012 @ 1:02 pm

  13. Are Mexico and Chile really low outcome? Both have grown a lot faster than NZ in the last ten years.

    Comment by Hugh — March 14, 2012 @ 2:25 pm

  14. There’s a graph setting % growth in per capita GDP against % GDP Govt expenditure?

    Comment by Clunking Fist — March 14, 2012 @ 2:26 pm

  15. – snap! –

    Comment by Clunking Fist — March 14, 2012 @ 2:27 pm

  16. A more meaningful graph would be per capita income v cost of providing a package of goods commonly provided by governments in civilised countries to pick up the very limited public health spending by the US for example. Just looking at government expenditure without knowing what it includes can be misleading.

    Comment by Andrew R — March 14, 2012 @ 4:46 pm

  17. Andrew R – the US is one of the highest spenders on public health in the OECD per capita, far higher than New Zealand. Check out http://www.oecd.org/document/16/0,3746,en_2649_37407_2085200_1_1_1_37407,00.html (tab 13).

    Comment by Plum — March 14, 2012 @ 5:41 pm

  18. More evidence we should follow the Norwegian model.

    Comment by NeilM — March 14, 2012 @ 6:23 pm

  19. @Neil:

    Isn’t the Norwegian model basically “Stumble on a huge trove of natural resources that attract a competitive price in the international marketplace”?

    Comment by Hugh — March 14, 2012 @ 6:28 pm

  20. 2009 health care spending as percentages of GDP (from stats.oecd.org since I’m too lazy to open Excel, also the US has a higher GDP per capita than NZ obv.):

    NZ: Govt 8.3%, private 2.0%
    US: Govt 8.3%, private 9.1%

    Usual caveat: America is weird and comparisons to them may not be useful.

    Comment by bradluen — March 14, 2012 @ 7:00 pm

  21. Here we go again.

    Lies, damn lies, and statistics.

    Every one will argue with every one else and no rational conclusion will be reached.

    Sigh.

    Comment by peterlepaysan — March 14, 2012 @ 8:03 pm

  22. “Isn’t the Norwegian model basically “Stumble on a huge trove of natural resources that attract a competitive price in the international marketplace””

    You (and teh National Party) are forgetting “keep a decent chunk of the profits by exploiting said resources ourselves”.

    Comment by nommopilot — March 14, 2012 @ 9:45 pm

  23. @nommo: Not at all, I’m just saying that claiming that we could have what Norway has if we structured our resource law accordingly is missing a big part of the equation.

    Comment by Hugh — March 15, 2012 @ 12:06 am

  24. @ Hugh and nommo

    yes something on the order of 3m barrels of oil a day or so.

    Comment by insider — March 15, 2012 @ 9:31 am

  25. If the debt is burgeoning, surely National’s unsustainable tax cuts come into the frame. Did they grow the economy? Maybe….in China,

    Comment by Steve (@nza1) — March 15, 2012 @ 7:37 pm


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