How to make policymaking fit for a bigger future

Government is back. Not as much as supporters want, too much for the likes of its enemies. But after 40 years of dominance of small-government economic orthodoxy, more active, more interventionist, more engaged government is characterising much of the Western world, courtesy of the pandemic, the climate emergency and what will increasingly become a worker crisis.

Now, to be strictly accurate, the ‘small government’ thinking that has marked Western, and especially Anglophone, economics since the 1980s was never quite what it said on the label. In the home of neoliberalism, the proportion of US federal government spending to GDP was around 35 per cent of GDP in the early Reagan years. Reagan, the purported paragon of free-market reform, followed by George H.W. Bush, pushed that level a lot higher. Clinton lowered it again, then George W. Bush pushed it a lot higher again, before Obama pushed it lower again (seeing a pattern here?). It was at 38 per cent of GDP during the Trump years, but dipped to 36 per cent just before the pandemic spiked spending into the stratosphere. Since then it’s come back down, but it’s still around 37 per cent.