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Where Would You Rather Live: Small-Government Somalia or Big-Government Sweden?

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Whisper it quietly, but I quite like big government. These days, it's unfashionable to say so. From New Labour to Blue Labour, from compassionate conservatives to neoconservatives, the consensus is that big government is bad government: slow, inefficient, intrusive, bureaucratic, overbearing, anti-democratic and anti-growth.

"The era of big government is over," President Bill Clinton (Democrat) declared in January 1996. Conservatives rejoiced. But guess what? By September 2008, big government was back. "We just act now," announced President George W Bush (Republican), as he unveiled his $700bn bank bailout plan. This champion of free markets went on to bail out the auto industry and, in effect, nationalise the mortgage lenders Fannie Mae and Freddie Mac.

Here in the UK, as the former chancellor Alistair Darling revealed in his memoir, it was big government that prevented cash machines from being switched off and cheques being torn up. Banks were nationalised; multibillion-pound loans and guarantees were offered.

So, why this disconnect between rhetoric and reality? Why this constant railing against the positive power of collective action? The public doesn't like big government, say fans of ... small government.

Yet how else to explain our ongoing love affair with the (scandal-ridden) National Health Service, which in its structure and funding is big government pure and simple? Why else are so many of the people whom voters tell pollsters they admire most - doctors, nurses, teachers, soldiers, the police - usually employees of big government?

Not yet convinced? Polls also show significant public backing for the renationalisation of the railways. And not just the railways: a 2009 poll found two out of three voters supported taking the electricity, gas, water and telecommunications industries back into public ownership. (Come back, Michael Foot - all is forgiven.)

Small-government supporters claim that countries with high levels of public spending grow more slowly. Yet, as the Columbia University economist Xavier X Sala-i-Martin concluded in his 1997 study 'I Just Ran Four Million Regressions', "no measure of government spending ... appears to affect growth in a significant way".

In his 2004 book Growing Public, the University of California economist Peter Lindert agrees - countries with high levels of government spending don't perform any worse than countries with low levels of government spending.

But doesn't big government crowd out the private sector? Stifle free enterprise and innovation? Not necessarily. Consider the arguments of Mariana Mazzucato, the Sussex University economist and author of The Entrepreneurial State. "Where would Google be today without the state-funded investments in the internet, and without the US National Science Foundation grant that funded the discovery of its own algorithm?" she wrote in the Guardian in April 2012. "Would the iPad be so successful without the state-funded innovations in communication technologies, GPS and touch-screen display?

"Where would GSK and Pfizer be without the $600bn the US National Institutes of Health has put into research that has led to 75 per cent of the most innovative new drugs in the last decade?"

Critics of big government say it crushes community spirit and civic engagement. Again, the empirical evidence suggests otherwise. "Among the advanced western democracies, social trust and group membership are, if anything, positively correlated with the size of government," the Harvard academic Robert Putnam observed in his acclaimed book Bowling Alone (1995). "[S]ocial capital appears to be highest of all in the big-spending welfare states of Scandinavia," he wrote.

Ah yes, Scandinavia. Despite having, I accept, much smaller and more cohesive societies than the US or the UK, the high-spending, high-growth Nordic nations continue to baffle and frustrate Anglo-Saxon small-staters. Take the UN's first ever World Happiness league table in 2012: Denmark, where government spending accounts for 58 per cent of national income, topped the list, followed by Finland (54 per cent) and Norway (44 per cent).

Here in the UK, public spending may have peaked at 50.8 per cent of GDP in 2009, in the wake of the bank bailouts, but since 2010 the austerians of the Conservative-led coalition have been cutting spending year on year. Using the latest IMF figures, Peter Taylor-Gooby, a professor of social policy at the University of Kent, has calculated that by 2017 government spending, as a proportion of GDP, will be lower in the UK than in the United States - 39.1 per cent to 39.3 per cent - for the first time since records began. "I was astounded," Taylor-Gooby tells me. "Even after the First World War, and the round of cuts then, we didn't go this far".

Meanwhile, those who pine for a leaner, meaner, smaller state cannot answer the simplest question: how would small government have paid for the bailout of RBS, Lloyds and the rest? The Treasury has coughed up roughly £850bn to prop up the UK's financial sector, according to the National Audit Office. Can small government tackle the threat of runaway climate change and the rising costs of adaptation and mitigation? It is forecast that the global warming bill will run into trillions of pounds. It may be fashionable to want to roll back the state, but ask yourself this: where would you rather live, 'big-government' Sweden or 'small-government' Somalia? l

Mehdi Hasan is the political director of the Huffington Post UK and a contributing writer for the New Statesman. This column is crossposted here.

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