GROWTH IN EXPENDITURE AND NATIONAL INCOME began to increase at a rate faster than the rate of growth of real national ond half of the ninete nth century,but the absolute prdcirilremarkablyall and w have already seen)real government expenditure as a whole did not constitute an increasing share of national income over the same period.Neverthe- less,there is reason to believe that,before the period of this study,the s ds ofinc ing govern nent eco mic activity had already been so The old liberalism was giving way to the new.In a publi c speech in September 1885,Joseph Chamberlain said,"The greater part of municipal work is Socialism,and every kindly act of legislation by which the community has sought to discharge its responsibilities and its obligations to the poor is Socialis sm,but it is e the worse for that."6A younge contemporary was to add to this the Wagnerian argument: "The wh tendency of civilization is,however,towards the multiplication of the collective functions of society.The ever-growing complications of civil- ization create for us new services which have to be undertaken by the state, n。 ate for us a of the existing services."Fifty yea later the sel same speaker presided over a government responsibl directly or indirectly for spending a sum equal to no less than 37 per cent of the peacetime national income. Government Expenditure and Gross National Product Since 18go We now examine the annual statistics of total government expenditure since 1890,its secula r growth secular changes in the proportion government expenditure to GNP,and the shorter-term changes in expenditure that make up the time pattern of growth and (perhaps) show a displacement effect in some periods that encourages further study We also consider how these things are affected by changes in populatior ces,and the level of e t The analysis leads o th nclusion cor rable e growth in goverment expenditurei real terms per head of population,that the rate of growth over the period as a whole was considerably faster than the rate of growth of gross national product in real terms per head of population,and (what is in some ways more important for our general thesis)that when we have taken account of population growth,price change and changes in the level of emp ment,we are left with an important ph omenon to explain time pattern of expenditure growth.The examination and explanation of this displacement effect provides the theme of later chapters. ullock and Shock,cP.210. 40
GROWTH IX EXPEXDITURE AXD NATIOXAL INCOME began to increase at a rate faster than the rate of growth of real national product in the second half of the nineteenth century, but the absolute size of such expenditure was still remarkably small, and (as we have already seen) real government expenditure as a whole did not constitute an increasing share of national income over the same period. Nevertheless, there is reason to believe that, before the period of this study, the seeds of increasing government economic activity had already been sown. The old liberalism was giving way to the new. In a public speech in September 1885,Joseph Chamberlain said, "The greater part of municipal work is Socialism, and every kindly act of legislation by which the community has sought to discharge its responsibilities and its obligations to the poor is Socialism, but it is none the worse for that."6 A younger contemporary was to add to this the Wagnerian argument: "The whole tendency of civilization is, however, towards the multiplication of the collective functions of society. The ever-growing complications of civilization create for us new services which have to be undertaken by the state, and create for us an expansion of the existing services."7 Fifty years later the self-same speaker presided over a government responsible directly or indirectly for spending a sum equal to no less than 37 per cent of the peacetime national income. Government Expenditure and Gross Yational Product Since 1890 We now examine the annual statistics of total government expenditure since 1890, its secular growth, secular changes in the proportion of government expenditure to GNP, and the shorter-term changes in expenditure that make up the time pattern of growth and (perhaps) show a displacement effect in some periods that encourages further study. We also consider how these things are affected by changes in population, prices, and the level of employment. The analysis leads to the conclusions that there has been a considerable growth in government expenditure in real terms per head of population, that the rate of growth over the period as a whole was considerably faster than the rate of growth of gross national product in real terms per head of population, and (what is in some ways more important for our general thesis) that when we have taken account of population growth, price changes and changes in the level of employment, we are left with an important phenomenon to explain—the irregular time pattern of expenditure growth. The examination and explanation of this displacement effect provides the theme of later chapters. 6 Cited in A. Bullock and N. Shock, eds., The Liberal Tradition from Fox to Keynes, London, 1956, p. 207. Extract from a speech delivered in Glasgow in 1906 by Winston S. Churchill, subsequently republished in his book Liberalism and the Social Problem, London, 1909. See Bullock and Shock, eds., cit., p. 210. 40
GROWTH IN EXPENDITURE AND NATIONAL INCOME GOVERNMENT EXPENDITURE AND GROSS NATIONAL PRODUCT AT CURRENT PRICE Table 2 and Charts 1 and 2,derived from Appendix Tables A-2,A-5 and A-6,demonstrate both the growth in government money expendi tures and the characteristic time pattern of that growth. The great absolute increase in the size of money expenditures during the period is striking.From 130.6 million in 1890,spending rose to ,592.1 million in 1920 and to more million n5.The lex of total e enditur 1900 as bas year,was 47 in 1890,567 in 1920,and 2,188 in 1955 (cf.Chart 2).The change in gross nationa product,however,was not nearly so rapid.GNP rose from C1,472 million in 1890 to C6,070 million in 1920 and then to over 16,700 million in 1955.Taking 1900 as base year,the index of GNP at current prices rose from 76 in 1890 to 312 in 1920 and to 863 in 1955.Expressed in ar the way the proportion o total government expenditure to gros national product at current prices rose from around 9 per cent in 1890 to 26 per cent in 1920 and to 37 per cent in 1955.This increasing propor- tion appears in Chart I as a narrowing of the gap between the GNP and government expenditure curves. The rgrowth did not take place inaregular fashion through time;thereis no growth trend of governn ent money exper ure refect. ing the year-by-year changes in national income.Instead,the curve of government expenditures has the outline earlier referred to-plateaus of ascending height separated by expenditure peaks.The pattern shows very clearly in the two charts.The expenditure peaks coincide with years of war (1900,1918,1943,1952),and,as we should exp ct.the selves and the th. ht of th eaus are ess ob in the case of the or War-192)and the Korcan W ar(195l-52) than in the case of the two world wars (1914-19 and 1939-45).This obviously refects the much greater disruption of the life of the com- munity during the world wars.Also the vears 1900 and 1952 are a little too ear the beginni ng and the end of ou riod for satisfactory inter pretation,ar in any case the statistics for the Boer War peric were collected at five-year intervals only.8 There are consequently strong arguments for concentrating our subsequent analysis of the displacement effect of war upon the periods of the two world wars However.we have not vet demonstrated that there is a phenomenon of displacement of sufficient practical interest tom rit detailed e we must first see how the pattern of money expenditures has been affected 8 It appears from these five-yearly figures,howe r,that the South African War did e5 rnment expenditures,and other historical evidence 花
CR0 WTH LV EXPENDITURE AND NATIONAL INCOME GOVERNMENT EXPENDITURE AND GROSS NATIONAL PRODUCT AT CURRENT PRICES Table 2 and Charts 1 and 2, derived from Appendix Tables A-2, A-5, and A-6, demonstrate both the growth in government money expenditures and the characteristic time pattern of that growth. The great absolute increase in the size of money expenditures during the period is striking. From £130.6 million in 1890, spending rose to £1,592.1 million in 1920 and to more than £6,000 million in 1955. The index of total expenditure, taking 1900 as base year, was 47 in 1890, 567 in 1920, and 2,188 in 1955 (cf. Chart 2). The change in gross national product, however, was not nearly so rapid. GNP rose from £1,472 million in 1890 to £6,070 million in 1920 and then to over £16,700 million in 1955. Taking 1900 as base year, the index of GNP at current prices rose from 76 in 1890 to 312 in 1920 and to 863 in 1955. Expressed in another way, the proportion of total government expenditure to gross national product at current prices rose from around 9 per cent in 1890 to 26 per cent in 1920 and to 37 per cent in 1955. This increasing proportion appears in Chart 1 as a narrowing of the gap between the GNP and government expenditure curves. The secular growth did not take place in a regular fashion through time; there is no growth trend of government money expenditure reflecting the year-by-year changes in national income. Instead, the curve of government expenditures has the outline earlier referred to—plateaus of ascending height separated by expenditure peaks. The pattern shows very clearly in the two charts. The expenditure peaks coincide with years of war (1900, 1918, 1943, 1952), and, as we should expect, the peaks themselves and the change in the height of the plateaus are less obtrusive in the case of the Boer War (1899—1902) and the Korean War (1951—52) than in the case of the two world wars (1914—19 and 1939—45). This obviously reflects the much greater disruption of the life of the community during the world wars. Also the years 1900 and 1952 are a little too near the beginning and the end of our period for satisfactory interpretation, and in any case the statistics for the Boer War period were collected at five-year intervals only.8 There are consequently strong arguments for concentrating our subsequent analysis of the displacement effect of war upon the periods of the two world wars. However, we have not yet demonstrated that there is a phenomenon of displacement of sufficient practical interest to merit detailed examination; we must first see how the pattern of money expenditures has been affected 8 It appears from these live-yearly figures, however, that the South African War did produce some displacement of government expenditures, and other historical evidence tends to confirm this (see Chapter 5). 41