German factory orders fell 5.7% in August, real GDP is stagnant or falling in many European countries, Standard & Poor’s has downgraded France to AA from AA+….
[T]he 18 euro area countries had zero real growth in the volume of production during the second quarter of 2014. Euro area real GDP grew only 0.5% in 2013 after falling 1% in 2012. In other words, output was lower in mid-2014 than it was at the end of 2011.
And yet—or because:
Euro area government spending was 49.8% of GDP in 2013 versus 46.7% in 2006. In other words, euro area governments have co-opted an additional 3.1% of GDP (roughly €300 billion, or $383.6 billion) compared with before the crisis—about the size of the Austrian economy.
France spent 57.1% of GDP in 2013 versus 56.7% in 2009, at the peak of the crisis. This is the opposite of austerity—but the French economy hasn’t grown in more than six months. It is no wonder S&P downgraded its debt rating.
Italy, at 50.6% of GDP, is spending more than the euro area average but is contracting faster.
And so on.
There seems to be a pattern developing. An old, old pattern.
You can’t take money out of the private sector of an economy and give it to government without both growing government and shrinking the private sector. Government is simply incapable of spending the money as efficiently as the private sector (if only from a confluence of greater internal friction due to bureaucracy and an in-built lack of concern for the cost of money, with which the private sector must always contend, while leaving aside a system of graft that grows faster in a bureaucracy than in a private sector entity that will surely be punished by the market).
Redistribution of money from the private sector to government holds back growth, at best. As we’re seeing in Europe. Smaller governments have a harder time doing that than Big Governments.