Public Expenditure; Fiscal and Monetary Policy

An adjunct of economic growth has been the growing share of the public sector in the economy. Between 1960 and 1972 public expenditure increased from 19 per cent of GNP to 25 per cent,1 although the latter figure is still low compared with public expenditure in most European countries. Between 1962 and 1972 government expenditure for social purposes, in particular on education, in relation to GNP rose. Expenditure on economic activities, i.e. transport and agriculture, remained fairly constant at about 4 per cent of GNP. Spending on defence fell in relation to GNP from 2·6 per cent to 1·8 per cent in 1972. While public expenditure on housing declined in relation to overall spending, spending on infrastructure rose rapidly and increased from 2·2 per cent of GNP in 1960 to 5·5 per cent in 1967 and 5 per cent in 1969 and 1970.2 Looking at categories of expenditure in relation to total budget expenditure, spending on defence fell from 19 per cent in 1962 to 13 per cent in 1976, while expenditure on social activities rose from 24 per cent to 40 per cent of the total and expenditure on education from 9 per cent to 19 per cent. Investment expenditure overall grew at approximately the same rate as GNP, lagging in health, education and agriculture, where there were delays in carrying out projects and towards the end of the 1960s a growing tendency to offset increases in current expenditure by cuts in investment expenditure.