SMALL IS BEST from the Centre for Policy Studies

Video based on the CPS report 'Small is Best' http://cps.org.uk/SmallisBest by Ryan Bourne & Thomas Oechsle. Follow the CPS on Twitter and be the first to see our next video http://twitter.com/CPSThinkTank

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Animation & direction by Leo: http://www.leon.cat - hello@leon.cat

Music by The California Ramblers.

SMALL IS BEST
by Ryan Bourne & Thomas Oechsle
http://cps.org.uk/SmallisBest

Economies with small governments tend to grow faster than those with big governments. This is the conclusion of Small is Best: lessons from advanced economies, by Ryan Bourne and Thomas Oechsle, published on Friday 25 May by the Centre for Policy Studies.

New analysis uses regression techniques across a long time period, and cross sectional analysis for the past ten years, to examine 34 countries defined as advanced by the IMF:

Econometric analysis of advanced OECD countries for the period 1965-2010 finds that a higher tax to GDP ratio has a statistically significant, negative effect on growth. For example, an increase in the tax to GDP ratio of 10 percentage points is found to lower annual per capita GDP growth by 1.2 percentage points. A similarly statistically significant negative effect on growth is found with a higher spending to GDP ratio. Detailed regression analysis stripped out the impact of variables such as investment as a proportion of GDP, the growth rate of the labour force, and the growth rate of human capital.

For the last 10 years, advanced small government countries have, on average, seen significantly higher growth rates than advanced big government countries. Between 2003 and 2012, real GDP growth was 3.1% a year for small government countries (i.e. where both government outlays and receipts were on average below 40% of GDP for the years 1999 to 2009), compared to 2.0% for big government countries.

There is little evidence that small government countries have worse social outcomes:
Health outcomes are mixed: in the past 10 years, life expectancy in small government countries has been higher than in big government countries. Infant mortality has been lower in big government countries.

Statistical evidence from the last 10 years suggests that small government countries achieve higher academic outcomes in reading, maths and science.
Employment growth and youth unemployment are not statistically different.
Tim Knox, Director of the Centre for Policy Studies, comments:

"This paper shows that smaller government results in higher growth -- making a mockery of the current austerity vs. growth division. This should give our politicians confidence to pursue a smaller state to achieve long-term, lasting prosperity."

© Centre for Policy Studies, May 2012
http://www.cps.org.uk

• Category

  News & Politics

[ZMGBass]

This was an interesting video, but I was somewhat disappointed to see ridiculously depicted statistics. Could you please ask your animator to take the effort to represent your statistical data more sensibly. I thought it was fairly misleading to lengthen the lines of the pisa schools by about 1/3, whilst the numbers only shifted by around 0.5%.  Dodgy manipulation of statistics by various organisation already causes enough problems, please don't join in.

[CPSThinkTank]

Thanks for the comments from all, we'll definitely take this on board. As the text in the video states, this portion is designed to show that there is little difference in the outcomes of (comparatively) low and high spending, to demonstrate that throwing large amounts of money at areas like education does not produce the intended results, so the implication is quite unintentional. We will certainly keep it in mind for our next video. Thanks for the valuable feedback!

[1950Kowalski]

Great video. Concerning the PISA statiscal issue... the average increase in the PISA educational scores for small government countries compared to big government countries is about 4% (more than 0.5%) but certainly not a third increase. It depends where one starts the graph (not necessary at zero) but if not, it should be stipulated to avoid confusion.

[Keeban3]

Few criticisms: Taxes and spending are not the same thing. When you say 'taxes or spending above X', that gives you two possible ways to bias the data: Where you put X, and Countries you can omit or include because taxing and spending are different. This allows people to question the data.

When you aim against taxes, you concede the deficit spending argument. And when you say that the smaller governments are growing faster as if that is a good thing, I don't know what to say at all.

[Ryan Denziloe]

I was going to mention the same thing. Presenting the statistics in this misleading - or rather, completely inaccurate - fashion, is only going to make sceptics think you've got an agenda.

[Francis Urquhart]

Good video, minus the animating issue mentioned below by @ZMGBass