Matthew O’Brien over at Atlantic.com decided to test the conservative orthodoxy that high levels of social spending (or a big “welfare state”) are the ruination of the economic health of the nations that try to sustain it.
So he arrayed European nations on a graphic according to how high their social spending and the growth rate of their GDP. On the graphic below, the higher a country’s social spending, the higher they are on the graph. The faster a country’s economy is growing, the further to the right they appear.
I don’t mean to oversimplify the particular tenet of conservative orthodoxy that this graphic tests, and I’m sure I’m doing so. But the orthodox view would predict that the countries would be aligned roughly on a diagonal from the top left to the bottom right, meaning that countries with less social spending would have more economic growth and vice versa.
Here’s how the graphic turned out.
Those darn Swedes seem to have the second highest level of social spending, but the very highest economic growth rate. Portugal has the worst economic growth rate (in fact, it’s a negative rate) but is near the middle of the pack in social spending. You can squint at it all you like, and it doesn’t prove the opposite of the orthodoxy, it seems to show no pattern at all in the relationship between the two measures.
(I should alert you that there’s some kind of adjustment that O’Brien discloses and discusses that takes into account the fact that poor countries are expected to grow faster than rich countries.)
OBrien titled his post: “The Myth That Entitlements Destroy a Nation’s Growth, Busted in 1 Chart.”