Milton Friedman has a piece in today’s Fin and also in the Oz making the point that, even though many fewer people nowadays professes belief in socialism than did so in 1945, the general movement of policy since the end of World War II has been in a socialist direction, that is towards an expansion in the share of GDP allocated to the public sector. He draws a distinction between ‘welfare’ and the traditional socialist belief in public ownership of the means of production, seeing the former growing at the expense of the latter.
From a social-democratic perspective, I’d put things differently. There are large sectors of the economy where competitive markets either can’t be sustained or don’t perform adequately in the absence of government intervention. These include human services like health and education, social insurance against unemployment and old age, production of public goods and information, and a range of infrastructure services. In all these sectors, governments are bound to get involved. Sometimes, the best model is private production with public regulation and funding, and sometimes it is public ownership and production. The result is a mixed economy.
Over time, the parts of the economy where competitive market provision is problematic have grown in relative importance. By contrast, agriculture, the archetypal competitive industry, has declined in relative importance as have mining and manufacturing, areas where governments have usually performed poorly.
The result is that the ideological swing towards neoliberalism has done little more than slow a structural shift towards a larger role for government.
fn1. Thanks to Jack Strocchi for locating this