Governments Grow in Size

The coronavirus has dominated all of our lives in recent months. Radical paths were taken by politicians in the form of lockdowns to contain the pandemic. But we should recognize that even if the coronavirus is a (major) challenge for us, we always have to keep a holistic view of world events. Just as there are epidemiological factors to consider in this crisis, there are also economic, social, cultural, political and other health factors at play. It is precisely these other factors that are so often forgotten in the panicky reporting, in the constant, manic tracking of the current infection numbers, that we want to take a look at in our series “The Costs of Coronavirus Lockdowns” in the coming weeks.

Throughout the Coronavirus crisis, governments around the world have been on a massive spending spree to cover costs that closed businesses had to incur. Public spending in general tends to rise during a crisis, but during this one grew to astronomic dimensions. On the one hand, this is understandable: if governments force businesses to close, the thinking goes, they should at least cover the damages or else everyone goes bankrupt. But on the other hand, it will take an even greater strain on the fiscal health of countries that already had problems with their bloated budgets – and needless to say, these stimulus programs can be counted as costs of the lockdown policy as well.

As the European Commission, Statista, and Handelsblatt report, government spending has risen dramatically in 2020. In Austria, the public spending has reached 58.3% of GDP, in Germany 54%, in France 64.3%, and in Italy 58.8%. This means that in 2020 Austrian government has spent 10.1% more of its GDP compared to 2019; Germany’s public spending as part of GDP shot up by 19.5%; France saw an increase of 15.7%, while the Italian government even afforded itself a 21% increase.