You don't have to go far to find someone blaming everything currently wrong with the world on how we liberal (classically so, you know, really liberal) types took a hatchet to the State over the past few decades. If only we hadn'g slashed taxes, hadn't emasculated the public organs, then it would still be there, toweringly strong, to protect us in these storms.
It's a nice idea but this set of numbers from the OECD seems to show that there wasn't in fact any slashing of the state in the first place. Table A is tax revenue as a percentage of GDP from 1975 to 2007, thus leaving out the known collapse in revenues of the last couple of years. Do you know the amazing thing?
The state was larger everywhere in 2007 than it had been in 1975.
In fact, the only number that seems to have fallen over those years is the OECD Americas average, something I'm sure is a result of including Mexico's zero (ie, not available, not no government) in 1975's average.
So, if government hasn't shrunk over that period we cannot really claim, or it cannot be claimed against us either, that the shrinkage of government has caused our current woes.
This leaves us with two possible alternative explanations. The first is that it is the increase in government which has caused our problems: this at least has the virtue of aligning with the correlation we see. Or it could be that we've been having less competent government even as we've been having more of it.
Either of which leave us with possible policy paths. The first would be that we actually try to have less government for a few decades and see how that works out: the second with the idea that we should be trying to have more competent government whether we have more or less of it.
Anyone who has any bright ideas on how we do that last though, anyone with any ideas about how we have more competence without having less that government is straining and failing to be competent about, answers on a postcard to 10 Downing Street please.