This article presents discussions on research methodology that seeks to explain the growth of government. The researcher carries out a review of the historical basis of governmental growth in different periods of time in various nations. Further, the researcher reviews the current mainstream theories aimed at explaining the phenomenon and weighing up the strengths and shortfalls of the same. To achieve this, the author examines the perspectives in the political science and academic tradition and introduces the methodological categorization of detective studies, statistical analysis and rational modelling. Further, the author indicates where each approach or methodology offers the most accurate description or effective explanation, as well as areas containing logical inconsistency or partial truths. However, this article does not support a particular perspective and does not produce a ranking order for the different school of thoughts. Rather, the article criticizes each theory and examines their unique uses. The author examines how the different models can be combined to solve a complex problem. As such, the author formulates a systematic framework and a series of execution steps which naturally combine the methodologies so that each addresses the aspect it is most capable of explaining, producing a comprehensive approach to emerging problems. The paper also highlights how existing research methods could be enhanced using the available data.

Table of Contents

Abstract   2

Chapter 1   6

The Research Objective: Theoretical Frameworks That Determine the Growth of Governments   6

Introduction and Research Problem   6

Definitions   6

Chapter 2   11

Research Hypothesis   11

Chapter 3   12

Literature Review   12

Important Facts and Observations   13

Rationale of the Research   16

Chapter 4   17

Aims and Objective of the Research   17

Research Methodology   17

Government Growth in the US   19

Government Growth in OECD   21

Government Growth in China   22

Chapter 5   24

A Side Discourse on the Three Perspectives and Three Methodologies   24

The three different focuses: Interests, Ideas and Institutions   25

The three research methodologies: “detective” studies, statistical analysis and rational modelling.   27

Chapter 6   29

Review of Research Work on the Growth of Government   29

Institutions: Interpretation of Wagner’s Law   29

Interests: Schumpeter’s Socialist Evolution and Economic Openness and Government Size.   31

Ideas: Marxism and Keynesian Economics   32

Chapter 7   35

Analysis under Different Approaches   35

Detective studies: Rise of Welfare State   35

Chapter 8   37

Rational Modelling: Growing inequality driving redistribution   37

Chapter 9   39

Statistical Analysis: Empirical Testing   39

Chapter 10   41

Developing a Comprehensive Framework   41

Theory of Evolution   41

Uncovering details and data-mining with Technology   43

Theoretical Migration into Political Science and Government Growth   44

Chapter 11   47

Summary and Conclusion   47

Chapter 12   50

Bibliography   50

Chapter 1

The Research Objective: Theoretical Frameworks That Determine the Growth of Governments

Introduction and Research Problem

The growth of government and the underlying drivers to the growth is one of the most researched themes in the modern political science, owing to its relevance to the modern dynamic and complex political situation and increased interest of the public in governance. Various stakeholders such as the public, politicians and researchers are increasingly interested in understanding how governments grow. This could be ascribed to the high rate at which general society division is extending, and the failure to invert the pattern. In this regard, there is the definite need to identify all theoretical frameworks that would influence the growth of government.

Definitions

Despite such issues with an exceeding mind boggling arrangement of drivers, it would dependably be important to make strides back so that it is broken down into fundamental parts. To comprehend why the government grows, there is have to see how it develops first. Before doing this, there is a requirement for one to characterize what the government and size mean as examined in this article.

Government refers to an organization or system of organizations through which the capacity to regulate behavior and enforce order within its territories is exercised or the means through which the state can impose its will on subjects. Budgetary speculation does not regularly create robust choices about the impact of government costs on financial execution. Doubtlessly, essentially every economist would agree that there are circumstances in which lower levels of government utilizing would overhaul money related improvement and distinctive circumstances in which a lot of government utilizing would be alluring. Various scholars has varied definitions, but it widely agrees that the government consists of the legislative function, the administrative/executive function and the judicial/arbitrator function. Together, the three capacities structure the premise for the arrangement of guidelines under which the association of society could be shaped and kept up, and how the actions of individuals can be bounded.

The size of government entails the human activities that are devoted to facilitating the three functions of the government. As such, it would be more apt to perceive the size of the government in terms of the economic resource outlay that a government commits or the level of government spending in the process of carrying out its operations. Tax revenue is regularly utilized as a decent substitute because of its part as the dominating salary segment, in spite of the fact that it is fundamental to specify that this has not been dependably the case ever.In addition, tax structure and volume of revenue could be subject to the reverse pressure from the spending side needs and evolve accordingly. Another way of defining size is the quantity of government employees and public personnel, although this introduces the problem of efficiency variations across the public and private spectrum.

Importantly, one of the key functions of government is the provision of public services; a concept that has been explored by scholars since the inception of public economy. This role can be traced back from the Roman viaducts, to the Great Wall of China and to the interstate highway of the US. Historically, it has been recognised as the most visible role of government. However, the term public goods narrowly defined in the definition. The provision of state resources for the welfare of the general public is a relatively recent concept, but it is more suitable in defining the role of government in providing public services. To be more comprehensive in the definition, the function can be modified to include the execution and materialisation of ruling the class’s vision. Subsequently, government can additionally be seen as an association which can gather the people, pool basic assets and order composed gathering activities to execute substantial scale social ventures which private people don’t have the motivation or the capability to undertake.

The third function is related to the first two functions; a government needs to have income generating ability in order to be economically viable or to have ability to perform its functions such as establishment of law, maintenance of institutions and building public projects. The government need to gather imposes so as to addition such capacities. A government can also finance its budget in other ways, such as asset sales/lease (common during the pre-industrial revolution England and socialist China where both owned large amount of land assets under state entity), exploitation of state owned resources, operating nationalised companies in state-regulated market, public debt financing.

The aforementioned functions can help to come up with a solider and comprehensive definition of government. The term “government” can be defined as a giant organization or a system of organizations within a society or even just a population that utilizes common resources to finance its budget in an effort to create or maintain law and order, as well as undertake other crucial functions such as public project development. In the above definition, concepts such as the source of legitimacy and institutional violence are deliberately left out. Whether a government is formed through the free election of liberal democracy or after unscrupulous acts of terror by an opposing group, the functions of a government do not change. Also the definition effectively integrates bureaucracy with politics, which can be viewed as an artificial division of public institution.

There is no need for further elaboration about the absolute the size of a government. Since the government and the public sphere in which it operates form the platform on which private activities are conducted, it is natural that as the amount of private activities increase, both the income channel to finance and the need for facilitating public both the income channel to finance and the need for facilitating public functions will expand accordingly.   In this regard, the basis for understanding any structural shift in the organisation of government is the relative relationship between government spending and aggregate economic activity. GDP and GNP are the main parameters used to determine the level of income of a government or a nation.

The emerging question is what is causing an ever growing proportion of aggregate public resources and human activities to be devoted to maintaining social order and in providing for public projects. Is there an additional significance of the public functions that the government provides from the demand side or has the government developed more efficiently and less-intrusive revenue generating methods from the supply side, enabling it to participate to a larger extent in the economy?Chapter 2

Research Hypothesis

This article suggests that the theoretical framework that determine the growth of governments should ideally identify the common underlying factors that drive up public spending universally across governments, and allow for country level specificity to be added in addition to accounting for variations. The frameworks suggested within this article will try to explain the timing of the initial and succeeding rounds of expansion since the end of the 19th century and provide insights into the structural shifts in the political and social settings that broke the stability pattern that had been there for over a millennium.

A successful growth theory should differentiate between factors that temporarily support growth of governments during a particular time-frame from the factors that have been continuously exerting the effect until today. It should show how the resistance for tax raise was overcome and what the common mechanism for government to increase revenue in order to support the expansions was. If specific characteristics of a country or region are found to account for the whole of fraction of government growth, there should no similar growth pattern in other nations that do not have such traits, unless other valid factors come into play.

Chapter 3

Literature Review

Economists are more hopeful about the impending years. Numerous anticipate that the monetary development will quicken, an evidence that the economy is at last picking up rate after the 2007-2014 subsidence. Emulating the end of the recession, different economies of the world, encountered differently not very impressive development rates averaging about two percent annually, something that economists accept that it would have been distinctive had geopolitics not played a role. The economists stress that any of the political hotspots of the world would certainly destabilize the economy and worldwide development.

An alternate school of thought accepts that a nation’s employment market technique impacts the legislature development. An enhancing job market means climbing family unit earnings, higher buyer certainty and more purchaser using. That is basic to development on the grounds that shopper using records for more than two-thirds of financial development. Other than more occupations interpreting into additionally spending force, economists think different powers, for example, business venture, stronger state and nearby funds and rising exports, will likewise help development in impending months.

In china, researchers have boosted their forecasts on various growth elements due to the governments easing of credit and acceleration of fixed-asset investment. An example of such limits include property purchase, which have been eased in some cities.The researchers believe that the past’s high growth was as a result of more rural laborers flowing into the manufacturing sector where productivity was ten times higher. Other implementers have urged the government to invest more in areas such as education, healthcare, and social security to improve the quality of workforce and boost long-term productivity.

Policymakers are isolated in respect to whether government development helps or impedes financial development. Promoters of greater government contend that legislature projects give significant open merchandise, for example, training and base. They likewise guarantee that builds in government spending can support monetary development by placing cash into individuals’ pockets.

Advocates of more modest government have the inverse perspective. They clarify that administration is too huge and that higher using undermines monetary development by exchanging extra assets from the gainful segment of the economy to government, which utilizes them less effectively. They additionally caution that an extending open area confounds endeavors to actualize genius development arrangements, for example, basic assessment change and individual retirement accounts- on the grounds that commentators can utilize the presence of plan shortfalls as motivation to contradict approaches that would fortify the economy.

Important Facts and Observations

Before examining the detailed empirical evidences and evaluating various theories, a few important observations can be made on the subject, which should serve as good sanity checks or logical boundaries. An effort to explain the growth of government should accommodate or at least not conflict with those basic facts.

Contrary to the modern common experience, governments are not on a growth trajectory since the beginning of civilization and the expansion of their activities and scale of influence are not pre-ordained as rules of nature. Prior to 1700, governments across the globe showed limited propensity to expansion for extended periods. City finance log from ancient Rome shows that expenditure increase was small after a period of 400 years. Thus, as a percentage of total economic output the expenditure may have actually decreased. Historical record of the Chinese tax system shows that on average, the land tax in terms of crop submission was lower in 1600 AD than in 200 BC.

The initial spurt of government growth occurred after England underwent the Glorious Revolution and steered Europe into industrialization, and initiated the first round of globalization. However, much spending was associated with the belligerency and interstate politics of Europe at the time, and largely reflects the cost of war incurred by different country governments. Non-war related public expenditure increased around the turn of the 20th century and accelerated post Second World War.

Modern government spending upshots are often associated with the increased spending on large social projects such as national wars, public education/health program, a social security program and state investment by public utilities. In addition, governments across globe have engaged in more economic activities which were originally dominated by the private sector. The scope and content of government’s public function has significantly expanded and diversified.

Governments irrespective of regime type experienced expansion in size; this can be observed across different types of democratic, autocratic and resource rich monarchs. In addition, this can also be observed within states through identifying the varying degrees of economic development. The median central government spending as a percentage of GNP for 46 developing nations increased from 18.7% to 26.4%. However, the powerful existence of drive for a large government and a reversion for high tax rate has been deeply ingrained in the mentality of democratic politics as observed in the House of Common debate on 18th Century tax reform, as well as the considerations of the founding fathers of the US when proposing the bill of rights. The worry of government interruption to private rights has dependably been a solid imperviousness to the development of open segment.

Both monetary hypothesis and observational proof propose that government ought to be more diminutive. Yet would it say it is conceivable to make an interpretation of great matters of trade and profit into open arrangement? Despite the fact that numerous policymakers comprehend that government using undermines monetary execution, some believe that particular vested parties are excessively politically effective and that lessening the span of government is an incomprehensible errand. Since the load of government has constantly expanded amid the post- World War II period, this is a sensible presumption.

In addition, there is a worry that the move to make the government smaller may be monetarily unsafe. As it were, the economy may be stronger over the long haul if the load of government is decreased, however the short-run results of using diminishments could roll out such an improvement untenable. This Keynesian dissection is substantially less pervasive today than it was 30 years back. However, it is still piece of the open deliberation.

In the last 20 years, without including the extra public spending incurred during the 2008 financial crisis, the government expenditure has been stable and stagnant, while economic inequality between people has increased dramatically.

Rationale of the Research

Various stakeholders have an interest in understanding the facets that are incorporated into the growth of governments. Each party of the concerned groups have their reasons for the same. In this regard, this article outlines the steps and procedures involved at determining such frameworks. The research will begin by outlining the overview in growth of past period in time for different governments in distinctive parts of the world, for example, the United States, China and the United Kingdom.The article portrays various theories that have been put across and the methods that have been considered herein. It criticizes each, and outlines the pros and cons of the same.

Chapter 4

Aims and Objective of the Research

There is need to stress the point that government growth should not be perceived as similar in all nations. Although the growth of government sizes relative to countries’ economies has been stable, different countries started expanding from different points, with regard to both the global historical timeline and stage of economic development.

Research Methodology

This paper gives a review of the verifiable knowledge of the UK and US, the post WWII knowledge of OECD nations and post social upheaval knowledge of China. The UK and the US have the longest economic growth history and capitalist democratic governments. As such, many scholars have written an extensive history about them.

The growth history of OECD countries is concentrated during the Post World War period. OECD comprises of the most successful capitalist nations across the globe. The countries in the category are relatively homogeneous in terms of their economic and social structures. However, they manifest differing government growth rates since different countries apply the principle of welfare state in varying degrees.

China’s experience in government growth and public finance expansion is widely covered in literature. The Chinese government, as an autocratic regime, believes in a contrarian ideology and organises its political power structure and bureaucracy in a distinct way without using many aspects of the democratic mechanisms as incentives. Nonetheless, the Chinese government fulfils the role of raising finance for institutional maintenance and supporting public projects/services development. A review of China’s perspective may greatly contribute to the discourse by providing a powerful mirror regarding the unique aspects of government growth that cannot be attributed to the growth of the government of the US and the UK.

Government Growth in the UK

The extent of UK government concerning the economy has been on a climbing pattern since the Glorious Revolutions of 1688. In the 19th century, the government share of the national income declined due to the Napoleonic Wars. However, after the war, the real public spending of UK government on non-war items did not gain a significant change.

Since the beginning of the 20th century, UK’s public spending has expanded from 12 percent to 48 percent of the country’s GDP, recording a 300% increase. On the contrary, the national defence budget, which reached a peak during World War II at 46.4%, has declined to 2.5%. The largest areas of growth in UK Since the beginning of the 20th century, UK’s public spending has expanded from 12 percent to 48 percent of the country’s GDP, recording a 300% increase. On the contrary, the national defence budget, which reached a peak during World War II at 46.4%, has declined to 2.5%. The largest areas of growth in UK government spending are NHS spending and social securities (welfare transfer and pension payments). Health care spending has expanded from 0.5% to just over 8%, while social security has expanded from 0.7% to around 15%. Spending on education has risen from 4% to 6% of the GDP since 1960s.

One notable thing is that there have been two major phases of public spending expansion following both WWI and WWII. The first phase, from WWI to WWII, showed a more dramatic upshot trend and maintained at a plateau until the breakout of WWII. The post WWII phase has exhibited a continuous upward trajectory until today.

Government Growth in the US

In the initial 100 years of US history since 1785, a measure of expense gathered was little contrasted with the current level. Government incomes prevalently originated from two sources: income duties and area deals. The restricted wellsprings of income for the national government constrained its use. The average annual rate of growth of tax collection in real terms after adjusting for inflation was 5.5% between 1792 and 1974. Prior to 1900, the growth rate was around 4.75%. The rate increased gradually to 5.4% in 1900, while the Real GNP rose at an average rate of 3.17% during the same period. In 1900, the government spending amounted to 8% of the GNP. Government spending increased to 36.5% off GNP by 1980.

Amid the second quarter of the twentieth century (between 1929 – 1950), an arrangement of noteworthy political occasions happened, including the Great Depression, the New Deal Program and World War II. These occurrences invited the intervention of the government of the US. The average level of real tax growth during the period was 7.17%, while the average level of economic growth was 2.92%. Government spending increased from 12 percent to around 25 percent of the GNP between 1929 and 1939. During the third quarter of the century, taxation level and spending continued to rise, albeit at a slightly slower pace. Tax growth declined to around 4.5%, and spending continued to rise to up to maximum of 42 percent of national income. Domestic social transfer grew from 1.1% before the onset of the Great Depression to 3.5% at the beginning of WWII. It grew more rapidly between 1949 and 1976 from 5.5% to 13.5%.

Comparable development prospects were recorded in business rate; the occupation rate in the general population segment developed twice as quick as the aggregate work power. At all administration levels (Federal, State and neighborhood), job developed at a normal rate of 4.5% from 1900 to 1974. As an extent of aggregate workforce job rate developed from 4% to 15%.

Government Growth in OECD

Nutter (1978) presents data related to the rate of growth in government spending and national income in OECD countries and the US from 1953 to 1973. The median level of government spending in OECD countries increased from 34 percent in 1953 to 49 percent in 1973. The data indicates that the growth in government spending during the period was higher in the OECD countries than in the US.

There was significant variation in both the level and the rate of change, government spending among 18 nations. In 1960 economic growth averaged 28.5% of GDP, which ranged from 18% in Spain to 35.4% in Germany. In 1975, the average increased to 38.5%, with Japan and Netherlands recording 23.5 percent and 53.5 percent growth, respectively.

Overall, expenditures in external activities represented a small fraction of the overall government spending in comparison to domestic spending. The median level of spending dropped from 6.1 percent to 4.9 percent, the level off domestic spending rose from 28% to 48%. This was mainly caused by the increased level of stability after WWII in OECD countries.

The largest levels of government spending as a percentage of national income in 1950s were recorded in Germany, France and UK. By 1970s, North European states such as Denmark, the Netherlands and Norway emerged at the top. Japan and Switzerland have consistently recorded the lowest levels government spending in external activities, while Sweden recorded both the fastest growing and the largest growth levels in the 1970s.

Government Growth in China

Since the implementation of major economic policy reforms in China in 1978, the country has recorded a balance of payments constantly. The average level of growth in government spending has been 31% of GDP. The country underwent public economic reform and tax restructuring in 1994, and the government adopted the modern multi-category market based tax system similar to that of conventional practice in the developed countries. Since then the tax revenue rose steadily from 11.2% in 1994 to 18.2% in 2010. Unlike UK and US, China finances a relatively small proportion of its public spending through debt. The level of government spending was 7 trillion CNY in 2010 (equal to 20% of GDP in the same year), with only 0.8 trillion collected through debt financing (2 percent of GDP)

From 2007 to 2010, government revenue climbed from 26.7% to 33.7% GDP. The level of tax revenue maintained a steady growth rate of around 17%, while the revenue derived from the transfer of land usage increased from 2.7% of GDP to 7.3%. The revenue derived from public fund investment increased to 9.2% of GDP from 4%. The highly hyped super SOEs of China, which made headlines in corporate news around world, experienced colossal market cap and thus, they did not contribute significantly to the aggregate level of revenue increase at 0.1-0.3%.

Much of the expenditure focused on supporting economic activities and infrastructure development. However, the focus on these sectors shrunk from 40% of government spending in 1996 to 26.56% in 2006, indicating that there was a shift in focus by the government. The social security and welfare transfer increased from around 0.26% of GDP to 2.26%, while spending on health care and education ranged between 1% and 2.5% of GDP during the same period.

Chapter 5

A Side Discourse on the Three Perspectives and Three Methodologies

The focal topic of this research is to create a hypothetical system, as opposed to simply concentrating on the issue of government extension.. Hence, before engaging in close comparison of academic literature, it is worth revisiting the existing cognitive frameworks.

In the current mainstream academic research on political science and comparative politics, the three main theoretical areas of focus are interest, idea and institution. The continuing debate over their unique merits has been a recurrent theme underpinning literatures. In terms of research method, three main ways can be identified namely, mechanism dissection or “detective studies”, statistical analysis featuring extensive linear regression testing, and theoretical modelling that borrows frameworks from economics and game theory.

It is essential to note that in contrast to the famous 3i, the classification for methodology is based on the author’s own observation rather than any existing research. Arguably, such categorization helps to distinguish the approach taken by different scholars. Although most scholars combine the three methodologies, many scholars concentrate on just one methodology.

The three categories are important in the sense that they aim to address two fundamental questions of political science or social science study in general. The raise the following questions; 1) what are the most important dimensions underpinning observed political phenomena, and how do we prioritize in our examination? 2) Given that we know where to heading to, how do we assess and contemplate about the problems?

Arguing about the best item in each category is challenging and contentious, given the presence of literal war on the issue. It will be later argued that focusing on one area usually leads to explaining either too little or too much of a phenomenon. This article is aiming to develop a systematic framework of how we can apply the three perspectives or the three research approaches simultaneous and yield theoretical outcome that gives a comprehensive approach.

The three different focuses: Interests, Ideas and Institutions

The three “Is” is a familiar concept in political science. Institutions to develop rules which set the constraints for human interaction and organizational structure that govern the functioning of political agents. Interest is the real, material concern of the principal actors. Idea refers to any cognitive construct that is formulated in social and political activities and the cultural norm that serves in the society.

Currently, much of the work on political economy is dominated by institutions or interests, or a combination of both. Institutionalism in its various forms tries to identify the comparative features in different nations’ political organisations and institutional sets. The different features yield helps to develop links to public choice, policy selection and economic performance. A more interest-centric approach applies strategic game theory in an elegant way, yielding predictive outcomes of optimal policy outcomes (the accuracy of the results does vary from one case to another). The idea is used often as an exogenous factor and is applied to fill problematic theoretical gaps, which cannot be satisfactorily answered only by institutional friction and strategic gaming alone. This is a trouble that is frequently encountered by scholars when explaining aspects of sudden political changes. As this is done in an ad hoc manner, academic scholars try to internalize ideas into their frameworks in order