OECD countries are making progress at reducing their heavy levels of
Government expenditure. The following OECD countries acheived
significant cuts to government expenditure/GDP between 1993 and 2002. 

Country     1993 2002 Difference
Finland     59.1 41.8 -17.3
Ireland     40.8 26.0 -14.8
Sweeden     67.5 52.7 -14.8
Hungary     56.2 42.0 -13.3
Canada      49.0 37.0 -12.0
Norway      51.0 39.7 -11.3
Netherlands 49.9 39.8 -10.1
Italy       56.4 46.6  -9.8
Spain       47.1 38.0  -9.1
UK          45.5 39.0  -6.5
Australia   36.2 30.5  -5.7
USA         34.1 28.8  -5.3

Government expenditure/GDP, 2002 is a forecast.
I think these figures are significant and show the effect of
globalisation, a force which will intensify as global financial markets
integrate barriers to international investment and trade fall and labour
mobility increases. Falling costs of financial privacy and the
development of internet finance will erode the ability of governments to
tax foreign sourced income and more countries will adopt a source based
taxation system. The more common use of source based taxation will
increase the extent to which resources will move in response to changes
in tax rates, and thus intensify tax competition on capital. Tax
competition on labour, the deregulation of the labour market,
liberalisation and privatisation of tertiary education and its funding,
can only result from increased labour mobility, which I dare to claim is
actually occuring, especially within Europe. Labour mobility within
Europe between countries of significant per capita GDP and skill
disparity will create a labour market with much greater after tax wage
disparity between skilled and unskilled labour. This will result in a
flood of private resources into tertiary education and sharp reduction
in the extent to which governments can redistribute between skilled and
unskilled labour. The result is that the connection between personal
marginal productivity and living standard will be restored in Europe and
welfare dependency and redistribution will be much reduced. Its hard to
overestimate the political effects of a continent of largely skilled
people who skill has come from their own thrift, investment and
contribution to their own betterment.

David Hillary

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