The Problem in Canada and the USA

  • Robert Bacon
  • Walter Eltis


The public sector has expanded rapidly in most Western economies and many have experienced problems similar to Britain’s. In this chapter the effects of a growing non-market sector in two countries, Canada and the USA, which publish statistics which can be compared with Britain’s are set out. Like Britain, Canada and the USA have had slow rates of growth of productivity in their market sectors, 2.4 per cent annum in Canada and 1.7 per cent in the USA in 1955–74 against 2.7 per cent in Britain in 1956–74.1 Like Britain also, their non-market spending has risen very rapidly. The result has been that all three countries have diverted a high fraction of the extra resources resulting from economic growth to their non-market sectors, leaving relatively little for their market sectors where all marketed output is produced.


Private Consumption Canadian Dollar Local Taxation Market Sector Social Spending 
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  1. 5.
    See, for instance, Michael L. Wachter, ‘The Changing Cyclical Responsiveness of Wage Inflation’, Brookings Papers on Economic Activity 1976 (1).Google Scholar
  2. 9.
    See, for instance, J. Richard Aronson and Eli Schwarz, ‘Financing Public Goods and the Distribution of Population in a System of Local Governments’, National Tax Journal, Vol. X XVI, June 1973;Google Scholar
  3. J. Richard Aronson, ‘Financing Public Goods and the Distribution of Population in Metropolitan Areas: An Analysis of Fiscal Migration in the United States and England’, published in Economic Policies and Social Goals: Aspects of Public Choice, Edited A. J. Culyer, Martin Robertson, 1974.Google Scholar
  4. 14.
    J. K. Galbraith, American Capitalism: The Theory of Countervailing Power, Houghton Mifflin, Boston, 1952.Google Scholar
  5. 15.
    See John H. Hotson, Stagflation and the Bastard Keynesians University of Waterloo Press, 1976, for an account of the evidence that there was tax-induced inflation in Canada.Google Scholar

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© Robert Bacon and Walter Eltis 1978

Authors and Affiliations

  • Robert Bacon
  • Walter Eltis

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