Big Government in a Small World: The Effect of Public Expenditure on Economic Growth

Abstract

Cities, regions and nations all over the world face turbulent developments in our world economy. The shelter model where cities, regions and nations could protect themselves against fierce competition from outside and where economic prosperity could be controlled—or at least be managed—by public authorities has vanished. There is no protected place left on our earth. The internationalization of our economies has created an unprecedented openness of the space-economy, in which after the world-wide liberalization of trade and the emergence of new economic power blocks (such as the EU) all places on our earth are part of a global economic network system (cf. Castells 1998). This network system has both a physical side, viz. an interconnectivity of modes of production, consumption and transportation based on a radical restructuring of logistic and communicative processes towards neo-Fordist types of production with a blend of economies of scale and scope (e.g., Lagendijk 1993, and Nijkamp 1999), and a virtual side, viz. a worldwide interconnected information system spurring the new economy.