Europe also tries to cut the tax take
Frankfurt, West Germany
Government is too big! That cry was heard in the United Kingdom when Margaret Thatcher took power. It resounded in Washington with Ronald Reagan. Now it is being heard on the European Continent, here in West Germany, and even in Socialist-governed France.
Germany's conservative-liberal coalition government of Christian Democrats and Free Democrats aims at trimming the ``public-sector share'' -- that is, the proportion of total national output absorbed by government spending -- from 50 percent of gross national product (GNP) in 1982 to 45 percent by 1988.
``This retreat of the state would be an excellent achievement, giving firm support to the trend toward private initiative,'' says Dr. Walter Seipp, chairman of Commerzbank, one of Germany's ``big three'' commercial banks.
French President Franois Mitterrand had a goal of reducing taxes as a share of GNP by 1 percent in 1984.
But as in the United States, there is a difference between the level of rhetoric and the amount of action. Because of hikes in defense spending, federal expenditures as a percent of GNP in the US grew from 22.4 percent in 1980 to 24.1 percent in 1983. Based on early GNP estimates, that proportion declined to around 23.7 percent in fiscal 1984, ending last Sept. 31.
In France, opposition economists claim the tax reduction was a mere 0.1 percent of GNP, not 1 percent. And, says Bruno Durieux, an economic adviser to former Prime Minister Raymond Barre, the government is ``going to have to increase taxes in 1986 or the deficit will go up like the American deficit.''
Germany has had considerable success in restraining expenditures. Between 1981 and 1984 the deficit was virtually halved to 2.7 percent of GNP. Government spending is supposed to increase no more than 3 percent in 1984, and each year through 1988. Thus the growth in government expenditures will lag behind the growth of GNP in current dollars, and the government's share of GNP will decline.
However, an increase in unemployment taxes has left the government's share unchanged so far.
Shrinking government has not proved easy for Mrs. Thatcher either. The share of public expenditures in the gross domestic product of Britain at first rose from 39.5 percent in fiscal year 1979-80, at the time she took office, to a peak of 43.5 percent in fiscal 1981-82. In the current fiscal year ending March 31, 1985, however, that share will have diminished to 42 percent, and in the following year it will be 41 percent, a Treasury spokesman in London said.
As in the US, there is no attempt in Europe to dismantle the social-security system. President Reagan was forced in his reelection campaign to promise not to touch these benefits. In Europe, any politician who threatened the basic welfare state, including medical insurance, would not survive the next election. But there are some attempts to restrain or even slightly trim some welfare spending, where the public sees it as having become overly generous.
Further, throughout Western Europe there is a new appreciation for the benefits of free enterprise. Noted Francis Blanchard, director-general of the International Labor Organization, ``To the Europeans in particular, it's a matter of fascination that the US, being known for ages as the country of big industry, enormous concerns, giant enterprises, etc., should now turn out to be the country where you have a sort of mushrooming of small . . . enterprises which obviously have been enormously instrumental in creating jobs.''
He says ``everyone'' in Western Europe talks about promoting private enterprise.
Pascal Salin, a professor of economics at the University of Paris, Dauphine, finds ``a different intellectual climate'' in France. He is no longer regarded as an oddball when he espouses what Europeans call ``liberal'' ideas -- using the original meaning of advocating free markets and less government intervention in the economy. ``You can express even libertarian ideas,'' he says.
Germany's Christian Democrats use a slogan, ``More achievement must be rewarded.'' The implication is that government should take less in taxes, leaving more money for those achieving goals through work and investment.
Business economists here and in France frequently talk about a need for greater ``flexibility'' in the labor market, and to a limited degree they get a hearing in government circles.
``There is no possibility of wages coming down in a weak industry,'' complained Herbert Wolf, an economist with Commerzbank, noting ``with envy'' how this has happened in the US. ``So we find a solution in the destruction of jobs.'' In other words, businesses either use more machines instead of more workers to step up production or just do not expand.
Business leaders also argue that if they were able to lay off people more easily, they would also hire more easily.
Britain, of course, has gone farthest in the effort to stimulate free enterprise and shrink government. Mrs. Thatcher hopes the 2 million new small investors in the communications giant, British Telecom, will become the vanguard of an army of ``people's capitalists.''
The Labor Party has pledged to ``renationalize'' all government industries sold to the public. But Chancellor of the Exchequer Nigel Lawson maintains ``it is too late'' to stop the march toward individual ownership. The new stockholders, he says, ``will not countenance a return to faceless state corporatism.''
In France, the conservative opposition also talks of returning newly nationalized industry to the private sector. If elections were held immediately, polls indicate these conservative parties come to power.
In the United States, the Reagan administration is planning to ``privatize'' Conrail, the Northeast and Midwest freight line, for around $1.2 billion.
Little known in the US is the intention of the center-right coalition in Bonn to ``privatize'' some of the 900 German enterprises the government controls or has an interest in. At the start of 1984, the government reduced its stake in VEBA, an oil company, from 43 to 30 percent. Finance Minister Gerhard Stoltenberg has produced a list of 11 new candidates for privatization, or partial sale to the public. But the proposal has a long way to go before it becomes government policy.
All this shows that it takes any government determination and persistence to shrink itself in size. So many people, so many special interests, benefit from government spending that politicians find it extremely difficult to even hold the line on expenditures. Nonetheless, the desire for trimming the role of government continues to grow stronger in Western Europe.