Is economic growth a public good?
- Schools: a public good. The state finances teachers and buildings
The library, the city park or the cycle paths and streets - all of these are so-called "public goods" that are not provided by a company, but by the state. In principle, access to them is open to all members of society - regardless of their income. Public goods also include things that seem to be taken for granted, such as education or security. For this purpose, the state provides schools, universities and teaching staff, a functioning legal system with a basic law, plus courts, police, fire brigade and the Federal Armed Forces.
Nobody should go away empty-handed ...
Public goods are different from private goods: if you buy a book, it counts as part of the private property. You alone decide what to do with it - e.g. who to lend the book to. In the case of this private good, everyone else can be excluded from consuming the good, if that is what they want. In the case of public goods, on the other hand, others cannot be excluded: a street lamp, for example, lights up for everyone, or the city library cannot be used by yourself. Nevertheless, public goods naturally cost something. Citizens pay them indirectly through the Taxes. Politicians determine how much money is spent on which public goods. Often, however, the tax revenue is insufficient. In order to at least partially cover the costs, the city and state can also levy fees. The entrance fee to the municipal swimming pool is such a usage fee, as is the toll that truck drivers have had to pay for using German motorways for a few years now.
The state in the economic cycle
- Mona is stunned: Mr. Peters explains to her what the state levies all taxes on
Income tax, trade tax, value added tax, profit tax, petrol tax ... the state seems to be resourceful and insatiable when it comes to inventing types of tax, but with the money that the state collects, it makes purchases itself. He provides his citizens with public goodssuch as schools, streets, subways, and swimming pools. To build the roads and all that, he hires companies, which he of course also has to pay for. A large part of the state income therefore flows back to the companies. The state is one of the largest clients for the German economy. The state can also use the taxpayers' money to provide targeted support to certain companies or sectors. If, for example, the state relies on renewable energies in the future, it will provide financial relief or support for the manufacture or purchase of solar systems, for example. Such state aid is called Subsidies.
Too much “state” in the economy?
Government support is also given to all those people who do not have enough money to meet basic needs. So the state tries Inequalities to compensate for which people are not responsible for themselves. You get something called social benefits paid. For example, families receive child and parental allowances in order to compensate for higher costs and loss of wages caused by bringing up children.
The state is therefore heavily involved in economic activity. In doing so, he deliberately restricts the freedom of action of companies and private households. Politicians and economic experts have been arguing for centuries what level of government interference is acceptable and whether it should intervene at all, with the help of subsidies, for example.
Tax revenue in Germany 2006 (a selection, figures in millions)© SWR / Source: Federal Ministry of Finance
- Mona is amazed at what is financed with her taxes: roads, public administration, police and much more
The television news and the front pages of the daily newspapers almost always deal with the same topics: fighting unemployment, how can economic growth be boosted, are pensions safe and when will they finally be back? Taxes lowered? The state has the task of creating all desirable framework conditions for a functioning society. Companies need traffic routes and industrial areas, private households require a supply of water and a fire brigade on hand in an emergency, people want parking spaces, sports fields and kindergarten places.
The difficulty of "steering" properly
To ensure that there is always enough money for these public goods, the state pursues a complicated economic policy. He has to collect enough taxes to pay for everything. But he must not charge taxes that are too high, so that the citizens still have enough to live and consume. Tax increases can quickly turn negative: only those who can spend a lot of money can also pay a lot into the state coffers - for example through value added tax. And: if companies are taxed too high, they have less money left for wages and investments. The result: fewer people are hired, employees are even laid off, and unemployment rises. Economic action by the state therefore requires a sure instinct ...
Government expenditure of the Federal Republic of Germany in 2007© SWR / Source: Federal Ministry of Finance 2007
© Text: Kerstin Stoll
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