Matolcsy: Why the state is bigger and more active than ever?

English2021. máj. 12.100WORDSMatolcsy György

It was high time to make the point and Ruchir Sharma did it. /FT, 26 April 2021/

Between 1980 and 2020 the welfare state grew steadily in all developed countries. The same is true of the regulatory state. Corporate bailouts have become standard procedure.

All developed countries rolled out more fiscal stimulus as a share of GDP in each successive crisis. According to Sharma’s calculations, last year’s combined fiscal and monetary stimulus reached a record 28% of US GDP and 40% in developed economies on average.


The more intertwined and sophisticated global economy we have, the more vulnerable it becomes: we must prevent massive destructions at all costs, meaning, at ever higher costs. Only governments and central banks can do the job, no one else.

Jobs must be protected because huge job losses might result in social revolts leading to higher wealth destruction than the overall costs of the stimulus measures.

The new knowledge-based information age needs ever-larger investments in education and in all sorts of infrastructure.

Last, but absolutely not least, economic and financial warfare requires more and more resources from the warring states.

Governor Matolcsy, MNB, the Central Bank of Hungary

Re “The idea the state has been shrinking for 40 years is a myth