Big Government, No Growth – The Implosion Of Statism
ZeroHedge, Oct 13, 2025 – Authored by Daniel Lacalle,
Excerpts:
Rising government spending and public debt create economic stagnation and declining living standards. Many citizens believe that the state will give them prosperity and equality. However, the state only makes paper promises by issuing debt, creating a constantly depreciated currency. Taxpayers are constantly expropriated, while the recipients of subsidies become a dependent subclass. Who wins? Bureaucrats.
Deficit spending is not a tool for growth. It erodes prosperity, creates persistent secular stagnation, real wage growth decline, and poor productivity growth.
High public spending and government debt falsely inflate GDP through government outlays while, in most cases, masking a private-sector recession underneath. GDP is easily manipulated by increasing government spending and changing the calculation of GDP deflators.
The state issues debt, a form of currency, and establishes a system that continuously suffocates the productive sector. In effect, GDP and CPI serve as measures of economic strength that obscure the imbalances created by the state; GDP overstates real growth by incorporating government spending financed by debt, while CPI, like the GDP deflator, underestimates the currency’s loss of purchasing power.
Major economies face a hidden real recession for households and small businesses using “robust” headline figures bloated by ever-rising government debt. Every new dollar of debt now generates less than sixty cents of nominal GDP in the U.S. However, when we look at countries like Japan, France, the UK or Germany, the multiplier effect of new government debt is either nonexistent or negative. The consequences are evident: true productive economic expansion is hurt by rising taxes, regulatory burdens, and inflation, which reduce incentives for private investment and innovation.
Statism creates enormous disincentives for productive investment and promotes malinvestment and the constant transfer of wealth from the productive sectors to the government. Governments finance their ever-expanding budgets in privileged conditions, creating a crowding out of the private sector that suffers the consequences of persistent inflation and raising taxes.
Remember that high taxes are not a tool to reduce debt but to justify it.….
…Persistent inflation is the systemic result of chronic government overspending and central bank easing to sustain sovereign debt bubbles…
Capitalism and social media do not cause inequality and discontent. Governments create inequality in its most severe form, which arises from political favouritism.
Artificial creation of currency is never neutral. It disproportionately benefits the first recipient of new money and governments and hurts the last recipients, wages, and deposit savings.
Workers and the middle class cannot protect themselves against the stealth expropriation of the economy…
By manipulating interest rates and maintaining elevated public outlays, governments create a stealthy nationalisation of the economy and a slow-motion crisis. This leads to a gradual decline in both purchasing power and living standards.
The solution is to diminish the power of the state, promote sound money, strengthen the private sector, favour entrepreneurship, and make systematic cuts to government spending.… Without decisive spending restraint, citizens remain trapped in a vicious cycle of dependency, currency devaluation, and impoverishment.
Rising government spending and public debt do not deliver productive growth. They create stagnation.
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