Public Expenditure

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Public Expenditure: Definition and Explanation of Public Expenditure: The classical economists did not attach much importance to public expenditure. They advocated the policy of laissez-faire. They held the view that government expenditure were apt to be wasteful. They firmly believed that if money was left in the private hands, it could bring better returns. According to them, when there is free economic competition, trade and industry flourishes and prices are regulated. This old laissez-faire
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  Public Expenditure:   Definition and Explanation of Public Expenditure:   The classical economists did not attach much importance to public expenditure. They advocated the policy of laissez-faire. They held the view that government expenditure were apt to be wasteful.They firmly believed that if money was left in the private hands, it could bring better returns. Accordingto them, when there is free economic competition, trade and industry flourishes and prices areregulated.This old laissez-faire philosophy  has now been discarded. Every government is taking active part inthe organization of its country. The range of economic activity has too much widened. There hastaken place a considerable increase in government expenditures. This division of the public financewhich received little attention at the hands of the classical economists is now considered to be themost important department of public finance. Effects of Growth of Public Expenditure:   Public expenditure  has now-a-day enormously increased due to the intensive and extensiveexpansion of state activities. The main factors/causes  which have contributed to the increase in thegovernment expenditures are as under: (i) Increase in Defense Expenditure: Practically every country of the world now is spending largequantity of money on preparing for a war or for its prevention. The countries are feverishly engaged inproducing costly war material. The air to air missiles, the jet aero planes, hydrogen bombs, tanks,submarines, F-16, etc., cost huge amounts of money to the exchequer. We conclude, therefore, thatthe main factor which has contributed to the enormous increase in the public expenditure is the everincreasing armament race which is going on in almost every country of the world. (ii) Expansion of Government Functions: Increase in public expenditure is also due to the keeninterest which governments are taking for the  welfare of their citizens. Every government is spendinglarge sums of money on construction of roads, hydro-electric projects, buildings, hospital, canals andother public works programmes. It is also spending huge amounts of money for providing education,housing facilities, public parks, libraries, museums, medical aid, etc. etc. (iii) Backward Area and Increase in Population: Another reason for the growth of publicexpenditure is that the modern governments with the limited resources at their disposal have broughtunder control the neglected parts of their territories. The governments are spending vast sums ofmoney for raising the standard of living of the people hitherto, living in the underdeveloped areas. Theincrease in expenditure is also due to the fact the population is increasing at a fast speed. The welfarestates of today, therefore, have to meet the needs of people living in their countries. The increase inpublic expenditure is, therefore, inevitable. (iv) Higher Price Level: Public expenditure has increased because of the higher price level in almostevery country of the world. The government has now to spend increased amounts of money on thepurchase of commodities and services. The public' expenditure is, therefore, bound to go up. (v) Increase in Public Revenue: The most important factor which has contributed to the expansionof public expenditure is the increase in public revenue. Since the Industrial Revolution, there has beencontinuously taking place an increased use of heavy plants and complex machinery. The per capitaincome of the people has gone up. As the taxable capacity of the people has increased, so therevenue of every state has also increased. With the rise in public revenue, the governmentexpenditure is surely to go up. (vi) Duplication of Expenses: Some increase in public expenditure is also due to the fact thatgovernment is sometimes wasteful and extravagant in its expenditure. Duplication of governmentexpenditure is not uncommon to any one of us.  (vii) Accelerating Economic Growth: The government of every country is doing its utmost foraccelerating the economic growth in order to raise the standard of living of the people. This has alsoled to the expansion of state expenditure.
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