The Importance of the Public & Private Sectors (Edexcel IGCSE Economics)

The Relative Importance of each Sector

• Most economies have a mixture of public and private sector provision of goods and services

• The United States and Japan are have a smaller public sector than Norway, Germany or China

  • The USA leans towards a free market economy

    • E.g Private firms often provide education and healthcare

• Countries with a large public sector include Cuba and China

  • The government exerts a high degree of control of key sectors such as banking, airlines, communications, energy production and manufacturing

Benefits of a Large Public Sector

Comparison of Public Sector Sizes

• The size of the public sector can be measured by considering

  • GDP per capita spending on the public sector

  • The number of employees per 1,000 of the population

Graph: Public Sector Employees by Country

Source: France stratégie

Graph analysis

• Nordic countries, such as Norway, Denmark, Sweden and Finland have larger numbers of employees in the public sector

  • This indicates that their government allocate a considerable amount of government revenue towards the provision of merit and public goods

  • These countries frequently rank at the top of quality of life indexes, as result of their excellent education and healthcare systems

• In contrast, the UK and USA have a smaller number of employees in the public sector

  • This indicates that USA and UK government allocate less revenue towards the provision of merit and public goods

  • USA and UK rank lower in quality of life indexes, reflective of less spending on education and healthcare

• Countries like Norway prioritise the public sector and provision of goods and services

  • Particularly in the provision of healthcare, educations and social welfare

• Data would suggest that many countries with a larger public sector enjoy a better quality of life and its citizens are happier

  • Usually, the larger the public sector, the higher the level of taxes

  • This is one reason why capitalists and free market economists argue against having a larger public sector