Public Expenditure

Ensure internal peace and security, Economic development, Social welfare

Government spends to maintain security, promote economic development, and ensure social welfare. Personal profit and private benefits are not government objectives.

Public expenditure on economic and social infrastructure, Public expenditure on the establishment of heavy and basic goods industries in the initial periods, Public expenditure in building state-owned financial and banking institutions to provide cheap credit

Public expenditure promotes economic development when it raises productive capacity, supports industry, or encourages private enterprise. The chapter says that spending on economic and social infrastructure creates employment and increases productive capacity, and that establishing heavy and basic goods industries in the initial periods can raise the growth rate. It also says public expenditure helps private enterprises by establishing state-owned financial and banking institutions to provide cheap credit.

Improving productive capacity

Productive expenditure is investment-like spending that enhances the economy's productive capacity through physical assets and human capital development.

Increasing state activities

Wagner's Law indicates persistent tendency towards extensive and intensive increase in state functions, leading to growing public expenditure.