CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Following the classical prescription before the great depression of the 1930’s the role of government in the economy were Limited to the few of services like law and order, natural security and promotion of property rights. Adam Smith (1776) in his discussion of the proper role of the government listed three factors. First “protecting the society from the violence and invasion of other independent societies, secondly, protecting as far as possible every member of the society from injustice or oppression every other member and thirdly, erecting and maintaining those public work which through they may be in the highest degree advantages to a great society are however of such a nature that the profit could never repay the expense to ay individual or small group of individual this list is referred to as the care function of the government. Today however, the economic role of the government has expanded to include consumption and investment expenditure.
Government or public expenditure has served as most commonly used fiscal policy in growth, expansion, structural transformation and
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diversification of economic base. Public expenditure is used for allocation, stabilisation and distribution (Musgrave and Musgave, 1989). Hence, public expenditure programmes is a comprehensive set of expenditure policy measures, designed to achieve a given set of macroeconomic goals including the restoration of equilibrium between aggregate domestic demand and supply (IMF 1993).
According to Gwartney (1998) while countries have moved towards economic freedom and open markets, government expenditure has increased more and more. Government expenditure can be defined as spending by the national and local government and some government based institutions. Economic growth is an increase in output or income overtime, it is a positive change in the level of production of goods and services over certain period of time. Economic growth is measured using real gross domestic product (G.D.P).
There are few more hoting debased topics in economic that what the government expenditure plays in economic growth. Keyesian argued that government should manage the amount of demand in an economy to maintain full employment. Since the 1950’s there has been growing evidence that government intervention can also be flowed and can be imposed even greater cost in an economy than market failure. There
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have been growing concern that government investment expenditure have been, crowding out supervisor private investments.
Government expenditure has continued to increase as a share of GDP within the organisation of economic Co-operation and Development (OECD) countries, government expenditures amounted for a larger size of GDP in 2002 that in 1999. In Nigeria, as in most countries, this is the case. Why this increase in government expenditure? Is it in the interest of the nation that the share of government expenditure in GDP is increasing?
Most growth theories like the big push theory and the balanced growth theory among others aimed at improving the growth rate in developed countries. This need for development is hindered by lies saving which is a result of low aggregation income in most developing countries.