The following chart from Statista highlights the intersection of two themes covered frequently here at The Sounding Line: the emerging public sector pension and the sovereign debt crises. Public sector (government) employment has reached high proportions in many of the world’s developed economies. Leading the world in this regard is Norway, with a full 30% of all employees in the country working for the government. Close behind Norway are the remaining Scandinavian countries and France, all with over 20% of employees working for the government. In tenth place is the United States with over 15% of all employees working for the government, just barely less than Spain. As is clear from the chart, every major western economy now has a public sector employment level over 10%.

You will find more statistics at Statista

The increasing domination of developed economies by public sector employees has resulted in an enormous diversion of capital from the productive private sector to economically unproductive government workers. It has also fueled surging pension fund shortfalls and sovereign debt growth around the world as the cost of funding growing ranks of government employees and their famously generous retirement plans outstrip what the private sector can support in taxes.

Back in May of 2017 we highlighted the increasingly precarious position of the Norwegian economy (which is dominated by the oil and gas industry), as low oil prices have driven per capita tax revenues down by approximately 30% since 2012.

By no means is Norway alone. For different reasons Greece has seen its per capita tax revenues fall over 35% since 2008 and in France they have fallen 15%.

All of this taken together creates an unsustainable situation of shrinking tax bases and stagnant economic growth forced to support wildly out-sized government spending. As the nearly bankrupt state of Connecticut is finding out now, there are limits to how high taxes can be raised before capital flight causes revenues to decline. Judging by the fact that France is now witnessing the largest outflow of millionaires of any country in the world, that point may have already been reached by some.

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