Big national shocks invariably increase the role of government in our lives. World War I, World War II, the Cold War and every other war-like conflict seem to have provided one excuse after another for government to get bigger. Economic crises are no exception, as illustrated by the Great Depression and the Great Recession.
After each crisis ended, there was some inevitable backsliding as government spending and government power receded. But we never returned to pre-crisis levels. A perpetual “ratchet effect” seems to ensure that each crisis leaves government larger than it would have been absent the crisis.
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