The nature and composition of public expenditure is of immense importance, because the manner in which public money is spent exercises considerable influence on the production and distribution of wealth.
Defence of the country and maintenance of law and order are, of course, necessary for the well-being of the community, but this expenditure should be and must be reduced to the minimum level without endangering the safety of the State.
ADVERTISEMENTS:
The money saved from this kind of unproductive expenditure can usefully be employed for promoting and developing productive and beneficent departments.
A greater figure of expenditure devoted to the nation-building schemes, like education and health, adds to the mental and physical efficiency of the people as a whole and contributes to greater production of national wealth.
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The State must necessarily be vigilant about the proper development of industries and the workers employed therein. It is also necessary that the State should provide for the organisation and conduct of researches in different spheres of economic, political and social activities.
Similarly, due proportion of expenditure of the State should be divided toward such undertakings as the public utility services and those industries where private enterprise is not likely to come forward.
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From this brief survey, it will be clear that a well regulated public expenditure greatly contributes to the growth of the national wealth and yields the maximum social advantage.
It tends to remove inequalities in the distribution of national wealth by taxing the rich and benefiting the poor classes of the community by the provision of goods, services and amenities which help to better their lot.
If the State adopts a progressive policy of taxation and imposes high death duties, and spends a big portion of the money realised in providing the poor with better means of employment, better conditions of work, national minimum wages, better and more sanitary houses, free and advanced educational facilities, free and highly developed facilities and medical aid, it produces better fed and more contented citizens who are a real asset to the nation.
But this can be possible only when the guiding principle of public expenditure is the attainment of maximum social advantage. According to Dalton, “The two chief conditions of an increase in the economic welfare are, first, improvement in productive powers, and, secondly, improvements in the distribution of what are produced.”