Stifling the private sector

Societies leaning towards capitalism have small governments that provide essential public goods to the people, formulate policy and leave the rest to the imagination and executing capabilities of the private sector. Governments in most developing countries, on the other hand, continue to be large. Investment in these countries is low, and the loss in the investment share of the GDP is either picked up by government spending or higher levels of consumption. Government revenues in many of these countries, India, Pakistan and, to some extent, Bangladesh, which has successfully implemented many fiscal consolidation measures, are low, and so are their fiscal capacities to undertake public welfare programmes. Governments are large with idle administrative capacities, often leading them to imagine and perform unnecessary regulatory functions. Many of the regulations stifle the private sector, thereby seriously limiting its growth potential.