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Long-term perspective on government healthcare spending

Nowadays healthcare is commonly considered a ‘merit good’ – a commodity which is judged that an individual or society should have on the basis of need rather than ability and willingness to pay. This view, partly grounded on the recognised positive externalities of healthcare consumption, is perhaps most visibly materialized in the fact that access to healthcare is currently a constitutional right in many countries.1

However, just a few generations ago the situation was very different. In fact, during the Middle Ages health was considered a matter of destiny across most of Western Europe; it was only afterwards, under the influence of Mercantilism and the Enlightenment, that this view started changing and public authorities increased their ambitions concerning the promotion of public health.2 Sundin and Willner (2007) say that “[g]enerally, before the era of the Enlightenment, it was thought that health was God’s gift and disease and death was His punishment for the sins of an individual, the congregation, the whole nation or its rulers. Hence, to live a decent life in accordance with His will and repenting one’s sins were considered the most effective preventive measures against illnesses”.3

To show this development we have produced a long-run dataset with estimates of government expenditure on healthcare as a percent of gross domestic product (GDP) for a selection of high-income countries, going back to 1880.

As the data show, in 1880 government health spending was below 1% of GDP in all countries; but this started changing quickly in the first half of the 20th century and by 1970 government spending on healthcare was above 2% of GDP in all these countries.