How significant is the government function in the economy?

Yesterday I wrote about how the government could balance the interests of firms and individuals especially the working class in the economy. The government could have strong influence on firms' and individuals' behaviours in the economy. However, sometimes without the intervention of the government, the economy can recover itself and even the market confidence could improve despite a messy political environment.

Spain is reported to have a largest recovery in its employment rate since the financial crisis; however, there is a huge uncertainty in the Spanish politics. Some including me think that when the politics is in a mess, the economy is definitely in a bad shape as well, and I personally even believe that the economic problem is one very important and main reason of a political unrest. However, there could be a hypothesis that government cannot direct the economic performance. Once the economy is in a good shape, the government tends to give itself credits of making the economy so great, despite the government has no power to make the economy grow or decline. While the economy is in decline, the political opposition will attack the party in power about its "false" strategies in terms of its economic policies, meanwhile the party in power will also behave very actively to show they are putting all possible efforts in correcting the economic issues. Later once the economy recovers itself, the government will take all the credits of correcting the economic issues. Therefore, during the economic cycle, the government does not have any decisive functions but due to the political purpose it takes all the credits about the economic growth as well as the economic contraction.

This is purely a hypothesis that I have not tested, but as it is very interesting, I list this though on my blog.