Disinflation—a falling but still positive inflation rate—is often good for an economy, and even mild deflation—in which that rate drops below zero—may be no worse than mild inflation, if it reflects rising productivity. For example, technological advances and strong demand have enabled the semiconductor industry to steadily improve the power of chips so, in effect, the price of a given chip steadily falls. Imagine a version of the same thing on an economy-wide scale, and you have benign deflation.And:
On the positive side, the retrenchment that deflation usually breeds can weed out inefficient producers and spur companies to drive for greater efficiency, which is helpful for future productivity. But in the near term, deflation will probably dampen enthusiasm for spending. When consumers and companies expect prices to fall, they're more inclined to put off their purchases. Moreover, every downward tick in the price level raises real interest rates, increasing business's real cost to invest. Falling prices also raise the cost of keeping inventories, another blow to investment.There's also a great analogy using Dell and Kmart.
Look at it this way. Say a country only spends its money on two things, healthcare and food. If country A spends sixty percent of its GDP on healthcare and country B spends only fifty percent, then country B must be better, right? But wait a sec! Country A spends only forty percent of its GDP on food, while country B spends fifty! Therefore, country A must be better. Bottom line is that I can't see how "percent of GDP spend on X" tells us anything about whether a country is doing something right or not.
UPDATE: Glenn Reynolds adds some words and a bunch of links from across the blogoshpere in "Big Fat Swedish Wrap-up".