I periodically share data comparing the United States and Europe, usually because I want to convince people that America’s medium-sized welfare state is better (less worse) than Europe’s bloated welfare states.
In other words, Bernie Sanders is wrong.
But I sometimes feel guilty when making these unflattering comparisons because Europe – at least by world standards – actually deserves a good bit of praise.
If you look at Economic Freedom of the World, you’ll find that the 28 nations of the European Union (outlined in red) have relatively strong scores. Indeed, 27 of them rank in the top half, with Greece being the embarrassing exception.
And 17 EU nations rank in the top quartile, three of them above the U.S.
If you dig into the data, you’ll find that EU nations generally get crummy scores for fiscal policy, but misguided policies on taxes and spending are more than offset by superior scores for trade, monetary policy, regulatory policy, and quality of governance.
Now let’s look at some recent trends. I mentioned yesterday that I’m at the European Parliament in Brussels for a conference on economic freedom.
My friend Martin Agerup from Denmark gave an overview of economic freedom in EU nations, and I want to highlight some of his slides.
We’ll start with this modified ranking of economic freedom, which looks at where a hypothetical European nation would rank if it cherry-picked the best real-world scores (for the five major indices) of the various EU countries.
This hypothetical country, based on the best practices of various EU nations, would have the third-highest score for economic liberty – trailing only Hong Kong and Singapore.
This underscores my point about considerable economic liberty in Europe.
Martin also looked at trends in the European Union.
Here’s a slide looking at the evolution of economic freedom in Western Europe and Eastern Europe.
Three things are worth noting about this chart.
- First, there was a dramatic improvement in economic freedom in Western Europe (blue line) from 1975-2000. Many people know about Thatchernomics, but there was a lot of pro-market reform in the rest of Europe.
- Second, you’ll notice the giant jump in economic freedom in Eastern Europe (red line) from 1995-2005. The collapse of communism has resulted in vast improvements in economic liberty.
- Third, the overall continent has seen comparatively little progress in recent years.
But averages can be deceiving. This next chart shows that some nations did rise and fall over the past decade. Many Eastern European nations boosted their scores by a modest degree, and Sweden also deserves a special mention.
Greece stands out for the worst performance in the past 10 years.
Which gives me an excuse to share one final chart from Martin’s presentation. Sweden suffered a deep crisis at the start of the 1990s, somewhat akin to what Greece suffered in 2008. But the two countries responded in radically different ways. Sweden shrank government and boosted economic liberty while Greece increased the size and scope of the state (aided and abetted by bailouts!).
This video has more details on the comparison of the two countries.
P.S. Notwithstanding the relatively nice things I just wrote about Europe, the continent faces some major fiscal challenges. And middle-class taxpayers, who already are being suffocated by high taxes, will probably get further pillaged.
International Liberty 
[…] close by looking at a chart from a 2018 presentation by Martin […]
[…] nations have a larger burden of government spending than the United States and generally have lower levels of economic liberty when compared to […]
[…] nations have a larger burden of government spending than the United States and generally have lower levels of economic liberty when compared to […]
[…] put this data in perspective, Italy has the next-to-lowest-ranked economy in Western Europe, with only Greece having less economic […]
[…] Here’s some related research on this topic from 2017. And here’s a column on the evolution of economic liberty (or lack thereof) in […]
PRAGER U VIDEO: THE SUICIDE OF EUROPE
The two major causes of Europe’s impending downfall.
June 5, 2018 Prager University
[…] while Belgium and other European nations have bad fiscal systems, they tend to score highly in other areas. Same for the United […]
it’s interesting that every year… in the EU’s socialist paradise… tens of thousands of elderly Europeans freeze to death because they can’t afford to heat their homes… the political class in Brussels claim to be fighting “global warming” by increasing energy costs… thus hurting their economies… and killing their own people……..there is a word for politicians like that… but I won’t repeat it here…
as an aside… 40 people died in the Syrian chemical attack… and the U.S. and the E.U. are ready to risk a world war to punish Assad for his government’s policy on the use of chemical agents… and yet E.U. energy policy kills tens of thousands of innocent people every year……………………….
Indeed, through Greece is apparently exiting from the acute phase of its crisis, the country is exiting the crisis with worse fundamentals and much eroded social capital, than it entered. I’m afraid that save a few short rebounds from the depths of the crisis the long term situation of Greece has become absolutely irreversible.
For example, a businessman in Greece, e.g. a civil engineer (a once decent profession) now faces an affective tax rate of around 80-85%. Income tax rates quickly climb in the upper 40% and mandatory contributions to government healthcare and retirement are in the upper 30%. With the roughly 15% left you buy stuff subject to 24% VAT. The healthcare system is completely void of reciprocity since government healthcare is the same for everyone regardless of income. The unemployed and even those who never worked get the same treatment (hint: not so good). The retirement system is also highly redistributive with eventual payouts raising very slowly with contributions.
With such a flat effort-reward curve there is no hope for anything competitive flourishing in Greece, save the resource curse of tourism, an endowment bestowed on the Greeks by geographical luck. As is typical of resource curses, The tourism endowment is now well on its way to becoming controlled by an oligarchic mafia under the pretext of environmental central planning.
PS. I also wonder, where does the economic freedom index capture something that is so visible from thirty thousand feet in the air, when one compares the US to Europe from an airplane window: the much more free market driven zoning of the us compared to the compartmentalized dirgistic and much more restrictive zoning of Europe. I’m always amazed at how stark of a difference that is whenever I fly between the two continents. In my view restrictive zoning and the way the housing and building supply is created cascades to almost all other areas of economic and social freedom, and in ways that I think few people realize. From housing affordability all the way down to birth rates and the desire to procreate and the resulting demographic crises, if one thinks about it.