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Over the past four days, I’ve looked at the supposed socialism of Venezuela, the Nordic nations, Greece, and France.

And I chose those nations deliberately because I used them as examples in this clip from a recent interview.

All of them are sometimes labeled as socialist countries, but if you look at the rankings from Economic Freedom of the World, you notice that this analysis doesn’t make much sense.

For example, the Nordic nations have a lot of economic liberty and are only slightly behind to the United States, which is why I explained last year that if those nations are socialist, then so is America.

And there is a big gap between the Nordic nations and France. And then another big gap before getting to Greece, and also a big gap before reaching Venezuela at the bottom. Should all of those nations get the same label?

So where do we draw the line to separate socialist nations from non-socialist nations?

I confess that I don’t have an answer because (as I’ve noted many times) we don’t have a good definition of socialism.

If socialism is central planning, government-determined prices, and government ownership of the means of production, then the only nations that really qualify are probably Cuba and North Korea. And they aren’t even part of the rankings because of inadequate economic data.

But if having a welfare state is socialism, then every jurisdiction other than Hong Kong and Singapore presumably qualifies.

Given this imprecision, I’m very curious to see where people think the line should be drawn.

P.S. This is why I usually just refer to statism or statists.

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My multi-part series on Socialism in the Modern World has featured Venezuela, the Nordic nations, and Greece.

But no discussion of dirigiste policy would be complete without a look at France.

After all, not only does France have a history of imposing 100-percent-plus tax rates, it also hold the dubious honor of being Europe’s biggest welfare state.

And it has the highest overall burden of government spending.

These are not good numbers, especially when you consider the demographic changes that are happening in Europe.

Sadly, there’s a long history of French statism. Andras Toth of the Carl Menger Institute explained some of the France’s grim economic history.

If there is an example of a dirigiste, interventionist state, then that is France in Europe. France was the birthplace of the mercantilist, absolutist monarchy in the early modern period. …the practice of mercantilist protection and monopolization of key industries, including the state-mandated “industrial development policies” …Under the rule of the famous finance minister, Jean-Baptiste Colbert… France sank into a series of crises and lost her preeminent position in Europe. …The modern French state is the stepchild of the political culture of the Bourbons. It is the prime example of dirigisme. It redistributes as much as 56 percent of annual GDP and imposes the highest tax burden in Europe. The French state directly manages key industries and sustains one of the largest welfare states in Europe. It also imposes complicated bureaucratic red tape on economic actors, trailing way behind the Scandinavian states and Germany as far as ease of business is concerned.

Though he also explains that the current president seems to understand that France needs less government and more economic freedom.

Macron was the first French politician to build his election campaign on reform and competitiveness in order to keep up France’s position in the world. Those who voted for him knew what to expect. As a member of Hollande’s team, he proposed increasing the work week from 35 to 37 hours to lessen the tax burden on higher incomes, and the competitiveness package he developed aimed to lessen the protection of workers and companies in order to promote growth. …France is again at a crossroads: She has to choose between the policies of Jean-Baptiste Colbert and those of Anne-Robert-Jacques Turgot, the great French liberal economist who was the economic minister of France between 1774 and 1776 and who argued for free trade, less taxation, and less regulation.

I also sympathize with what Macron is trying to achieve (at least with regard to domestic reforms).

But I fear it may be too little and too late.

Especially since the New York Times reports that Macron is increasingly unpopular.

…attacks…that Mr. Macron is a self-seeking servant of society’s fortunate… The undisguised hostility has made clear that, less than a year into this new presidency, anti-Macron sentiment is emerging as a potent force. It is being fueled by a pervasive sense that Mr. Macron is pushing too far, too fast in too many areas — nicking at the benefits of pensioners and low earners, giving dollops to the well-off and slashing sacred worker privileges.

Though he does deserve some of his unpopularity. He imposed green taxes late last year that triggered nationwide riots from motorists and other unhappy citizens.

But he’s also unpopular for some of his good policies, which leads me to fear that France may be past the tipping point, meaning that genuine and meaningful reform no longer is possible because too many voters are on the government teat.

I hope that’s not the case. France used to be one of the most wealthy and powerful nations in the world. But now its living standards are barely average according to the OECD’s AIC numbers.

Because of the ongoing debate about what the term actually means, it’s unclear whether France’s tepid economic performance can be blamed on socialism.

But we shouldn’t doubt that the country is paying a considerable price for having too much government.

P.S. My favorite cartoon about French socialism actually features Barack Obama.

P.P.S. One of the world’s greatest economists was French, but politicians in France obviously ignored Bastiat just like they ignored Turgot.

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In Part I of this series, we examined the horrific tragedy of Venezuelan statism, and in Part II of this series, we looked at the Scandinavian “free-market welfare state.”

Today, Part III will look at the ongoing deterioration of Greece.

I’ve written many times about how the mess in Greece was caused by an ever-rising fiscal burden.

Let’s look at two charts, drawing from the government spending section of Our World in Data, that confirm my argument.

This first chart shows the overall burden of government spending starting in 1880. As you can see, spending generally consumed a bit more than 20 percent of the nation’s economy (other than during wars) all the way from 1880 to the mid-1960s.

And then the spending burden exploded.

What drove that unfortunate increase in the spending burden?

We get that answer in our next chart, which shows that redistribution outlays have skyrocketed in recent years.

In other words, the welfare state is 100-percent responsible for the Greek fiscal crisis, whether you look at short-run data or these long-run numbers.

Has all this additional spending generated any good results?

Hardly.

As government has become larger and crowded out the private sector, that has dampened hopes for the Greek people. As reported by the Washington Post, they are responding with fewer children and more emigration.

During the country’s deep and prolonged crash, which began in late 2009 and worsened in 2011 and beyond, an already low birthrate ticked down further, as happened throughout the troubled economies of southern Europe. Greece was also hit by a second factor, with half a million people fleeing the country, many of them young potential parents. …Greece’s fertility rate, of about 1.35 births per woman, is among the lowest in Europe, and well below the rate of 2.1 needed for a stable population… In 2009, just before the fiercest parts of the crisis, there were 117,933 births in Greece. The number has since fallen steadily, becoming well eclipsed by the number of deaths. The birth total in 2017, 88,553, was the lowest on record.

This chart from the story is amazing, though in a very grim way.

This demographic implosion might not be a big problem if Greece was like Hong Kong and had a privatized system for Social Security.

But that’s obviously not the case. Instead, Greece is a morass of expensive entitlements.

Notwithstanding all the bad news, special interests in Greece continue to lobby for more spending and favors.

And they have allies in Europe, as indicated by this report in the EU Observer.

Dunja Mijatovic, the CoE’s commissioner for human rights, told EUobserver that Greeks are still suffering from the aftermath of international bailouts and imposed economic structural reforms. …Her comments follow the publication of her 30-page report on the impact of austerity measures in Greece, which says the fallout has violated people’s right to health, enshrined in the European Social Charter, and eroded the quality of schools. …Mijatovic, who toured Greece over the summer, says she was struck at the large cuts in areas like maternal and child health services.

Though I want to be fair.

There is occasional progress in the country, as indicated by another story from the EU Observer.

Greece has taken one step closer to the separation of church and state by removing 10,000 church employees off the public payroll. A deal agreed between prime minister Alexis Tsipras and archbishop Ieronymos II also includes a settlement of a decade-old property dispute between the Greek state and the Orthodox Church – which is one of the country’s largest real estate owners.

I consider this a small step in the right direction.

The Israeli government may even want to learn something from this reform.

And there are other hopeful signs, as illustrated by this story from Der Spiegel.

Olga Gerovasili, …administrative reform minister…is overseeing an administrative overhaul that could transform the country like nothing else has since Greece joined the EU. She wants to abolish Greek clientelism. …For centuries, the Greek administration was little more than an excuse for legal nepotism. …Relationships were more important than skills for filling official positions. …Job appointments are no longer to be in the hands of powerful local politicians… The aim of the system is also to use it to remove incompetent officials. …Another revolution. The Greek administration was legendarily labyrinthian. Files could travel for years through dozens of official offices. When bureaucrats aren’t hired for their skills, they need to justify their existence by signing as many things as possible. …Much like the nepotism, this is also to become a thing of the past.

I hope these reforms are real and permanent.

After all, a bloated and inefficient bureaucracy is one of the primary causes of excessive spending in Greece. But time will tell.

After all, it’s not easy taking away goodies from an entitled population.

“Greece finally needs to open its markets — that’s the most important thing,” says Aristides Hatzis, 51, a law professor at the University of Athens. Hatzis has written one of Greece’s most surprising bestsellers of the past few years: an introduction to laissez-faire thinking. It’s surprising because economic liberalism doesn’t have any deep roots in Greece. …”In the past decades, the governments have so overwhelmingly failed that Greeks blame everything that goes wrong on the state,” says Hatzis. …”It’s difficult to take away the privileges of influential lobby groups.” As long as that doesn’t happen, he says, the country won’t recover.

Having looked at the evolution of Greece’s economy, let’s now look at how the nation’s politicians have been responding to the crisis.

Are they liberalizing, or are they digger the hole deeper? In other words, are the good reforms larger than the backsliding, or vice-versa?

Naomi Klein will be happy with the answer. Here are two more charts, based on numbers from Economic Freedom of the World, both of which show that Greece is moving in the wrong direction.

First, we see that Greece’s score has dropped over the past 10 years.

And why has economic freedom declined?

The main cause is that fiscal policy has become much worse, thanks in large part to the IMF and various bailouts (which actually were designed to bail out irresponsible banks in nations such as France and Germany).

In any event, the nation’s politicians gladly accepted bad advice and used bailout money as an excuse to impose higher taxes, followed by higher taxes, and then decided to push taxes even higher.

The bottom line is that it is difficult to be optimistic about Greece.

Yes, there are some signs of hope. More and more people realize that big government has been bad for Greece.

But it’s not easy to get good reforms in a nation where most voting-age adults are directly or indirectly mooching off taxpayers.

P.S. Democratic socialism is better than totalitarian socialism, but it doesn’t produce good results.

P.P.S. Folks on the left argue that Greece is not a good example of socialism. They say it’s a cronyist economy rather than a socialist economy. Given the various definitions of socialism, they’re both right and wrong. I’ll simply note that there are many state-owned enterprises in Greece and the government has been dragging its feet about auctioning them to the private sector. So Greece is definitely closer to socialism than Sweden.

P.P.P.S. Here’s some Greek-related humor. This cartoon is amusing, but this this one is my favorite. And the final cartoon in this post also has a Greek theme.

We also have a couple of videos. The first one features a video about…well, I’m not sure, but we’ll call it a European romantic comedy and the second one features a Greek comic pontificating about Germany.

Last but not least, here are some very un-PC maps of how various peoples – including the Greeks – view different European nations. Speaking of stereotypes, the Greeks are in a tight race with the Italians and Germans for being considered untrustworthy.

P.P.P.P.S. If you want some unintentional humor, did you know that Greece subsidizes pedophiles and requires stool samples to set up online companies?

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In Part I of our series on Socialism in the Modern World, we looked at the tragic story of Venezuela.

Today, we’re going to look at what we can learn from the Nordic nations. And the first thing to understand, as I explain in this interview, is that these nations are only socialist if the definition is watered down.

As I noted in the interview, real socialism is based on government ownership and control of the “means of production.” But Nordic countries don’t have government-owned factories, government-controlled allocation of resources, or government regulation of prices.

In other words, those nations are not socialist (government ownership), they’re not fascist (government control), and they’re not even corporatist (cronyism).

So what are they?

In a column for the Washington Post, Max Boot accurately describes them as free-market welfare states.

…rigging elections and locking up or killing political opponents. This is one model of socialism — the same approach that has been applied in Cuba and the Soviet Union. But there are many other varieties that are far more benign. …the Scandinavian model. …Denmark, Norway and Sweden…show that a “free-market welfare state” isn’t an oxymoron. …By some measures, moreover, they are freer, economically…than the United States.

That last sentence isn’t a typo. The United States has more overall economic freedom than the Nordic nations, but both Denmark and Finland actually rank above America when looking at factors other than fiscal policy.

And Sweden and Norway only trail the United States by 0.03 and 0.06 points, respectively.

That being said, a big lesson to learn is that fiscal policy is a mess in the Scandinavian countries.

…there is nothing sinister about wanting to emulate the Scandinavian example. But that doesn’t necessarily mean it’s practical. The Scandinavians have lower corporate tax rates than the United States but much higher individual taxes. …The Scandinavian countries also charge hefty value-added taxes of 25 percent on consumption. The United States doesn’t have a national sales tax, and the average rate for state sales taxes is only 7 percent. In all, Scandinavians pay $25,488 a head in taxes compared with $14,793 a head in the United States — 72 percent more. This is what it takes to finance a Scandinavian-style social welfare state. It can’t be done simply by raising marginal tax rates on the wealthiest taxpayers to 70 percent, as Ocasio-Cortez suggests, because few taxpayers pay the top rate. It requires a massive tax hike on the middle class.

Amen. This is a point I have frequently made, most recently when writing about Alexandria Ocasio-Cortez’s statist agenda. Ordinary taxpayers will pick up most of the tab if the left’s agenda is adopted.

But I’m digressing. Let’s return to today’s main issue, which is the Nordic nations and socialism.

Technically, there’s no connection. As I said in the interview, those countries have never been socialist. Heck, if those nations are socialist, then so is the United States.

There is a lesson to be learned, however, and that lesson is relevant whether one uses the technical or common definition of socialism.

Simply stated, the relative success of those nations is due to free markets and a history of small government, but the imposition of big welfare states starting in the 1960s has weakened the region’s economic vitality.

This chart tells you everything you need to know.

P.S.  Actually, there is more your should know. Nima Sanandaji’s data on how Americans of Nordic descent are richer than residents of Nordic nations is very illuminating.

P.P.S. And we have specific data from Sweden showing how that nation lost ground after it adopted the big welfare state (and has subsequently gained ground thanks to pro-market reforms such as nationwide school choice and partial pension privatization).

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With the surprising success of Senator Bernie Sanders in the last presidential race and the more-recent instant-celebrity status of Representative Alexandria Ocasio-Cortez, some are wondering if the United States is about to enter a “socialist era”.

I’ve criticized some of the proposals that are part of this movement, such as confiscatory tax rates and the so-called Green New Deal, so it goes with saying that I’m not a fan.

To learn more about the implications of socialism, let’s look around the world.

We’ll start with Venezuela, which is the focus of a very interesting article in the Washington Post. Here are some excerpts.

Did socialism kill Venezuela? Blessed with the world’s largest oil reserves, this South American nation was once the region’s richest per capita. Twenty years after the launch of the late Hugo Chávez’s Bolivarian Revolution, it is now one of the poorest. …In Washington…Republicans are seizing on Venezuela to score points against those Democrats who have newly embraced the term… But socialism’s role in Venezuela’s collapse, observers say, is not as clear as either side likes to think. At least fleetingly, socialist policies propped up by state petrodollars helped bolster the country’s status as one of the Western Hemisphere’s most equitable societies. But state-heavy policies that distorted prices and exchange rates, coupled with corruption, mismanagement and official repression, turned Venezuela’s economic landscape into scorched earth. …But it is also not communist Cuba or North Korea, where foreign investment and private ownership are strictly limited. …wealthy Venezuelans still own private companies and high-walled mansions in elite neighborhoods. They play golf at country clubs and are taxed at a relatively manageable 34 percent.

This is very fair reporting.

All the main points are accurate: Living standards have plummeted in Venezuela, oil money complicates the analysis, and the economy isn’t quite as statist as Cuba and North Korea.

The article goes on to cite the views of several Venezuelans.

“All the wrongs were created under Chávez,” said Henkel Garcia, head of Econometrica, a Caracas-based financial analysis firm. “The economy only survived as long as it did because of high oil prices.” …Today, roughly a third of the nation, pollsters say, still appears to back socialism — although only half that many remain loyal to Maduro. …With hyperinflation causing acute shortages of food and medicine, more and more former Chavistas, or adherents of Chávez’s ideals, are saying mea culpas and increasingly turning out against Maduro. “Before I die, I want socialism gone from Venezuela,” said Yessid Merlano, a 50-year-old waiter. …Scarcities of food and medicine first surfaced years ago but are now so chronic that he and millions of other Venezuelans have shed pounds and sought work abroad. Before returning to Caracas last year, he spent 10 months working as a laborer in neighboring Colombia, “where all I saw were Venezuelans begging in the streets,” he said. “I feel guilty that I was a Chavista,” he said. “It’s all my fault, all the suffering.”

I’m glad that many Venezuelans now realize that socialism is misguided.

Though I wonder if they will support the reforms that will be necessary once the current regime is deposed (and given the perverse incentives of politicians, I’m even more worried whether a new government will implement those reforms).

The article concludes with some damning data on the country’s economic decay.

State health care, once a pride of the socialists, collapsed as hyperinflation and shrinking resources left hospitals with shortages of syringes and antibiotics, as well as broken equipment too expensive to repair. …Chávez purged skilled managers, engineers and technicians from the state-owned oil giant PDVSA, stocking it with government loyalists. That set it up for a catastrophic failure as global prices fell from record highs. Venezuelan oil output is now at its lowest levels since the 1950s. Industries nationalized by Chávez, who expropriated 1,500 companies, collapsed as regulated prices distorted markets. In two decades, the government seized nearly 5 million acres of productive farmland that has now been largely abandoned. In 1999, there were 490,000 private companies in Venezuela. By last June — the most recent count available — that number had fallen to 280,000.

None of this is a surprise. Venezuela is a basket case.

But that’s not our topic today. We’re focusing instead on whether there are any lessons that the United States can learn from the Venezuelan debacle.

Or, to be more accurate, I think the key question is whether advocates of democratic socialism in America have learned anything from Venezuela’s miserable performance.

Plenty of leftists, including Sen. Sanders, praised the awful policies of Chavez and Maduro.

Now that the chickens have come home to roost and Venezuela’s economy has tanked, have any of them apologized? Or tried to rationalize what happened? Or even expressed second thoughts about the supposed wisdom of socialism?

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When I write about Social Security, I normally focus on the program’s huge fiscal imbalance ($44 trillion and climbing).

But it’s not just a fiscal crisis. Social Security is also an increasingly bad deal for workers. Especially minorities with lower average lifespans. When compared to what they would get from a private retirement system, people are paying in too much and getting out too little.

There’s also another major problem with the program.

Academic experts have quantified how older workers are lured out of the labor force when they get money from the government. And since economic output is a function of the quality and quantity of labor and capital, this means we’re sacrificing wealth and reducing prosperity.

Here are some excerpts from a study by Professors Daniel Fetter and Lee Lockwood.

Many of the most important government programs, including Social Security and Medicare, transfer resources to older people… Standard economic theory predicts that such programs reduce late-life labor supply and that the implicit taxation reduces the ex-post value of the programs to recipients. Understanding the size and nature of such effects on labor supply and welfare is an increasingly important issue, as demographic trends have increased both the potential labor supply of the elderly and its aggregate importance, while simultaneously increasing the need for reforms to government old-age support programs. …We address these questions by investigating Old Age Assistance (OAA), a means-tested program introduced in the 1930s alongside Social Security that later became the Supplemental Security Income (SSI) program.

Here are charts illustrating how people are retiring earlier in part because of government payments.

And here are some calculations from the study.

Our estimates indicate that OAA significantly reduced labor force participation among older individuals. The basic patterns that we explore in the data are evident in Figure 2, which plots male labor force participation by age, separately for states with above- and belowmedian OAA payments per person 65 and older. Up to age 65, the age pattern of labor force participation was extremely similar in states with larger and smaller OAA programs. At age 65, however, there was a sharp divergence in labor force participation between states with larger OAA programs relative to those with smaller programs, and this divergence continued at older ages. Our regression results, which isolate variation in OAA program size due to state policy differences, imply that OAA can explain more than half of the large 1930–40 drop in labor force participation of men aged 65–74. …Our results suggest that Social Security had the potential to drive at least half—and likely more—of the mid-century decline in late-life labor supply for men. …Taken as a whole, our results suggest that government old-age support programs can have large effects on labor supply, through both their transfer and taxation components.

This chart captures how old-age payments in various states were associated with varying degrees of labor force participation.

By the way, I’m not sharing this information because it’s bad for people to retire at some point.

I’m merely establishing that there’s academic support for the common-sense observation that people are more likely to leave the labor force when there’s an alternative source of income (though it’s worth noting that there should be a sensible and sustainable system for providing that retirement income).

Moreover, people are likely to stop working when government systems give them money before age 65.

Three academics, Andres Erosa, Luisa Fuster, and Gueorgui Kambourov, have a study quantifying this problem in European nations.

There are substantial differences in labor supply and in the design of tax and transfer programs across countries. The cross-country differences in labor supply increase dramatically late in the life cycle…while differences in employment rates among eight European countries are in the order of 15 percentage points for the 50-54 age group, they increase to 35 percentage points for the 55-59 age group and to more than 50 percentage points for the 60-64 age group. In this paper we quantitatively assess the role of social security, disability insurance, and taxation for understanding differences in labor supply late in the life cycle (age 50+) across European countries and the United States. … The social security, disability insurance, and taxation systems in the United States and European countries in the study are modelled in great detail.

Here’s a sampling of their results.

The main findings are that the model accounts fairly well for how labor supply decreases late in the life cycle for most countries. The model matches remarkably well the large decline in the aggregate labor supply after age 50 in Spain, Italy, and the Netherlands. The results support the view that government policies can go a long way towards accounting for the low labor supply late in the life cycle for these European countries relative to the United States, with social security rules accounting for the bulk of these effects… relative to the United States, the hours worked by men aged 60-64 is…49% in the Netherlands, 66% in Spain, 44% in Italy, and 29% in France. …government policies can go a long way towards accounting for labor supply differences across countries. Social security rules account for the bulk of cross country differences in labor supply late in the life cycle (with its contribution varying from 50% to 100%), but other policies also matter. In accounting for the low labor supply relative to the US at ages 60 to 64, taxes matter importantly in the Netherlands (6%), Italy (6%), and France (5%); disability insurance policies are important for the Netherlands (7%) and Spain (10%).

And here’s one of their charts comparing hours worked at various ages in Switzerland, Spain, France, and the United States.

The good news is that we don’t push people out of the labor force as much as the French and the Spanish.

The bad news is that we’re not as good as Switzerland (probably in part because the Swiss have a retirement system based on private saving, so they have the ideal combination of good work incentives and comfortable retirement).

But it shouldn’t matter whether other countries have good systems or bad systems. What does matter is that America’s demographic profile is changing. We’re living longer and having fewer children and our system of entitlements is a mess.

We should be reforming these programs, both for fiscal reasons and economic reasons.

P.S. It’s not just Social Security. Other programs also lure people out of the job market and into government dependency, with Obamacare being an especially harmful example.

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International development experts often write about a “middle-income trap.”

According to this theory, it’s not that challenging for nations to climb out of poverty, but it’s difficult for them to take the next step and become rich countries.

The theory makes sense to many people because it describes much of what we see in the real world.

We even see the trap at higher levels of income. European nations were catching up with the United States after World War II, but then the convergence process stalled.

But I don’t think there’s actually a “middle-income trap.” Instead, nations don’t enjoy full convergence because they are hamstrung by bad policy.

And Hong Kong and Singapore are the best evidence for my hypothesis. These two jurisdictions have routinely ranked #1 and #2 for economic freedom.

And their solid track record of free markets and small government has paid big dividends. Here a chart, for Our World in Data, which shows how they have fully converged with the United States after starting way behind.

The performance of Hong Kong and Singapore is particularly impressive because the United States historically has been a top-10 nation for economic liberty (notwithstanding all my grousing about bad policy in America, we’ve been fairly good compared to the rest of the world).

So it takes extraordinarily good performance to catch up.

But it can happen.

P.S. By the way, one thing I noticed in the above chart is that Singapore has surpassed Hong Kong in the past couple of decades. This could just be a statistical blip, though I wonder if this is a result of the transfer of Hong Kong from British control to Chinese control. Yes, China has wisely chosen not to interfere with Hong Kong’s domestic policy, but perhaps investors and entrepreneurs don’t fully trust that this economic autonomy will continue.

P.P.S. Don’t forget that comparatively rich nations can de-converge if they adopt bad policy.

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