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Archive for the ‘Free Markets’ Category

With the possible exception of a few extreme environmentalists, everyone agrees that robust long-run growth is a key to a better society.

An unprecedented jump in growth, for instance, is what enabled the western world to escape poverty, resulting in the famous “hockey stick” of modern prosperity.

Maintaining growth is an ongoing challenge for developed countries, to be sure, and it’s also vitally important to help developing nations grow and prosper.

Which is why policymakers should focus on the policies that generate good outcomes.

Libek, a think tank in Serbia, has released a study on this topic. They start by pointing out that we now have some good measures of economic liberty in various nations.

…the Economic Freedom in the World Index in 1996 by the Fraser Institute…was the first methodological tool that measured intrusion in functioning of the market process by government entities, either directly through government intervention or indirectly though regulation and market institutions. A similar index, Index of Economic Freedom, produced by the Wall Street Journal and the Heritage Foundation soon followed… Since this very successful tool was invented, it has been widely employed in empirical studies…, the most important were concerning the role of economic freedom in fostering economic growth. …empirical studies mostly concluded that there is a significant connection between economic freedom and economic growth.

Since I’m always citing the Fraser Index and the Heritage Index, I agree that these are very helpful sources of data.

And lots of academics also use those numbers.

So Libek took a close look at this wealth of empirical research.

Libek conducted a metastudy regarding economic freedom in December 2017, with the aim to reexamine the connection between economic freedom and economic growth in published empirical studies. …Using Google scholar mechanism…92 studies…consider the connection between economic freedom and economic growth. Out of these, a predominant majority of 86 studies (93.5%) finds a positive correlation or connection between them, while only 6 studies (6.5%) have less positive results. …This metastudy shows that empirical studies have predominantly found that economic freedom is associated with higher economic growth rates, while there is only one study claim otherwise and results of other 5 are less conclusive. This high rate of concurrence between economists is highly unusual, given the fact that economist tend to often disagree even among theoretically more accepted topics. Therefore, it is conclusively shown that higher level of economic freedom, ceteris paribus, leads to higher economic growth.

The folks at Libek have a big incentive to care about these issues because Serbia is a reform laggard.

Here’s a chart comparing economic freedom in Serbia with other European regions.

And here is why economic reform is so vitally important for the people of Serbia.

Serbia remains one of the poorest countries in Europe, measured by GDP, with just 5 000 euros per capita. These low growth rates do not provide a possibility for development and closing the gap with more advanced European economies. …A study estimated future economic gains through higher economic freedom (Gwartney and Lawson 2004) reporting that 1-point increase in economic freedom (measured on a 1 to 10 scale) would increase long term rate of economic growth for 1.24% of GDP. Therefore, if Serbia would increase its score from the current 6.75 to 7.75 points – the approximately current level of Austria or Germany, Serbian long-term growth rate would increase from the envisaged 2% in 2017 (and estimated by the IMF to stand at 3.5% in 2018 and 2019) to 5.25% in 2020 and afterwards. This growth rate would enable a fast income convergence with other European countries, with GDP level per capita doubling in 14 years.

Amen. Serbia has the capacity to “converge,” but that won’t happen without economic liberalization.

For non-Serbians, the parts of the Libek report that will be of greatest interest deal with examples of nations that are out-performing their neighbors.

The importance of economic freedom is well shown by the most important case studies from different continents: Chile (South America), Singapore and Korea (East Asia), and Botswana (Africa). In all these prominent cases, economic freedom propelled these societies to a high and sustainable economic growth which led them to prosperity, compared to their neighbors.

The report specifically looks at the long-run data for countries that have sharply diverged from regional competitors.

Let’s start by comparing Chile with the rest of South America. As you can see, Chile’s dramatic economic liberalization led to far higher levels of national prosperity.

Now let’s compare Botswana to the rest of Sub-Saharan Africa.

I did something similar back in 2015 and also earlier this year, so this remarkable data is impressive but not surprising.

Last but not least, let’s compare Singapore and South Korea to their neighbors.

Once again, we see a compelling link between economic liberty and economic outcomes.

This is dramatically evident when comparing South Korea and North Korea, but you also see remarkable numbers when comparing Singapore with the United States.

The lesson is not that nations need perfect policy (even Hong Kong has some statism). Instead, the message is that governments should strive to increase economic liberty – hopefully in big ways but even small reforms are helpful – so that there’s more “breathing room” for the economy’s productive sector.

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I’m in China this week, giving various lectures at Northeastern University in Shenyang. My topic today was “Real-World Examples,” which gave me an opportunity to share many of the charts I’ve developed showing how market-oriented nations enjoy much more long-run success.

One of the charts shows how Chile has enjoyed strong growth since it shifted to free markets, especially compared to Venezuela, which is burdened by a vicious form of statism.

But I noticed that I created that chart back in 2011 and it only shows data for the years between 1980 and 2008. And I thought that might lead students to think I was deliberately omitting recent years because the data somehow contradicts my message about free markets and small government.

So it’s time for me to update my comparison of Chile and Venezuela. And I’m going to have lots of evidence to share because the World Bank published a lengthy report on Puzzles of Economic Growth just a couple of years ago. And chapter 7 specifically compares the two countries we’re examining today.

Chile and República Bolivariana de Venezuela are South American countries of similar size and population. They…share a similar history, cultural heritage and comparable social structures. In 1971, they recorded a similar level of per capita income, that is, $6,603 (chained dollars with a base year of 20001) in Chile and $7,231 in República Bolivariana de Venezuela.

The report explains how neither country enjoyed much success in the 1970s, though oil-rich Venezuela at least benefited from rising energy prices.

What’s most relevant, at least for today’s discussion, is how Chile then jumped over Venezuela thanks to pro-market reforms,

In 2003, this value was nearly twice as high in Chile ($12,140) as in República Bolivariana de Venezuela ($6,253). …Chile became a stellar economic growth example in the region and has been outperforming República Bolivariana de Venezuela ever since. The ratio of GDP per capita in Chile and in República Bolivariana de Venezuela changed from 0.75 in 1983 to 1.94 in 2003.

Here’s a chart from the report, showing how Chile’s economy grew rapidly while Venezuela languished.

The report is filled with lots of data.

One item that caught my attention (in part because of Trump’s short-sighted policies in America) is how Chile dramatically reduced trade barriers while Venezuela was more protectionist.

From 1979, Chile’s economy was characterized by the lowest level of tariff restrictions in all of Latin America (10 percent) and a lack of nontariff barriers… República Bolivariana de Venezuela increased its trade restrictions to force consumers to purchase goods produced by the nationalized industries.

But Chile’s success goes well beyond trade policy.

Here’s a table looking quality of governance and red tape.

And here’s some data looking at obstacles to entrepreneurship. As you can see, it took almost four times longer to open a business in Venezuela in 1999.

I assume the numbers are even worse today. Assuming, of course, than anyone even wanted to open a business in that sad country.

Here are some excerpts from the conclusion of the World Bank report. This is a pretty good summary of how Chile reversed its descent to socialism while Venezuela doubled down on bad policy.

In 1971–2003, both Chile and República Bolivariana de Venezuela experienced periods of growing statism in their economic policy. In Chile, however, it was only a short episode (Allende’s socialist experiment in 1971–73), while in República Bolivariana de Venezuela this policy direction was maintained nearly for the entire period covered by the analysis (with its culmination being Chávez’s populist administration elected in 1998). During these periods, state-owned enterprises grew in both countries; market mechanisms were additionally disturbed by administrative price controls and restrictions imposed on freedom of entry into the market—and constrained business activity in many sectors of the economy… Furthermore, severe restrictions on foreign trade and capital flows were imposed. In Chile, the statist experiment was interrupted after three years—once it had driven the economy into a state of profound imbalance with a giant deficit and unchecked inflation. A radical program of economic stabilization and reforms broadening the scope of economic freedom was initiated. This dramatic change in economic orientation produced positive results. From the second half of the 1980s until the end of the analyzed period (2003), Chile was the fastest-growing country in South America.

Now it’s time for me to share an updated version of my chart (though I’m removing Argentina so we can focus just on Chile and Venezuela). As you can see, the updated numbers from the Maddison database tell the exact same story as my 2011 chart.

And why has Chile grown so much faster? As I told the students here in China, it’s because there’s more liberty to engage in voluntary exchange.

In the latest report from Economic Freedom of the World, Chile is ranked #15 while Venezuela is at the very bottom.

P.S. Some people have tried to portray Chile as a failure, but such assertions are easily debunked.

P.P.S. Kudos to the World Bank for publishing a very substantive report. For what it’s worth, it’s the international bureaucracy most likely to produce sensible publications.

P.P.P.S. The only bad World Bank study I’ve encountered equated high tax burdens with a good report card.

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The good news is that Donald Trump is not imitating all of Herbert Hoover’s statist policies.

The bad news, as I explain in this interview, is that his protectionist mistakes could trigger a repeat of Hoover’s beggar-thy-neighbor protectionism that wreaked havoc in the global economy during the 1930s.

George Santayana is famous for warning that “Those who cannot remember the past are condemned to repeat it.”

Well, this is why I’m so agitated about what Trump is doing. It’s true that the economy will not be wiped out by the trade taxes he’s imposing today. But what happens when other nations retaliate, and then Trump doubles down with additional taxes on global commerce?

That’s a potential recipe for a big reduction in worldwide liberty. Which is exactly what happened in the 1930s, as illustrated by this chart from an academic study.

At the risk of understatement, that would not be good for American prosperity. And blue-collar workers would be among the victims since protectionism always destroys more jobs than it saves.

So what can be done about this?

The Washington Post reports on some bipartisan legislation that would curtail Trump’s authority to unilaterally destabilize world trade.

Sen. Bob Corker (R-Tenn.) introduced a bipartisan bill Wednesday that would give Congress new authority to check the president’s trade moves… Corker’s bill would require congressional approval when the president enacts tariffs under the auspices of national security, as Trump did last week in imposing levies on aluminum and steel imports from Canada, Mexico and the European Union. The legislation, which Corker released with a total of nine Democratic and Republican co-sponsors, is the most forceful congressional response to date to Trump’s protectionist trade agenda. …The bill’s prospects are unclear. Corker acknowledged that some Republicans are unwilling to cross the president, and Majority Leader Mitch McConnell (R-Ky.) has ruled out bringing up the measure as a stand-alone bill. But Corker’s bill appeared to be gaining traction on and off Capitol Hill on Wednesday. The U.S. Chamber of Commerce announced its support, as did Koch Industries. …Corker’s legislation would require the president to submit to Congress any proposal to adjust imports in the interest of national security. The legislation would qualify for expedited consideration for a 60-day period. …The co-sponsors are Republican Sens. Patrick J. Toomey (Pa.), Lamar Alexander (Tenn.), Mike Lee (Utah), Ron Johnson (Wis.) and Jeff Flake (Ariz.), along with Democrats Heidi Heitkamp (N.D.), Mark R. Warner (Va.), Brian Schatz (Hawaii) and Chris Van Hollen (Md.).

I’m sympathetic to such legislation, not only to thwart Trump’s protectionism, but also because I don’t think any White House should have so much unilateral power. In other words, I’m philosophically consistent. I didn’t think it was right for Obama to have the authority to arbitrarily change provisions of Obamacare and I don’t think it is right for Trump to have the authority to arbitrarily change provisions of trade law.

But let’s stick to the trade issue. Lower taxes on global commerce are one of the great achievements of post-World War II era. Policy makers around the world have lowered barriers and allowed the free market more breathing room.

That’s been a very successful policy.

By the way, politicians from developing nations deserve special credit. They’ve been especially aggressive in lifting the burden of trade taxes. Here’s a chart prepared by the Confederation of British Industry.

I started today’s column by warning that Trump shouldn’t emulate Hoover. I’ll end the column by pointing out that Reagan is a better role model.

And if that doesn’t work, maybe we can educate the President on why it’s good to have a capital surplus, which is the flip side of having a trade deficit.

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Normally when I write about Georgia, it’s to wax poetic about the Glorious Bulldogs. But I’m currently in Tbilisi, the capital of the nation of Georgia, which is wedged between Russia, Turkey, Armenia, and Azerbaijan.

So allow me to take this opportunity to highlight the benefits of sweeping pro-market reform. Georgia is ranked #8 according to Economic Freedom of the World and it doesn’t get nearly enough attention considering that lofty score.

This chart from EFW shows Georgia’s score since the reform wave started in 2004.

The fact that Georgia’s score jumped by one full point over 11 years is impressive, but it’s even more impressive to see how the country’s relative ranking has increased from #56 to #8.

Here are the numbers for 2004 and 2015. As you can see, there were particularly dramatic improvements in trade, regulation, and quality of governance (legal system and property rights).

My friend from Georgia, Gia Jandieri, said one of the worst legacies of Soviet rule was corruption. He and his colleagues at the local pro-market think tank explained to policymakers that reducing the size and scope of government was a good strategy to address this problem.

And they were right.

Georgia was ranked near the bottom by Transparency International in 2004, scoring just a 2 (on a 1-10 scale) and tied for #133 out of 146 nations. Now Georgia’s score has jumped to 56 (on a 1-100 scale), which puts it #46 out of 180 nations.

And a big reason why corruption has plummeted is that you no longer need all sorts of permits when setting up a business. Indeed, Georgia ranks #9 in the World Bank’s Ease of Doing Business.

For what it’s worth, Georgia is only three spots behind the United States (the previous year, they were eight spots behind America).

And I definitely shouldn’t forget to mention that Georgia is part of the global flat tax revolution.

So what does all this mean? Well, according to both the IMF data and the Maddison database, per-capita GDP in Georgia has more than doubled since pro-market reforms were enacted.

In other words, ordinary people have been the winners, thanks to a shift to capitalism.

P.S. Since I just wrote about my visit to the anti-Nazi/anti-Marxist House of Terror Museum in Budapest, I should mention that the “lowlight” of my visit to Georgia was seeing Stalin’s boyhood home earlier today. I realize “thumbs down” is a grossly inadequate way of expressing disapproval for a tyrant who butchered millions of people, but I didn’t want to get arrested for urinating in public.

I wonder if Hitler’s boyhood home still exists? I could visit and then say I covered both ends of the socialist spectrum.

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This morning in Monaco, I moderated a panel for the Convention of Independent Financial Advisors on the implications of an “uber-ized” economy. In my introductory comments, I asserted that the best part of capitalism was “creative destruction.” Simply stated, we all benefit when entrepreneurs come up with products such as personal computers that make our lives better.

But I also pointed out that creative destruction was the most painful part of capitalism. Think, for example, about the people who used to work in the typewriter industry.

One of the speakers, Professor Philippe Silberzahn of the EMLYON Business School, cited another example. Kodak used to be one of the biggest and most profitable companies in America, but the digital camera (ironically, first invented by Kodak) set the firm into a death spiral. What was creative for the rest of us wound up causing destruction for the people who worked at Kodak and the investors who owned shares of Kodak.

It’s easy, as an armchair economist, to argue in favor of creative destruction. As explained in this video, this is why we are far richer than our ancestors. Even if our ancestors worked in the candle industry and were bankrupted and tossed out of work when the electric light bulb hit the market.

But armchair theorizing (even when accurate) doesn’t change the fact that change means temporary pain. And this is a political challenge. Especially since those who suffer are the “seen” and the beneficiaries often are “unseen.”

But none of that changes the fact that politicians should not intervene. Assuming, of course, the goal is long-run increases in living standards for everyone.

In a column for CapX, Tim Worstall elaborates on how we become richer when we produce more with less.

Warren Buffett tells us all that slashing jobs is just the capitalist way. …But Buffett is wrong. This isn’t the capitalist way at all. This is just the way that any and every economy should work. Whether communist, socialist, social democratic or capitalist, all economies will economise on inputs into a process. That is what actually makes us richer. Buffett’s subsequent point – that “people live better when there is more output per capita” – is right. But that’s not specific to capitalism. …as Paul Krugman has pointed out, productivity isn’t everything but in the long run it’s pretty much everything. …Today, instead of everyone working in the fields, just 2 per cent of us do so. The other 98 per cent of the population are busing trying to sate some other human desire or want. And thus, we have the labour to run a health service, libraries, ballet companies, vital cat picture websites, manufacturing, ketchup plants and the like. Being economical with labour is the very thing that makes civilisation itself possible. … William Nordhaus has pointed out…entrepreneurs – for devising a new process which uses different or fewer inputs is the very definition of entrepreneurship – end up with some 3 per cent or so of the value they create. The remaining 97 per cent flows to the rest of us in the form of consumer surplus.

By the way, I’m not surprised that Buffett is wrong. He’s goofed before when venturing into public policy.

Tim closes with a very important point.

Not enough people realise that using fewer resources to do something makes us richer. And yes, human labour is just such a scarce resource that we wish to economise upon using. Perhaps if people understood this, they’d stop arguing that solar power is better than nuclear because it produces more jobs for the same amount of electricity produced.

And since we’re on that topic, here’s an item from Libertarian Reddit revealing a leftist who genuinely seems to think that the goal should be to produce less per unit of labor.

Sounds like Ms. Kohn should spend some time with this video.

But I like to be even-handed in my disdain for bad economics. Trump is a protectionist who wants to preserve certain jobs in certain industries.

Well, I don’t know if this artist is a left-wing Trump critic or right-wing Trump critic, but he’s right about the foolishness of trying to stop progress.

But this brings me back to where I started. The VHS worker was a victim, just as the workers at Kodak were victims.

It’s the inevitable consequence of progress. But if we try to stop progress, we all lose in the long run. The best way to help workers and investors who suffer from creative destruction is to have pro-growth policies so that if you’re in a disrupted sector, you have plenty of opportunities to quickly rebound.

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Like many libertarians, I’ve always assumed that Thomas Jefferson was one of the best Founding Fathers.

He certainly was an advocate of liberty and I’ve cited him several times (see here, here, here, here, here, and here) over the years.

But maybe being quotable is not enough.

There’s a fascinating article in the latest issue of Cayman Financial Review that looks at the emergence of economic liberty in the Anglo-Saxon world and it makes a persuasive argument that Alexander Hamilton was a more effective advocate of free markets.

Written by a Washington-area economist who uses a nom de plume because of his position in government, the article starts by explaining that England’s Whig Revolution in the early 1700s helped create the conditions for astounding British prosperity. Notwithstanding resistance from the landed elites.

In England, the Whig Revolution was a series of events – the successful invasion of William  of Orange to dethrone James II in 1688, the selection of George I to succeed Queen Anne in 1714, and the selection of Robert Walpole as the first Prime Minister in 1721 – that created the Westminster parliamentary system… Most important, the Whig Revolution also created the institutional and legal framework that transformed England into a modern capitalist economy and sparked the Industrial Revolution. The adoption of Dutch commercial law, the creation of the Bank of England, and the circulation of its bank notes monetized the English economy. English courts abandoned the medieval “just price” doctrine, which let judges nullify contracts after the fact based on the concept that all goods and services had an objective value and any deviation from this just price should therefore be unlawful. …Traditional guilds collapsed. Entrepreneurs were free to create new firms, determine output and prices, borrow from banks, and issue stock. New manufacturing firms lured workers away from the estates of the landed gentry to rapidly growing English cities with wages paid in paper currency. …Rapid economic, political, and social change inevitably produced a reaction led by the arch-Tory Henry St. John, the First Viscount Bolingbroke. …To Bolingbroke, the Whig Revolution corrupted England… Bolingbroke rejected the legal and political reforms that created a modern capitalist economy. …But he failed to turn back the clock.

The same battle occurred on the other side of the ocean. albeit several decades later.

And most of America’s Founders apparently were not on the right side.

The Whig Revolution, which had allowed England to develop a modern capitalist economy, did not immediately cross the Atlantic. …In the 1770s, colonial legislatures still regulated the prices for many goods and services and forbade arbitrage and speculation. Colonial courts still accepted “just price” doctrine, allowing judges, all whom were members of a small oligarchy, to overturn contracts when market prices moved against colonial elites. And when crops failed or prices fell, colonial legislatures frequently declared “debt holidays” to prevent creditors from seizing the property of the colonial oligarchs. …Most of the America’s founders were from the small, wealthy elite in the colonies. Identifying with the English gentry rather than the rising middle class, Bolingbroke greatly influenced most of the founders’ views of economics and politics. Most founders, especially Thomas Jefferson and James Madison, agreed with Bolingbroke about the primacy of agriculture, shared his fears of banks and a paper currency, and dreaded industrialization. Most founders accepted Bolingbroke’s policy recommendations.

But Alexander Hamilton had a more enlightened outlook.

Alexander Hamilton was different than other founders. …Hamilton immigrated to America in 1773. Serving as General George Washington’s aide-de-camp, Hamilton observed how a weak Continental Congress imperiled the war effort. …Hamilton had a very different prospective from other founders with the notable exceptions of Washington and John Marshall. Hamilton wanted America to become a dynamic meritocracy. …Hamilton wanted poor, but talented individuals like himself to have avenues other than land ownership to earn wealth. Moreover, Hamilton rejected slavery because it prevented slaves from their full economic potential and made masters indolent and lazy. Moreover, Hamilton rejected racism. “The contempt we have been taught to entertain for the blacks, makes us fancy many things that are founded neither in reason nor experience.” During the Revolution, Hamilton proposed emancipating slaves that agreed to fight in Continental Army. Later Hamilton founded the New York Society for the Manumission of Slaves. Instead of Bolingbroke, Hamilton embraced the Whig Revolution and wanted to bring its economic benefits to the United States. …Moreover, Hamilton was staunch defender of property rights even when it was politically costly to him. As a lawyer in New York City, he successfully argued for the restoration of property of Englishmen and Loyalists that had been seized after the Revolutionary War in violation of the Treaty of Paris and the law of nations.

What about Hamilton’s protectionism?

He’s semi-guilty, but the author explains that Hamilton was mostly looking for a way of funding a modest-sized government.

And as I wrote last month, a modest tariff to fund a very small central government (as all the Founders preferred) would be a great improvement over what we have now.

Moreover, Hamilton even understood the basic principle of the Laffer Curve a couple of hundred years before Art Laffer’s famous napkin sketch.

While some future policymakers misused Hamilton to justify their protectionism, Hamilton was not a protectionist in the modern sense. …In a world in which income and value-added taxes had not been invented, …Hamilton favored a revenue tariff that averaged about 10 percent over a property tax to fund the federal government. Hamilton sought to maximize the federal government’s revenue and provide a modest margin of protection to domestic manufacturers rather than to block imports. Indeed, Hamilton argued: “It is a signal advantage of tax on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed – that is an extension of the revenue.”

I’m not fully convinced that Alexander Hamilton is a libertarian hero (that would entail support for free banking rather than his version of central banking), but I’m looking at him much more favorably after reading this article.

And I’m now significantly less sympathetic to Thomas Jefferson.

I’ll close on a wonky note. In my column about the would-be nation of Liberland, I cited some research on the relationship between “state capacity” and economic prosperity. The notion is that an economy won’t prosper unless a government is both strong enough and effective enough to deter aggression and to provide rule of law (while otherwise leaving the private sector unmolested).

I’m certainly no expert on the Founding Fathers, but it seems that Hamilton had that point of view.

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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.

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