Ranking Societal Capital: USA Is #4, but the Long-Run Outlook Isn’t Encouraging

I’m a voracious consumer of publications that rank economic liberty and national competitiveness. Simply stated, these apples-to-apples rankings tell us which countries have policies that are friendly to growth (and thus the places that will enjoy rising living standards).

I’m also very interested in “societal capital,” which is the degree to which the people of a nation believe in values such as self reliance, work, individual initiative, and personal responsibility.

In some sense, societal capital may be more important for a nation’s long-run prosperity than how it scores in any particular index.

That’s because it’s probably just a matter of time before a country with low levels of societal capital winds up adopting bad policy.

That being said, other than occasional examples of cross-country polling data, I’ve never seen a good way of ranking nations based on societal capital.

But that’s now changed, thanks to a new report called the Global Index of Economic Mentality.

In an article for National Review, Professor Steve Hanke of Johns Hopkins University summarizes the key findings.

GIEM scores measure the public’s embrace of the idea of economic freedom. A high GIEM score indicates that citizens in a particular country support the idea that their government should not play a major role in directing or regulating economic activity or in redistributing income. Citizens of high-scoring countries typically back an institutional framework that prioritizes private initiative, free competition, and personal responsibility — in short, a system of free enterprise. …The GIEM study found that countries that embrace a free-market mentality have more efficient economic institutions and higher per capita GDP than those who support socialist, interventionist mentalities.

New Zealand is in first place and United States is in fourth place.

New Zealand comes out on top with the highest score on the inaugural Global Index of Economic Mentality, followed by the Czech Republic, Sweden, the United States, and Denmark. This year’s lowest scorer is Bosnia, preceded by Bangladesh, Myanmar, Montenegro, and Azerbaijan.

There’s some very bad news for Chile, which may explain why people in that nation just voted to potentially replace the constitution which has delivered unimaginable prosperity.

Rather surprisingly, Chile is the lowest GIEM scorer in Latin America, even a notch below Argentina, and 64th overall. These data suggest that while the Chicago Boys…accomplished innumerable free-market reforms — reforms that have led to a great improvement in prosperity and the second-highest GDP per capita of any country in South America — they have failed to convince the Chilean public of the benefits of the free-market system that has lifted them out of poverty.

And there’s bad news for the United States because young people have very worrisome views.

If we look at country-by-country demographics, there is not much difference between the economic mentality of those over 40 years old and under 40 years old for most countries. But there are notable exceptions. The countries with the most significant difference in economic mentality between the two age groups are the United States, New Zealand, and Australia. In these countries, the younger generations possess a significantly weaker attachment to free-market ideas than do older generations, with the U.S. as the most extreme case. It makes one wonder what brand of economics is being peddled in high schools and universities in the United States.

For what it’s worth, if only young people were counted, America would rank #14 rather than #4. Not horrible, but definitely a shift in the wrong direction.

Let’s close by looking at some data from a PowerPoint presentation about this new index.

First we have the methodology.

Second, here are the scores for the 74 nations.

Last but not least, here’s the U.S. score compared to the average score in other regions.

As you can see, Americans have very good attitudes about preferring markets and disliking redistribution, but we score quite poorly on the issue of personal responsibility.

P.S. I’m not surprised to see good scores for the Nordic nations, and it’s also good to see high scores for Georgia and Estonia, though I’m somewhat shocked that Switzerland is in the middle of the pack. But I’m not surprised to see poor scores for China and Italy.

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Senator Warren’s Redistribution Agenda Will Erode Societal Capital

Barack Obama’s strategy during the 2008 campaign was very shrewd. His statist policy positions and doctrinaire Senate voting record (almost identical to Bernie Sanders) made him very appealing to the left, yet he also made himself acceptable to other voters with a calm and moderate demeanor (Mayor Buttigieg is trying to follow the same strategy for 2020, albeit with less success so far).

Obama’s one major “oops moment” in an otherwise very disciplined campaign occurred one month before the election when he admitted that he wanted to “spread the wealth around.”

Elizabeth Warren isn’t following Obama’s script since she’s running as an out-of-the-closet leftist, but she just experienced her own “oops moment.”

Writing for PJ Media, Megan Fox explains that Senator Elizabeth Warren inadvertently – but very clearly – acknowledged that her plan penalizes people with individual integrity and personal responsibility.

Elizabeth Warren was confronted at an Iowa town hall event by a voter who wanted to know if he could get back the money that he paid for his daughter’s college education since Warren’s running on forgiving student loan debt. “My daughter is in school,” he said. “I saved all my money just to pay… Can I have my money back?” Warren replied, “Of course not!” The man continued to push Warren for an explanation for why some people can have a free education while others have to pay. “So you’re going to pay for people who didn’t save any money and those of us who did the right thing get screwed?” he asked. …the plan is really just a bribe to current college students with debt as it does not address students who take out student loans in the future. …That’s what we would normally call a hustle.

Katherine Timpf of National Review has a first-hand account of why Sen. Warren’s scheme rubs many people the wrong way.

…this guy…is…absolutely right… When he references the sacrifices that he and his family had to make to pay for his daughter’s college, what he’s implicitly saying is that his choice to be financially responsible has cost him things that money cannot replace. …I wrote about some of the sacrifices that I myself had to make to avoid shouldering a debt that I knew I couldn’t repay. …I found out that I’d been accepted to Columbia University’s graduate school of journalism. I was absolutely thrilled by this; it had been my dream since childhood to attend this exact school… Then, I realized I’d never be able to repay the $80,000 loan I’d have to take out to attend my dream school. …I withdrew. It was a tough decision — and the consequences were even tougher. …Unless Elizabeth Warren can go back in time and put me in a Columbia classroom during the time I spent cleaning those Boston Market bathrooms, her plan wouldn’t be “fair.” Unless she can give me the hours of my life back that I spent sitting alone covered in scabies cream, her plan wouldn’t be “fair.” …Elizabeth Warren can’t “pay me back” for a loan that I decided against taking out — a decision that I’d made precisely because I did not expect that anyone else would pay it back for me. …In other words? No — I don’t think that I should have to pay for someone else making an irresponsible decision when they could have made a responsible one.

Warren’s comments are getting lots of negative attention because people now have an easy-to-understand example of how her policies reward bad behavior and punish good behavior.

• If you save for your kid, you’re a chump.
• If you display personal responsibility, you’re a chump.
• If you work hard, you’re a chump.
• If you sacrifice today for a better tomorrow, you’re a chump.
• If you invest, you’re a chump.
• If you think it’s your job to take care of your family, you’re a chump.

There are many reasons to oppose redistribution programs. For instance, I was on TV just last month explaining how government programs encourage debt instead of savings.

What Warren has done, though, is to remind us something more important – that these programs are especially bad because they erode societal capital. They teach people it’s okay to live off the government and that they don’t need to worry about hard work and self reliance.

And when enough people adopt that attitude and a nation reaches a “tipping point,” then you wind up with a society where too many people are riding in the wagon and not enough people are pulling the wagon.

Think Greece.

P.S. I thought the big “oops moment” for Obama in 2008 occurred when he openly argued that he wanted higher capital gains taxes even if the government didn’t collect any extra revenue because of concomitant economic damage. In other words, like many folks on the left, he was willing to impose hardship on ordinary people just to hurt people with high incomes.

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