Posts Tagged ‘Free Markets’

Whenever I need to explain the difference between socialism and capitalism, I start by noting that socialism technically is different from Obama-style big-government redistributionism and cronyism.

Socialism involves something more pervasive, involving government ownership of the means of production (which, if you read this postscript, is why Jeremy Corbyn in the United Kingdom is far more radical than previous Labour Party leaders).

It also means eviscerating the competitive price system as a means of determining value and allocating resources, relying instead on politicians and bureaucrats to arbitrarily wield that power (some American politicians favor this latter approach in certain circumstances).

Needless to say, socialism has an unmatched track record of failure. It was such a disaster than only a few supposedly high-ranked academics (see this postscript) thought it worked.

But what about high-ranked communists who grew up under socialism. Did they think it worked?

The Houston Chronicle dug into its archives to produce a story about an incident that may have played a big role in history. It’s about a senior communist functionary who was exposed to a slice of capitalism.

Yeltsin visited mission control and a mock-up of a space station. According to Houston Chronicle reporter Stefanie Asin, it wasn’t all the screens, dials, and wonder at NASA that blew up his skirt, it was the unscheduled trip inside a nearby Randall’s location. Yeltsin, then 58, “roamed the aisles of Randall’s nodding his head in amazement,” wrote Asin. He told his fellow Russians in his entourage that if their people, who often must wait in line for most goods, saw the conditions of U.S. supermarkets, “there would be a revolution.” …In the Chronicle photos, you can see him marveling at the produce section, the fresh fish market, and the checkout counter. He looked especially excited about frozen pudding pops. “Even the Politburo doesn’t have this choice. Not even Mr. Gorbachev,” he said.

This random trip to a typical supermarket may have changed history.

About a year after the Russian leader left office, a Yeltsin biographer later wrote that on the plane ride to Yeltsin’s next destination, Miami, he was despondent. He couldn’t stop thinking about the plentiful food at the grocery store and what his countrymen had to subsist on in Russia. In Yeltsin’s own autobiography, he wrote about the experience at Randall’s, which shattered his view of communism, according to pundits. Two years later, he left the Communist Party and began making reforms to turn the economic tide in Russia. …“When I saw those shelves crammed with hundreds, thousands of cans, cartons and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people,” Yeltsin wrote. “That such a potentially super-rich country as ours has been brought to a state of such poverty! It is terrible to think of it.”

Since the Soviet Union was mired in poverty at the time, Yeltsin presumably was speculating about the potential wealth of his country.

And the good news is that the rigid communism of the Soviet Union is gone. Heck, the Soviet Union doesn’t even exist. Reagan was right when he predicted  the triumph of freedom, with Marxism being relegated to the “ash heap of history.”

But the bad news is that Russia (the most prominent of the 15 nations to emerge after the crackup of the Soviet Union) is a laggard on economic reform. There was a shift away from close-to-pure communism in the 1990s, to be sure, but the country still has a long way to go before it can be considered capitalist.

Here’s a back-of-the-envelope “statism spectrum” that I created. It’s designed to show that there are no pure libertarian paradises, not even Hong Kong. And there are no pure statist dystopias, not even North Korea (though that despotic regime is as close to pure evil as exists in the world).

Russia, I’m guessing, would be somewhere between China and Mexico.

And this gives me a chance to close with an important point.

Perfect economic policy almost surely is an impossible goal. But that’s fine. We can still enjoy good growth so long as we strive to at least move in the right direction. As I explained back in 2012, the private sector is capable of producing impressive results so long as it has sufficient breathing room to operate.

P.S. If you want a simpler and more amusing explanation of different economic systems, here’s the famous “two cows” approach.

P.P.S. The United States isn’t a socialist nation, but we’re not fully immune to that destructive virus. After all, we have a government-run rail company in America, a government-run postal service, a government-run retirement system, and a government-run air traffic control system, all things that would function far more efficiently in the private sector.

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The biggest mistake of well-meaning leftists is that they place too much value on good intentions and don’t seem to care nearly as much about good results.

Pope Francis is an example of this unfortunate tendency. His concern for the poor presumably is genuine, but he puts ideology above evidence when he argues against capitalism and in favor of coercive government.

Here are some passages from a CNN report on the Pope’s bias.

Pope Francis makes his first official visit to the United States this week. There’s a lot of angst about what he might say, especially when he addresses Congress Thursday morning. …He’ll probably discuss American capitalism’s flaws, a theme he has hit on since the 1990s. Pope Francis wrote a book in 1998 with an entire chapter focused on “the limits of capitalism.” …Francis argued that…capitalism lacks morals and promotes selfish behavior. …He has been especially critical of how capitalism has increased inequality… He’s tweeted: “inequality is the root of all evil.” …he’s a major critic of greed and excessive wealth. …”Capitalism has been the cause of many sufferings…”

Wow, I almost don’t know how to respond. So many bad ideas crammed in so few words.

If you want to know why Pope Francis is wrong about capitalism and human well-being, these videos narrated by Don Boudreaux and Deirdre McCloskey will explain how free markets have generated unimaginable prosperity for ordinary people.

But the Pope isn’t just wrong on facts. He’s also wrong on morality. This video by Walter Williams explains why voluntary exchange in a free-market system is far more ethical than a regime based on government coercion.

Very well stated. And I especially like how Walter explains that markets are a positive-sum game, whereas government-coerced redistribution is (at best) a zero-sum game.

Professor Williams wasn’t specifically seeking to counter the muddled economic views of Pope Francis, but others have taken up that challenge.

Writing for the Washington Post, George Will specifically addresses the Pope’s moral preening.

Pope Francis embodies sanctity but comes trailing clouds of sanctimony. With a convert’s indiscriminate zeal, he embraces ideas impeccably fashionable, demonstrably false and deeply reactionary. They would devastate the poor on whose behalf he purports to speak… Francis deplores “compulsive consumerism,” a sin to which the 1.3 billion persons without even electricity can only aspire.

He specifically explains that people with genuine concern for the poor should celebrate industrialization and utilization of natural resources.

Poverty has probably decreased more in the past two centuries than in the preceding three millennia because of industrialization powered by fossil fuels. Only economic growth has ever produced broad amelioration of poverty, and since growth began in the late 18th century, it has depended on such fuels. …The capitalist commerce that Francis disdains is the reason the portion of the planet’s population living in “absolute poverty” ($1.25 a day) declined from 53 percent to 17 percent in three decades after 1981.

So why doesn’t Pope Francis understand economics?

Perhaps because he learned the wrong lesson from his nation’s disastrous experiment with an especially corrupt and cronyist version of statism.

Francis grew up around the rancid political culture of Peronist populism, the sterile redistributionism that has reduced his Argentina from the world’s 14th highest per-capita gross domestic product in 1900 to 63rd today. Francis’s agenda for the planet — “global regulatory norms” — would globalize Argentina’s downward mobility.

Amen (no pun intended).

George Will is right that Argentina is not a good role model.

And he’s even more right about the dangers of “global norms” that inevitably would pressure all nations to impose equally bad levels of taxation and regulation.

Returning to the economic views of Pope Francis, the BBC asked for my thoughts back in 2013 and everything I said still applies today.

P.S. Let’s close by taking a look at a few examples of how the world is getting better thanks to capitalism.

We’ll start with an example of how China’s modest shift toward markets has generated huge reductions in poverty (h/t: Cato Institute).

Now let’s look at how a wealthier society is also a safer society (h/t: David Frum).

Or how about this remarkable measure of higher living standards (h/t: Mark Perry).

Here’s an amazing chart showing how something as basic as light used to be a luxury good but now is astoundingly inexpensive for the masses (h/t: Max Roser).

These are just a few random examples of how free markets, when not overly stifled by government, can produce amazing things for ordinary people.

We may not notice the results from one year to the next, but the results are remarkable when we examine data over longer periods of time.

And if our specific goal is to help the poor, there’s no question that economic growth is far more effective than government dependency.

Which is why I’ve explained that it’s better to be a poor person in a capitalist jurisdiction.

I’d much rather be a poor person in a jurisdiction such as Hong Kong or Singapore rather than in a “compassionate” country such as France. France might give me lots of handouts, but I’d remain poor. In a free-market society, by contrast, I could climb out of poverty.

P.P.S. Methinks Pope Francis would benefit from a discussion with Libertarian Jesus.

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Last month, I cited data from Economic Freedom of the World to explain that the United States was becoming less competitive because of creeping protectionism and reductions in the rule of law and property rights.

Now I have more bad news to share.

Last year, the United States ranked #12 for economic liberty.

But according to the new rankings released yesterday, the United States now has dropped to #16. Here are the new rankings (based on a 0-10 scale), with Hong Kong and Singapore once again leading the pack.

Why did the United States drop? In part, because our score fell from 7.81 to 7.73, but also because of what happened to the scores of other nations.

The bottom line is that Georgia, Taiwan, Qatar, Ireland, and the United Kingdom jumped ahead of the United States, while Finland fell behind America.

Now let’s get more depressed.

If you dig through the archives and get the rankings for 2000, you can see that the latest fall from #12 to #16 is part of a very disturbing pattern. The United States used to be #3 in the world, with a score of 8.5.

Wow, falling from 8.5 to 7.73. That’s definitely an indictment of statist policy during the Bush and Obama years.

But I’m going to share even more depressing data.

The folks at the Fraser Institute who put together Economic Freedom of the World retroactively alter scores and rankings as they get more data (sort of the way the U.S. government periodically revises GDP and employment data).

So if you look at their big excel spreadsheet, you’ll see that the United States actually wound up ranked #2 in 2000 with a score of 8.65, marginally ahead of Singapore, which had a score of 8.61.

So we’ve actually dropped from #2 to #16 in the rankings, and our score has plunged from 8.65 to 7.73.

I’ve saved the worst for last. I crunched the numbers to see which nations suffered the biggest declines since 2000. As you can see, the United States has the unfortunate distinction of being on a list with basket case economies such as Venezuela and Argentina.

To make matters worse, at least the U.K. has been moving in the right direction in recent years, with a slight increase from 7.80 to 7.87 between 2010 and 2013. And Iceland also has been trying to improve. Its score has jumped from 6.43 to 6.87 over the past three years.

The United States, by contrast, has downward momentum.

P.S. The nation with the biggest improvement since 2000 is Romania. Thanks to reforms such as the flat tax, its score has skyrocketed from 5.31 to 7.69, an increase of 2.38 points. At this rate, they’ll easily pass the United States in next year’s rankings.

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At the risk of stereotyping, the Chinese people are remarkably productive when given the chance. Hong Kong and Singapore are dominated by ethnic Chinese, and those jurisdictions routinely rank among the world’s top economies.

Taiwan is another high-performing economy with an ethnic Chinese population.

Ironically, the only place where Chinese people don’t enjoy high average incomes is China. And that’s because there’s too much statism. If you peruse the indispensable Economic Freedom of the World from Canada’s Fraser Institute, you’ll see that China is ranked #115 out of 152 jurisdictions, which is even below nations such as Greece, Haiti, and Vietnam.

As I explain in this interview, China’s politicians are undermining prosperity with a system based on cronyism rather than capitalism.

China’s in the news, of course, because of recent instability in its financial markets. And I’ve taken advantage of the opportunity to give my two cents on this issue (see here and here).

But I was making the same criticisms even when China’s economy was perceived as a big success. I wrote in 2010 that America didn’t need to fear the supposed Chinese economic tiger. I pointed out in 2011 that China was way behind the United States.

And I was at least somewhat prescient when I warned about a bubble in the Chinese economy in this 2011 debate.

Though plenty of folks on the left actually argued that China’s state-controlled economy was something to mimic. Writing for Reason, Ronald Bailey cites some of their silly statements.

As the world watches China’s Communist Party leaders try to order markets around, my mind turned to those pundits who earnestly recommended that the United States emulate the brilliant beneficient Chinese planners in running our economy. The most fulsome China booster was New York Times columnist Tom Friedman. …So enamored of China’s industrial policy was Friedman that in 2010 he likened Chinese economic planning boldness to making “moon-shots.” …And then there is the inevitable Robert Reich. Reich, who is a former Clinton Secretary of Labor, has never been right about anything when it comes to economic policy prescriptions. For example, Reich was convinced in the 1980s the Japan would bury the United States due to the planning acumen of that country’s savvy bureaucrats. …Just shy of 30 years later Reich sang the same stale tune in 2011, only instead of Japanese planners, he was praising the wonders of Chinese industrial planning… As late as 2012, Richard D’Aveni, a Professor of Strategy at Tuck School of Business at Dartmouth College, declared in The Atlantic that “The U.S. Must Learn From China’s State Capitalism to Beat It.”

Actually, Professor D’Aveni is right for the wrong reason. We can learn a lot from statist economies. But we should learn what to avoid, not what to copy.

To conclude, this post shouldn’t be perceived as being anti-China. I want there to be more prosperity in that country, which is why I defended China from an absurd attack by the IMF.

Moreover, I commend China for reforms that move policy in the right direction. And as I pointed out in the interview embedded above, China’s reforms in the 1980s and 1990s may have been limited, but they did help lift hundreds of millions of people out of abject poverty.

Since I mentioned the interview, one of the quirky parts of the discussion was whether politicians should be held criminally responsible for economic mismanagement. Here’s what I wrote a few years ago about an example of that happening in Iceland.

P.S. You probably didn’t realize that it was possible to see dark humor in communist oppression.

P.P.S. But at least some communists in China seem to understand that the welfare state is a very bad idea.

P.P.P.S. Some business leaders say China is now more business-friendly than the United States. That’s probably not good news for America, but my goal is to have a market-friendly nation, not a business-friendly nation.

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I’m a huge fan of the Fraser Institute’s Economic Freedom of the World.

I always share the annual rankings when they’re released and I routinely cite EFW measures when writing about individual countries.

But even a wonky economist like me realizes that there is more to life than economic liberty. So I was very excited to see that Ian Vásquez of the Cato Institute and Tanja Porčnik of the Visio Institute have put together The Human Freedom Index.

Here’s their description of the Index and some of the key findings.

The Human Freedom Index… presents a broad measure of human freedom, understood as the absence of coercive constraint. It uses 76 distinct indicators of personal and economic freedom… The HFI covers 152 countries for 2012, the most recent year for which sufficient data is available. …The United States is ranked in 20th place. Other countries rank as follows: Germany (12), Chile (18), Japan (28), France (33), Singapore (43), South Africa (70), India (75), Brazil (82), Russia (111), China (132), Nigeria (139), Saudi Arabia (141), Venezuela (144), Zimbabwe (149), and Iran (152).

Hong Kong and Switzerland are the top jurisdictions.

Here’s the Freedom Index‘s top 20, including scores on both personal freedom and economic freedom.

The United States barely cracks the top 20. We rank #12 for economic freedom but only #31 for personal freedom.

It’s worth noting that overall freedom is strongly correlated with prosperity.

Countries in the top quartile of freedom enjoy a significantly higher per capita income ($30,006) than those in other quartiles; the per capita income in the least-free quartile is $2,615. The HFI finds a strong correlation between human freedom and democracy. Hong Kong is an outlier in this regard. The findings in the HFI suggest that freedom plays an important role in human well-being

And here are some notes on methodology.

The authors give equal weighting to both personal freedom and economic freedom.

One of the biggest challenges in constructing any index is the organization and weighting of the variables. Our guiding principle is that the structure should be simple and transparent. …The economic freedom index receives half the weight in the overall index, while safety and security and other personal freedoms that make up our personal freedom index receive the remaining weight.

Speaking of which, here are the top-20 nations based on personal freedom. You can also see how they scored for economic freedom and overall freedom.

To be succinct, Northern European nations dominate these rankings, with some Anglosphere jurisdictions also getting good scores.

It shouldn’t be a surprise to learn that nations with economic freedom also tend to have personal freedom, but there are interesting exceptions.

Consider Singapore, with ranks second for economic freedom. That makes the country economically dynamic, but Singapore only ranks #75 for personal freedom.

Another anomaly is Slovenia, which is in the top 20 for personal freedom, but has a dismal ranking of #105 for economic freedom.

By the way, the only two nations in the top 10 for both economic freedom and personal freedom are Switzerland and Finland.

I’ve already explained why Switzerland is one of the world’s best (and most rational) nations. Given Finland’s high ranking, I may have to augment the nice things I write about that country, even though I’m sure it’s too cold for my reptilian temperature preferences.

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When I first got to Washington in the mid-1980s, one of the big issues was the supposedly invincible Japanese economy. Folks on the left claimed that Japan was doing well because the government had considerable power to micro-manage the economy with industrial policy.

With the benefit of hindsight, it’s now quite apparent that was the wrong approach.

In more recent years, some on the left have praised China’s economic model. And while it’s true that the country has enjoyed strong growth, it’s far from a role model.

Here’s some of what I wrote back in 2010.

Yes, China has been growing in recent decades, but it’s almost impossible not to grow when you start at the bottom – which is where China was in the late 1970s thanks to decades of communist oppression and mismanagement. …This is not to sneer at the positive changes in China. Hundreds of millions of people have experienced big increases in living standards. Better to have $6,710 of per capita GDP than $3,710. But China still has a long way to go if the goal is a vibrant and rich free-market economy. The country’s nominal communist leadership has allowed economic liberalization, but China is still an economically repressed nation.

With my skeptical view of the Chinese economic system, I figured it was just a matter of time before the nation experienced some economic hiccups.

And the recent drop in the Shanghai stock market certainly would be an example. I discussed the topic earlier this week in this Skype interview with Blaze TV.

To elaborate, there’s no precise formula for determining a nation’s prosperity. After all, economies are not machines.

But there is a strong relationship between prosperity and the level of economic freedom.

And as I explained earlier this year, China’s problem is that government is still far too big. As such, its overall ranking from Economic Freedom of the World is still very low.

And this means that the Chinese people – while much better off then they were under a pure communist system – are still not rich.

I mentioned the comparative numbers on per-capita economic output in the interview, which is something I wrote about back in 2011. And you can click here if you want the underlying figures to confirm that Americans are far more prosperous.

By the way, this is an issue where the establishment seems to have a semi-decent understanding of what’s happening, even if they don’t necessarily draw any larger lessons from the episode.

The Associated Press, for instance, has a good report on the issue. Here’s some of the story, which looks at why the the stock market seems untethered from economic fundamentals.

When China’s economy was roaring along at double digit rates in the 2000s, Chinese stocks floundered. But starting in the summer of 2014, as evidence of an economic slowdown gathered, the Shanghai Composite index climbed nearly 150 percent. …Now the Chinese stock bubble has burst and Shanghai shares are in a free fall. They’ve lost about 30 percent since peaking last month. …Prices in the stock market are supposed to reflect business realities: the health of the economy, the quality of the companies listed on stock exchanges, the comparative allure of alternative investments. But in a communist country where the government plays an oversized role in the economy, investors pay more attention to signals coming from policymakers in Beijing than to earnings reports, management shake-ups and new product announcements.

If savvy investors think it’s important to focus on what the government is doing, that’s obviously bad news.

During the booming 2000s, only politically connected firms were allowed to list on stock exchanges for the most part. Many of them were run by insiders of dubious managerial talent. The markets were dominated by inefficient state-owned companies. Investors were especially wary of investing in big government banks believed to be sinking under the weight of bad loans. Stocks went nowhere.

And when the government started to encourage a bubble, that also wasn’t a good idea.

…state media began encouraging Chinese to buy stock, even as the country’s economic outlook dimmed. The economy grew 7.4 percent last year, the slowest pace since 1990. It’s expected to decelerate further this year. But authorities allowed investors to borrow to buy ever-more shares. Unsophisticated investors — more than a third left school at the junior high level — got the message and bought enthusiastically, taking Chinese stocks to dangerous heights. Now it’s all crashing down.

I’m not sure “all crashing down” is the right conclusion.

As I said in the interview, the market doubled and now it’s down about 30 percent, so many investors are still in good shape.

That being said, I have no idea whether the market will recover, stabilize, or continue to drop.

But I do feel comfortable making a larger point about the relationship between economic freedom and long-run prosperity.

So if you want to learn lessons from East Asia, look at the strong performances of Hong Kong, Taiwan, Singapore, and South Korea, all of which provide very impressive examples of sustained growth enabled by small government and free markets.

P.S. I was greatly amused when the head of China’s sovereign wealth fund mocked the Europeans for destructive welfare state policies.

P.P.S. Click here if you want some morbid humor about China’s pseudo-communist regime.

P.P.P.S. Though I give China credit for trimming at least one of the special privileges provided to government bureaucrats.

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Folks on the left sometimes act as if the Nordic nations somehow prove that big government isn’t an impediment to prosperity.

As I’ve pointed out before, they obviously don’t spend much time looking at the data.

So let’s give them a reminder. Here are the rankings from Economic Freedom of the World. I’ve inserted red arrows to draw attention to the Nordic nations. As you can see, every single one of them is in the top quartile, meaning that they aren’t big-government jurisdictions by world standards.

Moreover, Finland ranks above the United States. Denmark is higher than Estonia, which is often cited a free-market success story. And all of them rank ahead of Slovakia, which also is known for pro-growth reforms.

To be sure, this doesn’t mean the Nordic nations are libertarian paradises. Far from it.

Government is far too big in those countries, just as it is far too big in the United States, Switzerland, New Zealand, Canada, and other nations in the top quartile.

Which is tragic since the burden of government spending in North America and Western Europe used to be just a fraction of current levels – even in nations such as Sweden.

The way I’ve described the Nordic nations is that they have bloated and costly welfare states but compensate for that bad policy by being very free market in other policy areas.

But you don’t need to believe me. Nima Sanandaji has just written an excellent new monograph for the Institute of Economic Affairs in London. Entitled Scandinavian Unexceptionalism: Culture, Markets and the Failure of Third-Way Socialism, Nima’s work explains how the Nordic nations became rich during an era of small government and free markets, how they then veered in the wrong direction, but are now trying to restore more economic freedom.

Here are some key excerpts, starting with some much-needed economic history.

Scandinavia’s success story predated the welfare state. …As late as 1960, tax revenues in the Nordic nations ranged between 25 per cent of GDP in Denmark to 32 per cent in Norway – similar to other developed countries. …Scandinavia’s more equal societies also developed well before the welfare states expanded. Income inequality reduced dramatically during the last three decades of the 19th century and during the first half of the 20th century. Indeed, most of the shift towards greater equality happened before the introduction of a large public sector and high taxes. …The phenomenal national income growth in the Nordic nations occurred before the rise of large welfare states. The rise in living standards was made possible when cultures based on social cohesion, high levels of trust and strong work ethics were combined with free markets and low taxes….the Nordic success story reinforces the idea that business-friendly and small-government-oriented policies can promote growth.

Here’s a chart from the book showing remarkable growth for Sweden and Denmark in the pre-welfare state era.

Nima has extra details about his home country of Sweden.

In the hundred years following the market liberalisation of the late 19th century and the onset of industrialisation, Sweden experienced phenomenal economic growth (Maddison 1982). Famous Swedish companies such as IKEA, Volvo, Tetra Pak, H&M, Ericsson and Alfa Laval were all founded during this period, and were aided by business-friendly economic policies and low taxes.

Unfortunately, Nordic nations veered to the left in the late 1960s and early 1970s. And, not surprisingly, that’s when growth began to deteriorate.

The third-way radical social democratic era in Scandinavia, much admired by the left, only lasted from the early 1970s to the early 1990s. The rate of business formation during the third-way era was dreadful.
Again, he has additional details about Sweden.
Sweden’s wealth creation slowed down following the transition to a high tax burden and a large public sector. …As late as 1975 Sweden was ranked as the 4th richest nation in the world according to OECD measures….the policy shift that occurred dramatically slowed down the growth rate. Sweden dropped to 13th place in the mid 1990s. …It is interesting that the left rarely discusses this calamitous Swedish growth performance from 1970 to 2000.

The good news is that Nordic nations have begun to shift back toward market-oriented policies. Some of them have reduced the burden of government spending. All of them have lowered tax rates, particularly on business and investment income. And there have even been some welfare reforms.

…there has been a tentative return to free markets. In education in Sweden, parental choice has been promoted. There has also been reform to pensions systems, sickness benefits and labour market regulations

But there’s no question that the welfare state and its concomitant tax burden are still the biggest problem in the region. Which  is why it is critical that Nordic nations maintain pro-market policies on regulation, trade, monetary policy, rule of law and property rights.

Scandinavian countries have compensated for a large public sector by increasing economic liberty in other areas. During recent decades, Nordic nations have implemented major market liberalisations to compensate for the growth-inhibiting effects of taxes and labour market policies.

Let’s close with what I consider to be the strongest evidence from Nima’s publication. He shows that Scandinavians who emigrated to America are considerably richer than their counterparts who stayed put.

Median incomes of Scandinavian descendants are 20 per cent higher than average US incomes. It is true that poverty rates in Scandinavian countries are lower than in the US. However, the poverty rate among descendants of Nordic immigrants in the US today is half the average poverty rate of Americans – this has been a consistent finding for decades. In fact, Scandinavian Americans have lower poverty rates than Scandinavian citizens who have not emigrated. …the median household income in the United States is $51,914. This can be compared with a median household income of $61,920 for Danish Americans, $59,379 for Finnish-Americans, $60,935 for Norwegian Americans and $61,549 for Swedish Americans. There is also a group identifying themselves simply as ‘Scandinavian Americans’ in the US Census. The median household income for this group is even higher at $66,219. …Danish Americans have a contribution to GDP per capita 37 per cent higher than Danes still living in Denmark; Swedish Americans contribute 39 percent more to GDP per capita than Swedes living in Sweden; and Finnish Americans contribute 47 per cent more than Finns living in Finland.

In other words, when you do apples to apples comparisons, either of peoples or nations, you find that smaller government and free markets lead to more prosperity.

That’s the real lesson from the Nordic nations.

P.S. Just in case readers think I’m being too favorable to the Nordic nations, rest assured that I’m very critical of the bad policies in these nations.

Just look at what I’ve written, for instance, about Sweden’s healthcare system or Denmark’s dependency problem.

But I will give praise when any nation, from any part of the world, takes steps in the right direction.

And I do distinguish between the big-government/free-market systems you find in Nordic nations and the big-government/crony-intervention systems you find in countries like France and Greece.

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