Hope for Chile

For a few decades, Chile was very interesting for fans of free markets.

The country became famous for its system of personal retirement accounts, but there were many other reforms that liberalized the economy. Everything from free trade to privatization.

Unsurprisingly, Chile quickly became the richest nation in Latin America, surpassing countries such as Argentina and Venezuela that foolishly embraced bigger government.

But in recent years, Chile has become very interesting for fans of political drama.

• In 2019, there were big protests by the left, initially triggered by an increase in subway fares in Santiago.
• In 2020, the left enjoyed a victory as the country voted overwhelmingly in favor of writing a new constitution.
• In 2021, the left enjoyed another victory when former student activist Gabriel Boric was elected president.
• In 2022, the pendulum swung back to the right as voters overwhelmingly rejected a left-wing constitution.
• Now, in 2023, the right enjoyed another big victory in yesterday’s election for a Constitutional Council.

In a report for Bloomberg, Matthew Malinowski and Valentina Fuentes explain what just happened.

Chile’s political right dealt a crushing blow to the government of President Gabriel Boric that will undermine the young leader’s progressive agenda…right-wing candidates won 33 seats Sunday in a Constitutional Council in charge of drafting a new charter. This is above the three-fifths majority needed to push through articles at will… Left-wing contenders obtained 17 spots… A prior attempt to rewrite the charter was overwhelmingly rejected in a September referendum out of concern it went to far to the left, overhauling the foundations of Chile’s free-market economy…and weakening political checks and balances. …The election serves as a harsh reality check for Boric’s left-wing administration as it seeks to revive its progressive agenda, including plans to increase taxes on the rich.

I started today’s column by noting that Chile was interesting for fans of economic freedom and then shifted to explaining why it was an interesting country for fans of political drama.

Let’s close by revisiting the implications for economic policy.

The obvious good news is that there presumably no longer is any danger that Chile will be saddled with a leftist constitution (filled with “rights” to other people’s money).

But I’m more interested in whether yesterday’s election results indicate a rebirth in support for free enterprise.

Chile enjoyed enormous gains thanks to economic liberalization, with the poor enjoying disproportionate gains. But I worry that the nation will get caught in the “middle-income trap” without additional limits on the size and scope of government.

That won’t happen with Boric still in power, so we’ll have to see what happens in the next general election.

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Latin America and Socialist Suicide

I wrote a few days ago about Latin America’s “pink tide” and how statist policies are driving away jobs and investment.

Today, let’s look at John Stossel’s interview with Gloria Alvarez about the grim future of the region.

I especially like the part about 9:00 and 21:00 when she talks about the failure of supposed right-wing governments that continue with socialism – or even make it worse (we have the same problem in the United States).

But the best part of the 25-minute video, in my humble opinion, is her explanation of why statism is seductive and liberty is not.

She uses an iceberg analogy. With socialism, people see good things above the surface but are blind to the horrible consequences beneath the water.

By comparison, the libertarian iceberg is superficially less appealing.

The small part above the water seems cold and heartless. All the good stuff is hidden underneath.

In some sense, these two images are a different way of showing what’s captured in this cartoon.

Needless to say, there’s a big difference between superficial and real. In the video, Ms. Alvarez cites Margaret Thatcher’s famous observation about the inevitable problem with socialism.

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Socialism Humor

Socialism is a total and miserable failure, anywhere it’s been tried.

But socialism satire is the silver lining to that dark cloud. That’s today’s topic, starting with this video from Babylon Bee.

Next we have a sure-fire method of hiding a gun (or anything else of value) from a socialist.

I noted at the start of today’s column that socialism has never worked at any point in the past.

Our third item reveals that will never work at any point in the future.

Our fourth item is a visual depiction of Winston Churchill’s observation that capitalism is the unequal sharing of the blessings while socialism is the equal sharing of the miseries (other than the ruling elite).

As usual, I’ve saved the best for last.

It seems socialism even lacks the predictive power of a stopped clock

I’ll close with a serious observation that not all forms of socialism are created equal.

Totalitarian socialism (former Soviet Union, modern-day North Korea and Cuba) is the worst of the worst.

So-called democratic socialism, by contrast, is a movement of economic ignoramuses who (hopefully) have no desire to kill or imprison those who believe in economic liberty.

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The Failure of Socialism in Venezuela, Part III

In Part I of this series, I documented the dramatic decline in living standards ever since socialists took power in Venezuela.

In Part II, I compared Venezuela’s decline to the other Latin American nations, particularly the success story of Chile.

Initially, I planned on this being a two-part series. After all, what else needs to be said when a nation does so poorly that even other socialists try (and fail) to disavow its policies.

But I decided to add Part III because of a remarkable report in the New York Times.

Authored by Isayen Herrera and Frances Robles, it actually acknowledges that socialism has created massive problems. Here are some excerpts.

…a socialist revolution once promised equality and an end to the bourgeoisie. Venezuela’s economy imploded nearly a decade ago, prompting a huge outflow of migrants in one of worst crises in modern Latin American history. …Conditions remain dire for a huge portion of the population…prices still triple annually, among the worst rates in the world. …Half of the nation lives in poverty…one in three children across Venezuela was suffering from malnutrition as of May 2022… Up to seven million Venezuelans have simply given up and abandoned their homeland since 2015… Last year’s inflation rate of 234 percent ranks Venezuela second in the world, behind Sudan.

What makes this story especially noteworthy is that the Times wrote another article about Venezuela’s dismal economy less than three years ago, yet that piece never once mentioned socialism.

So it’s a sign of progress that the paper now acknowledges that statist policies deserve the blame.

And I also think it’s remarkable that the article noted that socialism produces a grotesque version of inequality, with government insiders and other cronies getting rich while ordinary people suffer horrific deprivation..

Venezuela is increasingly a country of haves and have-nots, and one of the world’s most unequal societies… the wealthiest Venezuelans were 70 times richer than the poorest, putting the country on par with some countries in Africa that have the highest rates of inequality in the world.

The poster child for undeserved socialist wealth is Hugo Chavez’s daughter, who amassed more than $4 billion of ill-gotten gains.

P.S. In spite of the wretched state of the Venezuelan economy, some nutty leftists put together a “Happy Planet Index” that ranked Venezuela above the United States. I still haven’t figured out whether that was crazier than the Jeffrey Sachs’ index that put Cuba above America.

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The Failure of Socialism in Venezuela, Part II

Back in 2011, I shared a chart comparing economic growth in Chile, Argentina, and Venezuela between 1980 and 2008.

My simple goal was to show that market-oriented nations enjoy very fast growth compared to nations with “mixed economies  or socialist economies.

Over the past dozen years, I’ve repeatedly shared that chart and featured it in the “anti-convergence club.”

Having written yesterday about the ongoing economic misery of Venezuela, it dawned on me that is it probably time to update the numbers.

So I went to the International Monetary Fund’s World Economic Outlook database.

What did I find? As you can see from the chart, everything I wrote back in 2011 is still true. Except Chile looks even better and Venezuela looks even worse.

The obvious takeaway is that the longer a nation follows good policy, the better the results. And the longer a nation is subjected to socialism, the worse the results.

If you want numbers, inflation-adjusted per-capita output has nearly tripled in Chile over the past four decades. Call that a reward for good policy.

By contrast, economic growth in Argentina has been very anemic, just 21 percent in 42 years. Call that the price of bad policy.

But Argentina’s anemia looks great compared to Venezuela, where per-capita GDP has suffered a 70 percent collapse. I’m not sure there’s a word to describe such a cataclysmic decline. For lack of a better alternative, we’ll say that’s the “reward” for socialism.

I always challenge my leftist friends to respond to my never-answered question. Maybe I should simplify things and simply ask if they still think Venezuela is a role model.

P.S. I’m still amazed that the New York Times published a lengthy article on Venezuela’s economic misery and somehow never mentioned socialism.

P.P.S. While Venezuela is the main focus of today’s column, I can’t resist sharing my concerns about Chile. As documented in my six-part series in 2021, Chile elected a socialist president. It is therefore possible that a future version of his chart will show grim news. But hope is not lost. Chilean voters overwhelmingly rejected a proposal for a new constitution based on socialism. And just a few days ago, the legislature rejected a huge, class-warfare tax increase.

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The Failure of Socialism in Venezuela, Part I

Socialism is an immoral system that has a horrible track record of misery and failure.

One of the most tragic examples is Venezuela.

It used to be the richest nation in Latin America. But per-capita GDP has collapsed according to IMF data.

As you can see from the chart, there were a couple of decent periods, peaking in 2008 and again about five years later.

But those were driven by world oil prices. The overall trend during the Chavez-Maduro years has been negative.

Socialism has been such a disaster that the country is now largely incapable of benefiting when oil prices rise.

By the way, if you somehow think IMF data is suspect, you can also look at the UN’s Human Development Index. Over the past couple of decades, only Syria, Libya, and Yemen performed worse than Venezuela.

In his column for the Miami Herald, Andres Oppenheimer documents Venezuela’s descent into misery.

As Venezuelan dictator Nicolás Maduro celebrates his 10th year in office this week, a reality check shows that his presidency has been much more disastrous than people think. Maduro…has performed an economic miracle in reverse: He has turned what used to be one of Latin America’s richest countries into the poorest one, alongside Haiti. …Venezuela’s gross domestic product has plummeted from $350 billion in 2013 to $60 billion today… Venezuela’s poverty rate has soared from 40% of the population in 2013 to 94% today… Venezuela’s annual inflation rate has risen to nearly 350% this year from 56% in 2013… More than 7.2 million Venezuelans have fled the country during the past decade, according to United Nations estimates. That’s the biggest mass exodus in Latin America’s history.

That’s a depressing indictment.

But there’s more bad news to share. Here are some excerpts from an article by Dominic Wightman for the U.K.-based Critic.

Caracas has grown into one such city from hell. …there’s all-round cynicism, the pongs of death and dank deprivation ubiquitous. …The capital city is flatlining, the flatline only spiked by oases of ill-gotten gains underwritten by Russian gangsters, by wannabe Cuban puppet masters and the Chavistas themselves, whose grip on Venezuela has been transitorily perpetuated by narcodollars… No politics class or textbook can prepare a man for fifteen years viewing first-hand this latest chapter in the failure of socialist doctrine. The descent to hell in Venezuela has been swift and gruesome. …Too often in the West we have discussed Socialism as if it were a cheese on a cheeseboard, some kind of edible mushroom from which we might find nourishment, even as a side dish in a broader menu of political possibilities. The truth is that Socialism is poison, whichever way it is prepared or digested. It is appropriate — no, it is vital — to be so black and white about it.

Wightman’s analysis is particularly persuasive since he is married to a Venezuelan woman and has personally witnessed the nation’s decline over many years.

P.S. I’m still flabbergasted that the New York Times published a lengthy article on Venezuela’s economic misery and somehow never mentioned socialism.

P.P.S. Here’s my description of what it’s like to encounter victims of Venezuelan socialism.

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The Continuing Failure of Government-Run Healthcare in the United Kingdom

I’m routinely critical of the many ways that government intervention has created an expensive and inefficient health system in the United States.

But there are countries where government causes even greater problems. So when I want to feel good about America’s clunky healthcare system, I look at the mess across the ocean.

The United Kingdom has a socialist health system. And it’s real socialism, with government running the hospitals and employing the doctors and nurses.

And this produces predictably bad results.

I’ve shared numerous horror stories about that approach (see here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, and here), but this report from David Parsley is so astounding that even some of my knee-jerk leftist friends may reconsider their support for big government.

Ukrainian refugees who travelled to the UK to escape the war are risking their lives by returning to their homeland to seek urgent medical treatments after giving up on the NHS. Due the NHS pressures and long waiting lists for procedures, Ukrainians living with families across the UK are taking the perilous trip back into a war zone where they are treated by doctors immediately despite Russian bombardments of their towns and cities. …Maiia Habruk escaped Kyiv last spring along with around five million fellow citizens and found a safe haven with a couple in south east London. But she returned to Ukraine in mid-December after failing to get the treatment she needed from her local hospital in Lewisham. …She decided the only way to get the treatment she believed she required was to make the 24-hour trip back to Ukraine, which includes a flight to Poland and a long and dangerous train journey to Kyiv. …Maiia, who witnessed almost daily bombing raids by the Russians while in Kyiv, knows three other Ukrainians in London who sought emergency health procedures back in their war-torn country due to the lack of availability of quick treatment from the NHS.

These people were engaging in cost-benefit analysis. They compared the risk of death, injury, or suffering from Russian bombs to the risk of death, injury, or suffering from languishing on a waiting list in the United Kingdom.

And they decided Russian bombs were the better option.

This disaster is attracting attention in other nations. The Wall Street Journal opined two days ago about the NHS.

The American left can’t seem to quit its desire for single-payer Medicare for All. So it’s worth noting that the United Kingdom, which already has a system resembling that socialist dream, is rethinking it amid another winter of healthcare misery. …Waiting times for ambulances for the most serious calls are getting longer, with the average response time reaching 10 minutes 57 seconds in December, compared to a target of seven. Once patients reach the emergency room, 35% now face waits above four hours… As of November, some 7.2 million patients have been referred for treatment but are waiting for it to start. Of those, 2.9 million have been waiting more than 18 weeks. The NHS considers itself a success if it starts treatment within that four-month window, which is the epitome of defining failure down. …Excess deaths in 2022 were the most since 1951, excluding the pandemic. …The U.S. suffers a chronic problem of healthcare financing but not of health-care delivery. Britain shows that with single-payer you end up with both. The U.K. also shows that single-payer’s biggest victims are low-income people who can’t afford to opt out.

Yet there are nonetheless American politicians who want to copy this failed system.

Allister Heath of the U.K.-based Telegraph has a grim assessment of his nation’s government-run system.

…the NHS is finished. It is broken beyond repair, ruining the lives of hundreds of thousands, and threatening the social fabric and economic performance of our nation. …this 75-year experiment in health socialism has failed appallingly, culminating in a surge in excess deaths, waiting lists that aren’t worthy of a civilised nation, inhumane strikes, intolerable delays for ambulances, explicit rationing… NHS spending is up 12 per cent in real terms since 2019-20; there are 13 per cent more doctors and 11 per cent more nurses, and yet the service delivered 5 per cent fewer treatments in the first nine months of 2022 than in the same period in 2019. …Its six pillars – that it is “free” at the point of use, the full state ownership of hospitals, its complete dependence on taxpayer funding, its supposed culture of altruism, its nature as a shared moral project uniting rich and poor, and its centrally planned workforce – are the very causes of its disintegration.

P.S. I can’t resist some closing comments about the politics of government-run health care.

The first story cited above includes these comments from left-of-center U.K. politicians.

Labour’s shadow health secretary Wes Streeting told i “Vladimir Putin is dropping bombs on Ukrainian hospitals, yet patients are travelling back to Kyiv rather than face NHS waiting lists. …Liberal Democrat health spokesperson Daisy Cooper said: “It’s a damning indictment of the government’s record on the NHS that Ukrainian refugees are returning to a war-torn country to access health care.”

Accurate criticisms, to be sure. But both Labour and the Lib Dems simply want to dump more money in the system.

But the so-called Conservative Party does exactly the same thing, as the Wall Street Journal noted in its editorial.

Former Prime Minister Boris Johnson in 2021 pledged an additional £36 billion over three years for the NHS and related home and nursing-home care, funded by a payroll-tax increase. Mr. Sunak and Chancellor Jeremy Hunt followed in November with another £3.3 billion a year for the next two years.

And Allister Heath made a similar observation in his column.

The Cameron-May-Johnson survival strategy was to “neutralise” the NHS by refusing to contemplate difficult reforms, genuflecting endlessly at its altar, prioritising it in every Budget, greatly boosting its funding after Brexit and worshipping it hysterically during the lockdowns; yet, in the end, it was the NHS that neutralised the Tories. Small-state, high-growth Toryism is incompatible with an unreconstructed NHS, with its need for ever-higher taxes. How long will the Conservatives continue to lie to themselves about this?

This is a good opportunity to revisit my “what’s the alternative?” argument.

Self-styled right-of-center parties have to choose whether to become tax collectors for the welfare state or whether to push for entitlement reform. There’s no other alternative.

P.P.S. There is one group of people who are net winners from the U.K.’s government-run system.

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Thanksgiving, Property Rights, and Redistribution

I normally share this video from Reason every Thanksgiving.

But this year I’m going to recycle instead a video from John Stossel.

The moral of the story is that societies based on collectivism do not succeed.

People don’t work hard when the rewards of their labor go to others. Even in small communities, that approach does not work.

By contrast, they have a much greater incentive to be productive when the benefits accrue to themselves and their families.

In a nutshell, redistributionism does not work. This is why the original Plymouth Colony was failing. And it’s why places such as Cuba today are so miserably poor.

This is a lesson to keep in mind when people on the left or right try to tell you that bigger government is a good idea.

Let’s conclude with some Thanksgiving-themed humor about libertarians.

There  are lots of jokes about a Trump-loving uncle causing discord over turkey, but libertarians have similar abilities.

They even relish the opportunity.

Two more items for our collection.

P.S. This column from the archives shows how politicians might ruin Thanksgiving.

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Is Biden a Socialist?

As explained in my three-part series (here, here, and here), socialism is a poisonous ideology. With poisonous results.

It is morally corrupt, elevating government over the individual and the family.

And it is economically nonsensical since it punishes success and subsidizes sloth.

But not every leftist is a socialist (and you can argue that not every socialist is a leftist).

So how should we classify Joe Biden?

As reported by Alex Gangitano for the Hill, the president asserted that only “idiots” thought he was a socialist.

President Biden on Saturday said people holding signs calling him a socialist were idiots…he said in remarks at Jones Elementary in Joliet, Ill…“I love those signs when I came in — socialism. Give me a break, what idiots,” the president added. …The Illinois stop is another on a list of typically blue strongholds the president is visiting in the days before Election Day on Tuesday. He also traveled to New Mexico and California this week and will make stops in New York on Sunday and Maryland on Monday.

If you read the entire article, at no point does Biden explain why the signs were wrong. Or idiotic. Instead, he did his usual political routine, attacking Republicans for wanting to make changes to Social Security and Medicare (I wish!).

Since Biden dodged the issue, let’s look at whether the critics are right.

Is the president a socialist?

The answer depends on who is answering. For economists, socialism has a very specific definition. It does not simply mean big government.

Socialists are people who want government ownership, central planning, and price controls. Sort of like Cuba, North Korea, or the former Soviet Union.

At the risk of sounding like a softie, I don’t think Biden qualifies if we use this strict definition. Just like I didn’t think Obama was a genuine socialist when I addressed accusations against him back in 2010.

Though maybe it’s fair to say Biden leans in that direction.

• He wants the government to own and control things, like the postal service and the Social Security system. But so do most Republicans.
• He likes industrial policy so that government can tilt the playing field in favor of political contributors. But so do many Republicans.
• He likes price controls, at least indirectly, for items such as prescription drugs. But so do some Republicans.

I’ll close by acknowledging that many people – including self-described democratic socialists – don’t use the technical definition of socialist.

Indeed, most people probably think socialism is just a way of describing a system with high tax rates and lots of redistribution. Sort of like Sweden or Denmark.

I think they’re wrong, but Biden definitely would qualify as a socialist based on that casual definition.

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Socialism/Communism Humor

I’ve shared many columns featuring communism humor and even more columns filled with socialism humor.

Today, let’s look at crossover humor. Each of these five items applies equally to both of those collectivist ideologies.

The worst person in world history makes an appearance in our first item.

Our next item mocks leftists in general.

For our third item, I agree that there’s a difference between Marxism and so-called democratic socialism, but the cat correctly notes there’s a huge difference between free enterprise and cronyism.

Let’s return to the problem that our leftist friends have with the real world.

Here’s Homer Simpson getting ready to thrash both socialism and communism.

Last but not least, our final item notes that the dictators (and their progeny) live fat and happy lives while ordinary people suffer immensely under communism and socialism.

With a body count of 100 million, communism definitely killed a lot of people. Whether they were “friends” is a separate question.

P.S. To close with a serious comment, socialism is an economic system based on misguided policies such as government ownership, central planning, and price controls. Communism is a political system based on dictatorship and oppression.

By definition, every communist is a socialist. But not every socialist is a communist (especially not today’s so-called democratic socialists who are really just class-warfare redistributionists rather than real socialists).

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The Hidden Cost of China’s Statism

I wrote many years ago that China did not have a “tiger economy.”

Indeed, I subsequently pointed out that China’s growth is not impressive when compared to East Asian nations that did enjoy rapid growth.

My goal was to convince people that the U.S. should not cite China to justify bad ideas such as industrial policy.

But there’s now evidence that I was understating my argument.

Check out this tweet about how the Chinese government has exaggerated the nation’s economic output.

The above tweet comes from a fascinating article in the Economist that analyzes how authoritarian governments can’t be trusted to report accurate economic data.

It turns out that China is one of the worst offenders.

Dictators are often seen as ruthless but effective. Official gdp figures support this view. Since 2002 average reported economic growth in autocracies has been twice as fast as in democracies. But…dictators’ economic stewardship may not be as effective as they claim. New research finds that autocrats greatly overstate their countries’ economic growth. …The data showed that dictators’ reported gdp tended to grow much faster than satellite images of their countries would suggest. …cumulative gdp growth between 2002 and 2021 in countries “not free” is nearly cut in half: from 147% to 76%. …In a related study Jeremy Wallace, a researcher, found misreporting by Chinese provinces, too. As he notes, a leaked American diplomatic cable from 2007 revealed the view of Li Keqiang, the prime minister, then a provincial party secretary. He had said, with a smile, that gdp figures were “for reference only”

Here’s a more detailed version of the above image.

The gray circle near the top right is what the Chinese government is telling the world. The red circle much lower on the graph shows the real performance of the Chinese economy based on satellite data.

This data is bad news for the Chinese people. And it’s an indictment of President Xi, who is pushing China in the wrong direction – toward more statism and more government control.

So I’m not surprised that the geese with the golden eggs are escaping.

But I continue to be amazed that some of the fools in Washington want to copy bad Chinese policy.

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Has Free Enterprise Produced More Prosperity or More Suffering?

I have a multi-part series making the case for capitalism (Part I, Part II, Part III, Part IV, Part V, and Part VI), and I’ve shared lots of long-run data showing how some people began to enjoy unimaginable prosperity as capitalism emerged and monarchism, feudalism, and mercantilism began to fade.

For those interested in this remarkable story of human enrichment, Don Boudreaux and Deirdre McCloskey have must-watch videos on how capitalism enabled (some) nations to escape poverty.

But not everybody understands or appreciates the benefits of capitalism.

MSN has an article, authored by Claire Conway, about new research that ostensibly shows that capitalism has been bad news for people.

…a study recently published in World Development…provided three conclusions. They found that extreme poverty was not, in fact, a normal or universal condition prior to the 19th century. …The second conclusion is that the rise and expansion of capitalism saw a dramatic deterioration in human welfare. …The third conclusion reached is that recovery from this prolonged period of immiseration occurred only recently. Progress in human welfare did not begin until the late 19th century in Northwest Europe and not until the mid-20th century in the global South. Researchers point out that this coincides with the rise of the labor movement, de-colonization, and socialist political parties.

At the risk of understatement, these results are very shocking.

So I tracked down the study, authored by Dylan Sullivan and Jason Hickel, which can be read here. Here are some highlights from the research.

The common notion that extreme poverty is the “natural” condition of humanity and only declined with the rise of capitalism rests on income data that do not adequately capture access to essential goods. Data on real wages suggests that, historically, extreme poverty was uncommon and arose primarily during periods of severe social and economic dislocation, particularly under colonialism. The rise of capitalism from the long 16th century onward is associated with a decline in wages to below subsistence, a deterioration in human stature, and an upturn in premature mortality. ..Where progress has occurred, significant improvements in human welfare began only around the 20th century. These gains coincide with the rise of anti-colonial and socialist political movements.

Yes, shocking results. But, having read the article, they are not accurate results.

Some of the mistakes are fundamental, such as blaming capitalism for bad results under colonialism.

Other mistakes are the result of data manipulation, such as the authors arbitrarily deciding that poverty only exists during times of famine.

But I want to focus on one of the study’s final points, which is that human progress is correlated with the rise of socialism.

Here are some further excerpts from the study.

The European data, then, does not support the standard poverty narrative. …The rise of capitalism, rather than delivering improvements in human welfare, was associated with plummeting wages… Progress did not begin until the 1880s in the European core, and the 20th century in the European periphery…The evidence reviewed here suggests that, where poverty has declined, it was not capitalism but rather progressive social movements and public policies…that freed people from deprivation. …Poverty alleviation and gains in human health have historically been linked to socialist political movements and public action, not to capitalism.

Is this true? Were people in Western Europe just as poor in 1875 as they were in 1575? Or perhaps even worse off? Did living standards only increase after government started to intervene and redistribute?

Let’s go to Our World in Data, operated by Max Roser and his team at Oxford University.

Here’s a chart on major European economies (along with the United States, for the benefit of U.S. readers). As you can see, it does appear that almost all the growth has occurred very recently.

But we just looked at a linear chart, which is considered inferior when measuring and understanding long-run trends.

What happens if we look at a logarithmic chart?

As you can see, rapid growth began well before 1900. Before income taxes. Before the welfare state. And long before anything resembling socialism.

In other words, Sullivan and Hickel have a very shaky hypothesis that collapses like a house of cards when you examine real-world data.

But we don’t need to rely on numbers from 100 years ago or 200 years ago. My “anti-convergence club” is based on dozens of comparisons over recent decades and in every case we see that market-oriented nations easily out-perform countries with more bigger and more intrusive governments.

The bottom line is that Sullivan and Hickel have no good answer to my never-answered question.

P.S. The authors assert that there’s more statism today than in the 1800s, probably because they are focused on fiscal policy. But that may not be true because of big, offsetting improvements in other policy areas.

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Fascism, Socialism, and Mussolini

Based on Sunday’s election in Italy, the nation’s next Prime Minister almost certainly will be Giorgia Meloni, which has some worried that Italy is returning to the “far right” fascism of Benito Mussolini.

From an economic perspective, though, it would be more accurate to say that Mussolini is “far left.”

Or to say that he is a collectivist, which puts him in the same camp as socialists and communists.

In an article for the Independent Institute, Angelo Codevilla discussed how Mussolini began his career as a socialist activist, but ultimately was forced out of the party because of his nationalist views..

He was active in socialist circles, both Italian and international, giving speeches to workers and helping to organize strikes… He got to know Vladimir Lenin… Benito became a full-time socialist activist…as editor of its socialist newspaper. …he supported himself writing essays and editing a journal called Lotta di classe—class struggle… In 1911 the party entrusted the 28-year-old with editorship of its flagship publication, Avanti!. …He had become Italian socialism’s brightest star. …In…1914…he committed socialist heresy by writing that class struggle is a bad idea because the nation is more important than social class. He called his few scattered followers fasci, bundles, of individuals. …Hence he labeled the movement “Fasci Rivoluzionari d’Azione Internazionalista” and its members “Fascisti.” …the party expelled him.

In other words, Mussolini was part of the conflict between “national socialism” and “international socialism.”

Both versions of socialism favored big government, but they differed in how they viewed the nation state.

And this conflict, driven in part by the events of World War I, led Mussolini to develop fascism as a distinct strain of statism.

…continuing to call himself a socialist and propagandizing his evolving blend of nationalism and socialism…Mussolini shifted to building fascism into a party. …Hegel, following Napoleon, had made patriotic worship of the scientifically administered, progressive state the political essence of modernity. Mussolini’s vision of Italy followed from that. “The bureaucracy is the state,” he said. …Mussolini explained, …The state personifies the country, and disciplines its several elements to its service. “Soon, we will be the state.”

And he was right, at least in the sense that he and his fascists soon took over the government.

In the 1921 elections, Mussolini’s Fascists had gained only .04% of the vote. But chaos reigned in the streets because of socialist, Communist, and anarchist mobs, as well as because of the perhaps 40,000 fascist squadristi (the Blackshirts) who fought them. …Mussolini organized the descent of some 30,000 squadristi on Rome to demand he be named prime minister. …the king appointed Mussolini to head a government with almost no fascists. But…Mussolini gradually dispossessed the rest. …Fascist Italy was the first country in which the elected legislature gave up its essential powers to the executive…thus establishing the modern administrative state. …Socioeconomic organization was fascism’s defining feature. Only employers’ and employees’ organizations approved by the government were allowed. …No longer would corporations be responsible to owners.

Mussolini’s fascism was different than traditional socialism in that the goal was to have the government control the economy, but not to have government take over “the means of production.”

Both approaches were very hostile to free markets, of course.

I’ll close with some excerpts about Italian fascism and FDR’s failed New Deal.

After Franklin Roosevelt’s inauguration in 1933, Mussolini’s enthusiasm for likening the New Deal to fascism’s political-economic order… he made clear that “the spirit of [FDR’s program] resembles fascism’s since, having recognized that the state is responsible for the people’s economic well-being, it no longer allows economic forces to run according to their own nature.” …Fascists rejoiced that FDR had forsaken liberal for corporativist principles… It could hardly have been otherwise since the essence of the National Industrial Recovery Act—the involuntary inclusion of all participants in categories of economic activity and their subjection to government-dictated prices, wages, and working conditions—was at least as detailed as those in fascism’s corporate law. 

Since I’ve written about how the New Deal (and much of modern leftism) is based on fascist economics, I obviously agree.

But I’ve also explained that it’s better to refer to such policies as corporatist or interventionist since fascism nowadays also implies support for some of Hitler’s lunatic ideas about race and conquest.

P.S. The main message of today’s column is that it’s silly to label Mussolini (and his political heirs) as being on the far right. But it’s also true that Mussolini’s nationalist approach to statism is different than the ideas advocated by Marx (and his political heirs).

Dissecting and explaining these differences is why I think the left-right ideological spectrum should be replaced by this triangle.

By the way, the top of the triangle could say “Classical Liberalism,” but I used “Libertarian” so American readers would easily understand.

P.P.S. There’s a “Political Compass Test” that does a good job of determining one’s philosophical orientation, but it completely botches where Mussolini belongs.

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Socialism and Immigration

I’ve written many columns about the migration from high-tax states to low-tax states.

The obvious takeaway is that people want to move to places where they can keep more of their money. And if they don’t have money, they want to move to places where lower tax burdens create more economic opportunity.

The same principle is true when considering international migration.

Nations with lower tax burden attract more investors, entrepreneurs, and job creators. And they also attract the people who want the new jobs that are created.

We’re seeing an example of this in the Western Hemisphere.

Charles Lane of the Washington Post has a very good column today, explaining a big reason why so many migrants are coming to the United States.

…the exodus from failed left-wing Latin American regimes has global repercussions…many people seeking relief from poverty and oppression go to the wealthiest and freest nation in their own hemisphere: the United States. Right now, escapees from Cuba, Venezuela and Nicaragua make up a rapidly growing share of the influx at the border between the United States and Mexico. …All of the above should inform the debate about “root causes” of migration… the historic debacle represented by the departure of over 6 million from Venezuela… That is a fifth of the entire country. …The foreseeable failure of subjecting the economy to top-down control and denying people basic freedoms can.The exodus is thus a tremendous compliment to the United States and other democratic capitalist countries.

As I said, a very good column. I feel obliged to point out that Mr. Lane was being redundant when he wrote “failed left-wing,” but let’s conclude by examining a couple of policy issues.

First, some people argue that illegal migration can be reduced if American taxpayers send foreign aid to Latin America. But since foreign aid tends to subsidize bad policy, that approach almost surely will backfire.

Second, we should make sure the people who come to America are arriving for opportunity rather than handouts. That’s true whether we have a restrictive policy or an open-door policy.

P.S. The second point doesn’t apply for potential migrants from countries such as Denmark that have overly generous welfare policies.

P.P.S. It’s a problem that Biden wants to drive away highly productive people.

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Socialism Humor

It’s been almost six months since I last mocked the poisonous ideology of socialism.

So let’s rectify that oversight with five new items for our collection.

Our first item shows where “Soviet Barbie” lives, followed by the fancy abode of a self-annointed socialist leader.

Next, we have a bus driver warning about a reality check (basically the same message as this great tweet).

Our third item compares a defining characteristic of capitalism (mutually beneficial voluntary exchange) and a defining feature of socialism (envy).

Our next item shows how a socialist ignores real-world evidence while focusing on a never-achieved fantasy.

As usual, I’ve saved the best for last.

This one reminds me of the story the New York Times wrote in 2020, which focused on Venezuela’s decrepit economy but somehow never mentioned socialism.

Our friends on the left apparently want people to believe that socialism produces horrible results because of mysterious outside factors. Just bad coincidences, or something like that.

But since there’s never been a successful socialist economy (even voluntary socialist societies collapse), maybe it is time they realize they’ve been supporting a failed ideology.

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Government-Run Dating Apps Would Be a Recipe for Lifelong Celibacy

For those who read these columns on my website, you presumably have noticed that I have a rotating banner at the top of the page.

One of the options is a quote from Milton Friedman about the blundering inefficiency of Washington.

Though I believe in fairness. I also have periodic columns about the incompetence of local governments, state governments, and foreign governments.

The bottom line is that if someone thinks government is the answer, I definitely think they’ve asked the wrong question.

But that doesn’t stop some people from a knee-jerk belief in bigger government. In an article for the Jacobin, Nick French wants the government to take over dating apps.

I’m not joking. Here is some of what he wrote.

…the longer I use these dating apps, the stranger the whole experience feels. …what matters to the app owners is not getting their users good dates. What matters is that they can make money off of us. …We could consciously uncouple our dating lives from the tyranny of the profit motive, though — with publicly owned apps that will democratize how we meet people online. …companies profiting from user data handsomely without compensating users smacks of exploitation. After all, if it’s my app use that generates data and therefore profits for the company, aren’t I entitled to a share of that value I created? …it does seem strange that questions about the implications of dating for social justice should be left in the hands of Silicon Valley MBAs — whose ultimate motivation, of course, is to turn a profit. Questions about how to deal with bias or prejudice in dating apps would be far better off as a matter for public, democratic deliberation.

For what it’s worth, profit-seeking companies have an incentive to give customers what they want.

Based on the performance of bureaucracies such as the Postal Service, I suspect we’ll all live celibate and lonely lives if the government takes over apps like Tinder and Bumble.

And that would be the case regardless of whether we have government-run dating apps (socialism) or government-controlled dating apps (fascism).

Mr. French seems open to either approach.

What might that look like? It doesn’t necessarily mean establishing a government-run National Dating Service or taking Tinder under state control. …but what exactly this “platform socialism” looks like will differ from platform to platform. …Users could collectively deliberate about the possible impacts of different choices, from the perspectives of social justice as well as users’ individual well-being. …the state would have an important role to play: in providing public funding for the development of cooperatively owned dating apps.

By the way, some governments already try to play matchmaker.

…some countries are already paying to set up their own dating services. The Singaporean government’s Ministry of Social and Family Development has a webpage devoted to helping the uncoupled find partners; it advertises a government-run online dating portal, officially accredited dating agencies, and a “Partnership Fund”

I’m usually a fan of Singaporean economic policy, but obviously I don’t think governments have the ability to boost marriage and fertility (but at least they don’t go overboard like Hungary).

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The United Kingdom’s Failed Post-War Socialism

I’m in the United Kingdom for the Free Market Road Show and had planned on writing today about the awful economic policies of Boris Johnson, the supposedly Conservative Prime Minister.

Yes, he produced an acceptable Brexit, but otherwise has been a big spender. Sort of the a British version of Trump or Bush.

But I’m going to give Boris a (temporary) pass because I can’t help but vent my spleen about this sign I saw yesterday while touring the Imperial War Museum in London.

As you can imagine, I was irked by this bit of pro-socialist propaganda.

Since when does a government takeover of private industry lead to “a fairer, more caring society”?!?

Maybe that was the intention of the voters who elected Clement Attlee, the Labour Party who became Prime Minister after the 1945 election.

The real-world results, though, were disappointing. Indeed, the sign acknowledges that the post-war recovery was anemic.

But it then put the blame on conscription.

As a sensible Brit would say, this is utter bollocks.

Plenty of other nations drafted men into military service, yet they still managed to enjoy decent growth.

Why did those countries enjoy more prosperity? Because they didn’t copy Clement Attlee’s horrible mistake of nationalizing industry (genuine socialism, by the way).

Indeed, while the United Kingdom was becoming the “sick man of Europe,” West Germany boomed in large part because it went in the other direction, getting rid of dirigiste policies such as price controls.

There is a happy ending to this story.

Margaret Thatcher was elected in 1979 and privatized industries – in addition to other pro-growth reforms such as spending restraint and tax-rate reductions.

As a result, the United Kingdom in a very short period of time managed to overtake Germany in the Fraser Institute’s rankings for economic liberty.

I’ll close with a thoughtful and magnanimous offer.

I’ve corrected the mistaken wording on the sign at the Imperial War Museum. I hereby offer – free of charge – this new version.

P.S. It’s a long program, but I strongly encourage readers to watch Commanding Heights: The Battle of Ideas, which tells the economic history of the 20th century. You’ll learn how Thatcher saved the U.K. economy and how Reagan saved the U.S. economy.

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The Destructive Crusade to “Reimagine” Capitalism

For most of human history, we’ve had primitive and impoverished societies based on feudalism and tribalism.

The good news is that capitalism began to emerge a couple of hundred years. The parts of the world that adopted free enterprise became incredibly rich. And there even have been meaningful improvements in living standards in the parts of the world that only partly liberalized.

But not everyone likes economic freedom. They argue for alternatives to markets.

And they’ve put forth all sorts of ideas over the past 100-plus years. Some of them utterly reprehensible, such as communism and Nazism.

Others ideas have caused immense damage, such as socialism and fascism. And others such as corporatism and the welfare state, have undermined the benefits of free markets.

The bottom line is that none of those alternatives have worked. They’ve produced stagnation at best. And, in many cases, oppression and deprivation.

Yet our friends on the left haven’t given up. Like medieval monks searching for the Holy Grail, they desperately want to find something that can replace capitalism.

And some of those folks on the left are putting big money into the effort, as reported by Steve Lohr of the New York Times.

Wages have been stagnant for most Americans for decades. Inequality has increased sharply. …Those problems…are partly byproducts of…free markets, free trade and a hands-off role for government. Its most common label is neoliberalism. …The William and Flora Hewlett Foundation and Omidyar Network announced on Wednesday that they were committing more than $41 million to economic and policy research focused on alternatives. “Neoliberalism is dead, but we haven’t developed a replacement,” said Larry Kramer, president of the Hewlett Foundation. …The Ford Foundation and the Open Society Foundations have pledged to join the initiative and make grants later this year. …many prominent economists have questioned the wisdom of leaving so many human outcomes to the whims of markets. …“Reducing inequality has to be a goal of economic progress,” said Dani Rodrik, an economist at Harvard’s Kennedy School and a leader of its project on reimagining the economy. …Mike Kubzansky, chief executive of Omidyar Network, said today’s economic challenges spanned partisan divisions. “I think there’s pretty broad agreement that the traditional set of economic ideas has passed its sell-by date,” he said.

As a quick aside, when folks on the left use “neoliberal” as a slur, they are using the word to depict capitalism or libertarianism (the “neo” indicating today’s version of classical liberalism).

And I also can’t resist pointing out that Rodrik needs to learn about the “Eighth Theorem of Government.”

But let’s focus on the main issue. The Wall Street Journal editorialized on the left’s search for an alternative to free enterprise and pointed out that the real goal is to give Washington more power and control.

The 20th-century economist Joseph Schumpeter famously wrote that capitalism sows its own destruction by creating a knowledge class who despise its success. Behold the Hewlett Foundation and Omidyar Network’s $40 million gift to the paupers at Harvard and MIT to “reimagine capitalism.” …By “reimagining capitalism,” …what these foundations really mean is putting politicians and the administrative state in charge of redistributing more of its proceeds.

Amen.

One point I’ll add is that the left’s goal may be “redistributing more,” but an unavoidable economic consequence is that the economy doesn’t produce as much.

And that’s bad news over time, even for the people who are the supposed beneficiaries.

Which is why genuinely compassionate people support capitalism, which is the only system that has a proven track record of reducing poverty.

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The Ongoing Horror of Cuban Socialism

Back in 2014, I compared the long-run economic performance of Cuba and Hong Kong.

Both jurisdictions were roughly equal about 60 years ago. But the data show a dramatic performance gap ever since the communists took power in Cuba, with Hong Kong (which was very pro-market back then) enjoying much bigger increases in prosperity.

Sadly, not much has changed in Cuba since I wrote that column.

The communist dictatorship is still there, and the economy is still socialist (notwithstanding even Castro admitting its failure).

And this means ongoing misery for ordinary people.

Here are some excerpts from a story published by Agence France-Presse.

Cubans are no strangers to queuing for everything from bread to toothpaste, often standing for hours under a blazing sun with no access to a toilet or drinking water, and always with the fear of leaving empty-handed. It is a daily ordeal Cubans have endured for about 60 years of communist rule… Cuba recorded an official inflation rate of 70 percent in 2021, when the economy recovered a modest two percent after an 11-percent drop in 2020, signaling the nation’s worst economic crisis in almost three decades. With government reserves dwindling, food imports — some $2 billion worth per year before the pandemic struck — had to be drastically cut back in the country of 11.2 million. …The shortages affect everyone; even the well-heeled have to contend with long lines, though they often pay other people to hold their place. …It is common for shops to have only two or three products at a given time, or none. Sometimes, people queue not knowing what, if any, product they will be able to buy that day.

Some defenders of Cuba blame the hardship on the United States, which imposes considerable restrictions on trade and tourism with Cuba.

I’m always happy when people recognize the downside of trade barriers, but blaming Cuba’s economic misery on the partial embargo is akin to a football team blaming its field goal kicker after getting shut out, 56-0.

Virtually all economists, including left-leaning ones, agree that bad Cuban economic policy is what’s causing deprivation and suffering.

Mary Anastasia O’Grady opined on this issue in her Wall Street Journal column.

Repression and propaganda are the only two things that Havana does well. …For decades, Cuba has blamed what it calls the U.S. “blockade” for island privation. Regime talking points have been repeated ad nauseam in U.S. media and beyond. …Why life for most Cubans is primitive in the 21st century is not hard to discern. Shortages caused by communism have been made infinitely worse during the Covid-19 pandemic because, as tourism dollars dried up, the regime naturally diverted diminishing hard currency to itself. There is no gasoline or diesel for ambulances… Military vehicles and secret-police cars are always ready to go. Nurturing the island’s nomenklatura also takes real money, as does caring for the children of elite kleptocrats who display their obscene wealth—like car collections, thoroughbred horses and luxurious travel—on social media. …Havana is sore because it doesn’t qualify for credit from the U.S. But Cuba is a proven deadbeat, having defaulted on hundreds of millions of dollars in debt to Russia, Europe, Latin America and Japan. The despots are pouting too because they can’t stick their snouts in troughs at the International Monetary Fund and World Bank.

Let’s close by looking at some long-run economic trends.

I started this column by charting the difference between Cuba and Hong Kong. But since Hong Kong’s economic attractiveness is being eroded by China, let’s instead see how Cuba compares to a handful of other nations.

I’ve previously compared Cuba and pro-market Taiwan, as well as Cuba and sort-of-pro-market Panama. Now let’s add sort-of-pro-market Botswana to the analysis.

As you can see, the Maddison data shows you don’t need perfect policy to get much better results than Cuba.

The moral of the story is that you get great results with lots of economic liberty, okay results with some economic liberty, and miserable results with almost no economic liberty (i.e., lots of socialism).

Which is the lesson of my anti-convergence club.

P.S. The AFP story from above included this hopeful sentence.

The government in Havana has said that boosting national production is the best way to deal with shortages and queues, and has slowly started opening the economy to private enterprise.

I certainly hope this is true, though I’m skeptical since previous promises economic liberalization have not been fulfilled (heck, they’ve even attracted mockery from late-night TV hosts).

P.P.S. Communism has always attracted dupes and apologists. In the case of Cuba, that list includes Bernie Sanders, Nicholas Kristof, and Nikole Hannah-Jones. And maybe we should add Jeffrey Sachs and some environmentalists to that list as well.

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Socialism Humor

Socialism is a total and miserable failure, anywhere and everywhere it’s been tried.

But there’s a silver lining to that dark cloud.

We’ve been able to enjoy lots of socialism satire over the years, and we’re going to continue that tradition with our first collection of socialism humor for 2022.

For our first item, we have a book of fairy tales, which surely will include the politically correct versions of The Little Engine that Could, The Ant and the Grasshopper, and The Little Red Hen.

Even better, these fables can be read by Bernie Sanders.

But not everyone is sympathetic to the world of make-believe, as we can see from our second item.

Our third example of satire is this timeline of Venezuela’s 20-year decline.

There’s actually nothing funny about the above list, but it does remind me of how many leftists praised Venezuela’s socialist policies in the early years.

But now they’re strangely silent (or they make bizarre arguments).

So let’s get back to direct satire. Here’s a look at our friends on the left ignoring the rampant inequality in socialist nations (a small handful of people connected to government get rich while everyone else is impoverished) while fixating on inequality in market-oriented nations (where the non-problem problem is that some people get richer faster than other people get richer).

Last but not least, here’s my favorite item from today’s collection.

I’m the boring kind of libertarian who doesn’t like drugs.

But even I can understand this meme.

To end on a serious point, I challenge any and all leftists to respond to my never-answered question. Or to show me their version of the anti-convergence club.

I won’t be holding my breath.

P.S. If you like the fairy tales in the second item, there’s also a version about gun control and an adaptation from Dr. Seuss.

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Chile Election Week, Part VI: Wrecking the Constitution?

Now that a socialist has been elected (with open support from the Communist Party), what comes next for Chile?

Lots of bad policy, for sure, but Axel Kaiser warns that the left also wants to replace the country’s pro-liberty constitution.

Axel, who is President of Fundación para El Progreso and also a Senior Fellow for the Atlas Center for Latin America, just scratches the surface in this short video. He told me that there are many other desirable provisions, including school choice.

So it shouldn’t be surprising that the left in Chile is so determined to replace it with a document that empowers politicians.

I wrote about this issue last year, citing experts (including folks on the left) who all agreed that giving politicians new powers over the economy was the clear purpose of a new constitution.

This is basically a fight about whether to replace rights with entitlements (or, in the language of philosophers, whether to replace “negative rights” with “positive rights”).

By the way, there’s research showing that a society based on liberties is the best way of generating the prosperity needed for higher living standards (i.e., the access to goods and service that proponents of positive rights claim to support).

And, earlier this year, I showed how that works conceptually.

But you don’t need empirical research or theoretical analysis. Just open your eyes and look around the world. The nations based on socialism and so-called positive rights have produced economic misery and deprivation.

By contrast, there’s a much better track record – especially for ordinary people – in countries where government plays a smaller role.

It’s tragic that Chilean voters chose the redistribution approach in Sunday’s election. If they opt for a new constitution next year, the nation will be doomed.

P.S. By the way, here are some excerpts from today’s Wall Street Journal‘s editorial about the election.

Latin America, or much of it, is moving to the populist left, and Chile became the latest example by electing socialist Gabriel Boric… He’s the most leftist politician to win in Chile since Salvador Allende in the 1970s. His major theme was reducing economic inequality, which he proposes to do through state power. Mr. Boric wants to raise taxes, eliminate the country’s highly successful private pension system and increase government spending and regulation. He supports the constituent assembly now rewriting the constitution, and his goal is to give government more control over just about everything. …Foreign investors and Chileans with money and property are nervous. From the end of 2019—when the left launched riots demanding a new social contract—until August 2021, Chile’s central bank says some $50 billion (15% of Chilean GDP) fled the country. About half was investment capital and half from businesses and households. …on Monday the Chilean peso fell 2% against the U.S. dollar while the broader stock market plunged 10%. …The world is watching closely to see if the new president will…take Chile in the direction of such failing Latin states as Argentina or Peru, or worse.

Amen.

The best case scenario is that Chile is copying Argentina. The worst case is that it is copying Venezuela.

P.P.S. There was a president in the United States who wanted to remake society on the basis of “positive rights.” Fortunately, he did not succeed.

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Chile Election Week, Part V: Another “Leftist Savior”

I warned a few days ago that Gabirel Boric would be bad news if he won Chile’s presidential election. Well, he won, and now we’re going to find out whether he will repeal the policies that made the country successful.

He definitely seems to be another “leftist savior,” as described in this video.

At best, Chile has elected someone as bad as Kirchner in Argentina.

The worst-case scenario is that Boric will be an utter disaster, like Chavez or Maduro from Venezuela.

If you want more details about the election results, Las Últimas Noticias put together this helpful graphic.

I had predicted a 54-46 Boric victory, but these results are even worse.

But what’s really depressing is that Latin America – and the world – is going to lose a role model.

Chile was already declining because of the soft leftism of two recent presidents, Michelle Bachelet and Sebastián Piñera, and it seems almost certain that this degeneration will accelerate as Boric pushes a hard-left agenda.

I’m especially worried about damage to the nation’s system of personal retirement accounts.

I’ll close with a personal observation that people sometimes challenge me to point out successful libertarian nations.

I have traditionally responded by stating that there’s no such thing as a pure libertarian country, but that we have some great success stories if we focus on comparative policy.

Sadly, I can’t really use Hong Kong as an example any more, and now it looks like I’ll have to drop Chile off my list. So my fingers are crossed that nothing bad happens to Switzerland, Estonia, New Zealand, or Singapore!

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Chile Election Week, Part IV: What’s at Stake in Today’s Vote?

Greetings from Santiago. Chileans vote today for a new president and there’s a risk that a Venezuelan-style leftist, Gabriel Boric, will prevail.

And that puts at risk the economic progress described in this video.

The video has a good discussion of Chile’s very successful system of private pensions (which will be in danger if Boric wins).

But it also points out how free trade helped create the prosperity of modern Chile.

And that narrative is confirmed by looking at Chile’s score from the Fraser Institute’s Economic Freedom of the World.

I’m always happy to sing the praises of free trade and condemn protectionism, but let’s keep the focus on today’s election in Chile and why it matters.

That’s why this tweet tells you everything you need to know.

Notice how Chile began to prosper after it began to shift to free markets around 1980 and notice how Venezuela began to fall after it shifted to statism starting around 2000.

Chile and Venezuela. Two countries with very different economic trajectories in recent decades. This animation shows per capita income from 1970 to 2017. Source: https://t.co/XzW3Xhtig4 pic.twitter.com/EWGhMIAMKB

— Simon Kuestenmacher (@simongerman600) February 26, 2020

Notwithstanding all this evidence, Boric is favored to win today’s election. Which would be a vote for national economic suicide – perhaps akin to the British people voting for the pro-nationalization Labour Party after World War II (described in this video, for those interested).

I hope I’m wrong, both about the results of the election and the potential changes to economic policy if Boric prevails.

P.S. If you’ve enjoyed my Chilean election coverage, I did the same thing a couple of years ago in the United Kingdom (see here, here, here, here, and here).

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The Most Important Election of 2021

If you want visual proof of Chile’s “improbable success,” this chart tells you everything you need to know.

Thanks to free-market reforms in the 1980s and 1990s, growth exploded, Chile became the Latin Tiger and poverty plummeted.

It’s remarkable how quickly per-capita GDP has increased compared to the average of other major Latin American economies (Argentina, Bolivia, Brazil, Colombia, Ecuador, Mexico, Peru, Paraguay, Uruguay, and Venezuela).

Some folks on the left (including editors at the New York Times) bizarrely think Chile’s “neoliberal experiment” has been a failure. Given their upside-down perspective, they probably think Venezuela is a smashing success.

But today’s column is not about what’s happened in the past. It’s about what may happen in the future because of an upcoming presidential election.

Let’s start with this article from the Economist, which expressed concern back in November that the first round of the presidential election would lead to a stark ideological choice between the hard left and hard right.

…stable Chile disappeared two years ago, in an explosion of massive and sometimes violent protests…In a vote for the constitutional convention in May (in which only 43% turned out), support surged for the hard left while drying up for mainstream parties. As a result, the convention has become a theatre of wokeness, with calls to wage war against pivotal industries…, alongside…for a bigger role for the state in pensions, health care and green regulation. …pessimists fear a Utopian list of unaffordable rights and anti-capitalism. …Gabriel Boric, the candidate of the hard left, has seemed poised to win the presidential election. A former student leader, …some of his allies…include the Communist Party… Mr Boric wants to expand tax revenues by 8% of gdp over six to eight years (impossible, say many economists) and review trade agreements in order to engage in industrial policy. …That is why support has grown for José Antonio Kast of the hard right. …Whereas Mr Boric promises the most left-wing government since the chaotic Socialist-Communist administration of Salvador Allende, Mr Kast offers the most right-wing one since the dictatorship of General Augusto Pinochet.

Sure enough, the November election put Boric and Kast in a runoff, which is scheduled for December 19.

I don’t know if it would be accurate to say this is akin to a hypothetical Rand Paul-Bernie Sanders contest, but a report in the Wall Street Journal suggests that are very big economic implications.

After years of protests and political upheaval that seemed certain to shift Chile’s politics sharply to the left, voters in the first round of a presidential election largely backed candidates who support the country’s free-market economy… More than half of the ballots in the Sunday vote went to three right-wing candidates who support the market economy, led by first-place finisher José Antonio Kast with 28% of the vote. Gabriel Boric, the leftist candidate who backs dismantling a private pension system and creating a state-run lithium company, finished second with 26% of the votes… “People didn’t buy the idea that Chile needs to dismantle the market-friendly model, they just want a stronger social safety net,” said Patricio Navia, a Chilean political scientist at New York University. …The future of Chile’s once-lauded economic model that bolstered foreign trade and slashed poverty over the last three decades has been in doubt since mass protests erupted two years ago… Mr. Kast, a 55-year-old former lawmaker…, says he is a democrat who is offering Chileans economic prosperity and freedom.

By the way, the presidential election isn’t the only big thing that’s about to happen in Chile.

The article also acknowledges something I wrote about last year, which is the possibility of a new constitution based on entitlements rather than liberties (i.e., positive rights vs negative rights).

The election is being held as a special assembly made up of mainly leftist delegates is writing a new constitution, which could weaken investor protections and expand social rights. The constitution is expected to be finished next year when it will be put to a referendum.

A Washington Post column published yesterday by Professor Michael Albertus summarizes what’s at stake.

Chile’s presidential runoff election on Dec. 19 is the country’s most important election since its return to democracy in 1990. …Chile’s election pits José Antonio Kast, a bombastic far-right politician whom many liken to Donald Trump and Jair Bolsonaro, against Gabriel Boric, a far-left lawmaker and former student organizer. …The stakes couldn’t be higher. Chile’s ongoing constitutional convention is poised to propose next year the biggest overhaul to the country’s political system since the Pinochet dictatorship.

Prof. Albertus points out that the election isn’t just about economics.

There are big fights about immigration, law and order, abortion, and indigenous rights.

For those of us who care a lot about prosperity, Mary Anastasia O’Grady of the Wall Street Journal opined two days ago on the implications of Chile’s upcoming choice.

The stakes are high in Chile’s Dec. 19 runoff presidential election pitting the free-market former Congressman José Antonio Kast against socialist Congressman Gabriel Boric. The country has been trending left for years. But Mr. Kast’s surprise first-place finish in the election’s first round—with 28% of the vote—and the center-right’s strong showing in legislative elections suggests that Chileans are reconsidering national suicide. …If the vote goes left, Chileans can expect policy geared toward greater redistribution of the existing wealth-and-income pie—higher taxes, nationalization of pensions, populism, etc. If the vote goes right, there will be a chance to restore the fast growth of the 1990s by deepening the liberal economic agenda. …there’s something much bigger at stake. That is the survival of the democratic institutions protecting the pluralism, property rights and public order that have made Chile one of Latin America’s richest countries. Mr. Boric is backed by a coalition—Approved Dignity—heavily influenced by the Communist Party and other hard-left groups. …If Mr. Boric wins the runoff, you can bet they will demand their pound of flesh.

Ms. O’Grady’s column notes that Chile’s free-market reforms dramatically reduced poverty (for more details, see here, here, and here).

The market economy has been enormously successful in Chile. The share of Chileans living in poverty fell to 8.6% in 2017 from 68.5% in 1990, according to official data. Extreme poverty over the same period dropped to 2.3% from 48.8%. It’s a development record that few countries in the world have achieved.

Last but not least, she makes a very important point that Chile’s recent performance has not been very impressive.

…the clamor for change isn’t irrational. According to Chilean economist and investor José Luis Daza, …In the five years before the pandemic in 2020, the country grew at an average annual rate of 1.9%, less than half that of the world economy. “After 2000,” he told me in a phone interview from Santiago last week, “there has been zero productivity growth. In fact, it has been marginally negative.” …It was in the midst of this economic malaise in October 2019 that extreme-left militants burst onto the scene in Santiago. …Mr. Daza recently put his work in New York on hold to join Mr. Kast’s economic advisory team with a focus on growth.

I’m not surprised. There has not been any meaningful pro-growth reform this century. Indeed, the opposite is true. Policy has actually drifted in the wrong direction.

But if Boric wins this weekend, a drift in the wrong direction could become a tidal wave, washing away the Chilean Miracle.

The last thing Latin America needs is another Venezuela. Milton Friedman will be rolling over in his grave.

P.S. I’m especially concerned that a victory for the left could lead to the repeal of some of Chile’s best policies, including social security personal accounts and nationwide school choice.

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Who (or What) Deserves Credit for Germany’s Post-War Economic Miracle?

A couple of years ago, to help build the case against socialism, I showed how West Germany enjoyed much faster growth and much more prosperity than East Germany.

The obvious lesson to be learned from this example of “anti-convergence” is that market-oriented economies out-perform state-controlled economies.

I want to revisit this topic because I recently dealt with someone who claimed that government spending via the Marshall Plan deserves the credit for West Germany’s post-war economic renaissance.

What does the evidence say? Was foreign aid from the United States after World War II a key driver (for Keynesian or socialist reasons) of the West German economy.

The answer is no.

Professor David Henderson explained the role of the Marshall Plan for Econlib.

After World War II the German economy lay in shambles. …less than ten years after the war people already were talking about the German economic miracle. What caused the so-called miracle? The two main factors were currency reform and the elimination of price controls, both of which happened over a period of weeks in 1948. A further factor was the reduction of marginal tax rates later in 1948 and in 1949. …Marshall Plan aid to West Germany was not that large. Cumulative aid from the Marshall Plan and other aid programs totaled only $2 billion through October 1954. Even in 1948 and 1949, when aid was at its peak, Marshall Plan aid was less than 5 percent of German national income. Other countries that received substantial Marshall Plan aid exhibited lower growth than Germany.

Moreover, the money that was dumped into Germany as part of the Marshall plan was offset by money that was taken out of the country.

…while West Germany was receiving aid, it was also making reparations and restitution payments well in excess of $1 billion. Finally, and most important, the Allies charged the Germans DM7.2 billion annually ($2.4 billion) for their costs of occupying Germany.

Inconvenient facts like this make the socialism or Keynesian argument very difficult to maintain.

In a 1990 study on whether there should be something similar to the Marshall Plan for Eastern Europe, Melanie Tammen summarized some of the research on how the original plan for Western Europe was a flop.

…those that received relatively large amounts of aid per capita, such as Greece and Austria, did not recover economically until U.S. assistance was winding down. Germany, France, and Italy, on the other hand, began their recovery before receiving Marshall Plan funds. As for Belgium, it embarked on a radical monetary reform program in October 1944, only one month after liberation. Belgium’s economic stabilization and recovery were well under way by 1946, fully two years before the arrival of U.S. aid. Great Britain, conversely, received more Marshall Plan aid than any other nation but had the lowest postwar economic growth rate of any European country. The critical problem facing Europe was…simply bad economic policy.

Kai Weiss of the Austrian Economic Center in Vienna also addressed this issue. Here’s some of what he wrote for the Foundation for Economic Education.

Common knowledge says that the United States’ Marshall Plan was responsible for the rapid economic growth, rebuilding the country by throwing a lot of money at it. But that’s a mistaken view. …why was there a “Wirtschaftswunder”? …two main reasons: a monetary reform and the freeing of the economy by abolishing price controls and cutting taxes. All of this was implemented thanks to one man: Ludwig Erhard. …What Erhard did was unthinkable in a hostile environment. The Allied forces, still heavily controlling Germany, left the Nazi price controls and rationing intact. But when Erhard became Secretary of the Economy in West Germany, he quickly ended all price controls and stopped rationing — to the dismay of the US advisors. …He, not a Keynesian Project like the Marshall Plan, enabled the miracle.

Speaking of Ludwig Erhard, here’s a video clip on what he did to trigger West Germany’s prosperity.

I have one minor disagreement with that video.

It states that Germany combined “free markets with a strong welfare state.”

That’s a very accurate description of, say, current policy in Denmark.

But total social welfare spending in Germany was less than 20 percent of GDP for the first few decades after World War II, considerably less than social welfare spending today in the United States.

At the risk of being pedantic, it would be more accurate to state that Germany combined free markets with a medium-sized welfare state.

Let’s close with one final bit of evidence.

Here’s a look at the most pro-market nations in the decades after the war. Germany (outlined in red) was never at the top of the list, but it was almost always in the top 10.

Was Germany a libertarian paradise?

Hardly.

But the main takeaway from today’s column is that it’s even more absurd to claim that Germany’s post-war growth was because of big government.

P.S. Regarding Eastern Europe, western nations ultimately decided to create a cronyist institution, the European Bank for Reconstruction and Development, in hopes of boosting post-Soviet economies. Needless to say, that was a mistake. Many nations have enjoyed good growth after escaping communist tyranny, but the cause was good policy rather than handouts.

P.P.S. The Erhard video is an excerpt from The Commanding Heights, a must-watch video that basically tells the economic history of the 20th century).

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Happy Libertarian Thanksgiving

Over the years, I’ve shared three videos making the same point about how the first European settlers in America nearly starved because of socialism.

Let’s recycle one of those videos today.

To be sure, starving because of socialism didn’t become a big thing until the 20th century.

So the settlers were ahead of their time, albeit in a bad way.

But at least they gave us another data point showing that it doesn’t make sense to have an economic system that penalizes productivity and subsidizes sloth.

Let’s take a closer look at what happened in the 1600s.

Here’s some of what Helen Raleigh wrote for the Federalist.

Today’s self-identified democratic socialists like to claim real socialism has never been tried in America, but they need to brush up on their history. The Pilgrims did try it — and it failed. …Puritans from the Separatist Church, led by Rev. John Robinson, decided to…secure a land patent in the existing Virginia colony. …The deal stipulated that everything the colonists produced would belong to a “commonwealth,” and at the end of seven years, everything would be equally divided between investors and colonists. …this deal forbade colonists from having any personal time to work on any private business during the seven-year contract term. …Even with the help of the Indians, the colonists had a hard time surviving. Although the word “socialism” hadn’t been invented yet, the Plymouth colony bore many resemblances to a socialist society. Since investors back in England demanded that the colony operate communally, everything was owned by every colonist jointly. No one was allowed to own private land or to work on his private business. The communal social and economic structure proved disastrous. Not all colonists were willing to work hard or at all for the “commonwealth.” …Since not everyone was pulling the same weight, the colony was constantly running out of food, a typical problem in all the socialist countries, from China to Venezuela. …Bradford wisely recognized that a change had to take place…turning the communal property into private property… hardworking and motivated colonists turned Plymouth colony into one of the most successful colonies in North America.

John Stossel authored a piece for Reason on the same sad history.

Tragedy of the Commons nearly killed the Pilgrims. When they landed at Plymouth Rock, they started a society based on sharing. Sharing sounds great. But sharing, basically, is collective or communal farming, which is socialism. Food and supplies were distributed based on need. Pilgrims were forbidden to selfishly produce food for themselves. That collective farming was a disaster. When the first harvest came, there wasn’t much food to go around. The Pilgrims nearly starved. Since no individual owned crops from the farm, no one had an incentive to work harder to produce extra that they might sell to others. Since even slackers got food from the communal supply, there was no penalty for not working. …People eager to provide for their families were less eager to provide for others. Bradford wrote, “young men, that were most able and fit for labour, did repine that they should spend their time and strength to work for other men’s wives and children without any recompense.” …The Pilgrims’ solution: private property. …the collective farm was split up, and every family was given a plot of land. People could grow their own food and keep it or trade it. “It made all hands very industrious, so as much more corn was planted than otherwise would have been.” wrote Bradford. “Women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability.” The Pilgrims flourished because they turned to private property. So, this Thanksgiving, be grateful for private property, a foundation of capitalism.

Let’s close with some humor.

Libertarians have a reputation for being somewhat dorky and that comes across in this bit of satire from Babylon Bee.

After his state’s governor banned gatherings of more than 10 people for Thanksgiving, local libertarian Paul Figgen was looking forward to boldly defying the government with a massive holiday gathering of dozens. Unfortunately, he’s having a hard time finding dinner guests since no one wants to hang out with him. “I know Thanksgiving was made a federal holiday by the infamous war criminal Abraham Lincoln,” said Figgen, “but I really want to stick it to the Feds and organize a huge dinner and talk about how taxation is theft while smoking weed with a bunch of people! I invited everyone but no one seems to want to hang out for some reason.” …”It’s ok,” Figgen sighed. “If people want to be a bunch of sheep, that’s fine. I’ll just have Thanksgiving with my cardboard cutout of Ron Paul. He loves to hang out with me.”

As a libertarian, I wince when I read this, but I also laughed.

As illustrated by this cartoon, we sometimes have a not-so-endearing tendency to make moralistic arguments at inopportune moments.

The fact that we’re right doesn’t really matter.

P.S. If you like Thanksgiving-themed humor, you can click here and here for some cartoons from the Obama era.

And if you’re not a fan of America’s hypocritical politicians, you’ll like this “self-stuffing turkey.”

Last but not least, I dug into the archives to find this dystopian look at a left-wing Thanksgiving.

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Socialism Humor

I try to share something humorous every weekend (economics humor last weekend and politician humor the previous weekend).

This weekend, we’re going to add to our collection of socialism humor.

Our first item nicely summarizes the incentive structure of socialism (sort of like this cartoon).

Our second item mocks the left’s hypocritical approach to coercion.

This next item may have been motivated by Libertarian Jesus.

Our fourth item makes a lot of sense if you know history.

Last but not least, here’s a version of “real socialism hasn’t been tried.”

P.S. If you want information on why socialism is bad economics, you can peruse my three–part series.

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Is Venezuela a Warning for the United States?

Thanks to socialism, Venezuela is a basket case.

This video from John Stossel asks if the United States can and should learn from this bad example.

The easy answer is yes. Indeed, you can click here and here to get 56 examples of why we should not copy Venezuela’s descent to statism.

The main thing to understand is that the world is an economic laboratory and the various countries are experiments showing what works and what doesn’t work.

Nations such as Venezuela clearly are wretched examples of what happens if there is a large amount of bad policy.

Other nations, by contrast, are examples of what happens if there’s a medium level of bad policy. Think Greece, Argentina, and Italy.

While countries such as the United States and Denmark show what happens if there is a (comparatively) modest amount of bad policy.

All this is depicted in the “socialism slide,” which I created back in 2019 to show how nations score in the Fraser Institute’s Economic Freedom of the World.

The good news is that the United States would have to fall a long way down the slide before approaching Venezuela-style economic despotism.

Even Biden’s plan would represent just a small step in that wrong direction.

P.S. I’m focused on the dangers of copying Venezuela’s bad economic policies, but I agree about the downsides of the other two policies – gun control and speech control – mentioned in the video.

P.P.S. I’ll never stop being amazed that the New York Times wrote about Venezuela’s economic crisis and never once mentioned socialism.

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Socialism Humor

I want people to understand the intellectual and empirical case against socialism, as summarized in my three-part series (Part I, Part II, and Part III).

But I also recognize that most people aren’t that excited about nerdy economic-themed articles.

Which is why I also use satire as a weapon against collectivism. And updating our collection of collectivism humor is the focus of today’s column.

Our first item combines economic issues such as tax rates and redistribution with basic notions of fairness (properly defined).

Our second item points out how socialists are generally huge hypocrites.

Once they accumulate some money, they magically decide that their knee-jerk policy of “tax the rich” somehow only applies to the people who have even more than they do.

Needless to say, they almost never voluntarily give away their money, either to government or directly to poor people.

Our third bit of humor for today’s column shows how our statist friends are at war with facts, evidence, and the real world.

Speaking of real-world evidence, @iowahawkblog brags that the Chicago Cubs have a better track record than socialists.

Per tradition, I’ve saved the best for last.

Here’s a meme showing that socialism is capable of solving one societal problem.

P.S. For those who want to understand more about socialism, particularly how it compares to capitalism and redistributionism, my five-part series from 2019 on “socialism in the modern world” looks at Venezuela, Nordic nations, Greece, and France.

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A Primer on Free Enterprise vs. Big Government

I’ve made the case for capitalism (Part I, Part II, Part III, Part IV, and Part V) and the case against socialism (Part I, Part II, and Part III), while also noting that there’s a separate case to be made against redistribution and the welfare state.

This video hopefully ties together all that analysis.

If you don’t want to spend 10-plus minutes watching the video, I can sum everything up in just two sentences.

1. Genuine socialism (government ownership, central planning, and price controls) is an utter failure and is almost nonexistent today (only in a few basket-case economies like Cuba and North Korea).
2. The real threat to free enterprise and economic liberty is from redistributionism, the notion that politicians should play Santa Claus and give us a never-ending stream of cradle-to-grave goodies.

For purposes of today’s column, though, I want to focus on a small slice of the presentation (beginning about 2:00).

Here’s the slide from that portion of the video.

I make the all-important point that profits are laudable – but only if they are earned in the free market and not because of bailouts, subsidies, protectionism, or a tilted playing field.

This is hardly a recent revelation.

I first wrote about this topic back in 2009.

And many other supporters of genuine economic liberty have been making this point for much longer.

Or more recently. In a new article for City Journal, Luigi Zingales emphasizes that being pro-market does not mean being pro-business.

The first time I visited the Grand Canyon many years ago, I was struck…by a sign that said, “Please don’t feed the wild animals.” Underneath was an explanation: you shouldn’t feed them because it’s not good for them. …We should post something of this kind on Capitol Hill as well—with the difference being that the sign would read, “Please don’t feed the businesses.” That’s not because we don’t like business. Quite the opposite: we love business so much that we don’t want to create a situation where business is so dependent on…a system of subsidies, that it is unable to compete and succeed… This is the…difference between being pro-market and being pro-business. If you are pro-business, you like subsidies for businesses; you want to make sure that they make the largest profits possible. If, on the other hand, you are pro-markets, you want to behave like the ranger in the Grand Canyon: …ensuring that markets remain competitive and…preventing businesses from becoming too dependent on a crony system to survive.

Amen.

Cronyism is bad economic policy because government is tilting the playing field and luring people and businesses into making inefficient choices.

But I also despise cronyism because some people mistakenly think it is a feature of free enterprise (particularly the people who incorrectly assume that being pro-market is the same as being pro-business).

The moral of the story is that we should have separation of business and state.

P.S. There’s one other point from Prof. Zingales’ article that deserves attention.

He gives us a definition of capitalism (oops, I mean free enterprise).

We use the term “free markets” so often that we sometimes forget what it actually means. If you look up “free markets” in the dictionary, you might see “an economy operating by free competition,” or better, “an economic market or system in which prices are based on competition among private businesses and not controlled by a government.”

For what it’s worth, I did the same thing for my presentation (which was to the New Economic School in the country of Georgia).

Here’s what I came up with.

By the way, the last bullet point is what economists mean when they say things are “complementary.”

In other words, capital is more valuable when combined with labor and labor is more valuable when combined with capital – as illustrated by this old British cartoon (and it’s the role of entrepreneurs to figure out newer and better ways of combining those two factors of production).

One takeaway from this is that Marx was wrong. Capital doesn’t exploit labor. Capital enriches labor (just as labor enriches capital).

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