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Posts Tagged ‘Statism’

Two days ago, I shared the most morally reprehensible tweet of the year.

Today, we’re going to share a tweet that also is painful to read, but in this case only our friends on the left will be discomforted.

I’ve opined about Chile’s success and Venezuela’s failure on multiple occasions, but here’s the great José Piñera with an especially powerful comparison of the two nations.

I’ve had dozens and dozens of conversations with friends on the left about Chile and Venezuela and they have no response other than to sputter “Pinochet was a dictator!”

That’s true, I tell them, but please respond to my question about what we can learn when we compare Chile’s successful experience with economic liberty and Venezuela’s awful experience with statism.

At which point they bring up Pinochet again and refuse to deal with the actual data.

Speaking of data, since embedding a chart in a tweet sometimes doesn’t lead to the most user-friendly presentation, I went to the Our World in Data website to create my own version of Jose’s chart.

This type of chart looks at “relative changes” in per-capita economic output, so all nations start at the same place and we then examine which ones grew the fastest.

Or, in the case of Venezuela, which ones declined (and the ones, such as Argentina, that performed poorly).

Here’s another version of the chart, but this one gets rid of all the other nations so we can more easily compare Chile and Venezuela. As José Piñera wrote in his tweet, this is “extraordinary.”

Because Venezuela has a lot of oil, the nation’s economy does face exaggerated ups and downs as energy prices fluctuate.

But it’s easy to see a trend of economic stagnation (the nation’s energy industry was nationalized and is now collapsing, so that will augment Venezuela’s misery).

Our final version of the chat adds the average performance for the world and the average performance for Latin America. As you can see, Chile is still the best performer and Venezuela is still at the bottom.

I’ll close with two final observations.

But perhaps José Piñera‘s preferred candidate, José Antonio Kast Rist, will win this year’s election and save Chile from going in the wrong direction.

P.S. Venezuela used to be much richer than Chile, so it makes sense that Chile began to converge. But now the two countries are part of the anti-convergence club because Chile is now richer and continuing to grow much faster.

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Don Boudreaux, Deirdre McCloskey, and Dan Hannan have all explained how capitalism enabled mass prosperity after endless stagnation and poverty.

There’s a similar message in this video from Kite & Key Media. The most relevant parts start at 2:30, though I recommend watching the entire video.

But if you don’t have time to watch any of the video, here are four of the key points.

  1. We are much richer, on average, than we were 50 years ago. This is a point I made both in June and September, and it’s worth adding that the all income groups tend to rise together.
  2. There was almost no growth for much of world history, a dismal reality that is beyond the comprehension of politicians such as Congresswoman Ayanna Pressley.
  3. Technological progress enabled by capitalism not only ended mass poverty, but it also brings many luxuries within reach of lower-income and middle-class people.
  4. As shown by basket cases such as Venezuela, Lebanon, and North Korea, bad policy can wreck economic progress.

Regarding point #4, my only complaint with the video is that some viewers might conclude that economic growth will be automatic so long as politicians don’t make catastrophic Venezuelan-style policy mistakes.

It would have been nice to point out that, yes, the worst-possible set of policies produces the worst-possible economic damage, but also to explain that a modest amount of statism can hurt growth by a modest amount and a lot of statism can hurt growth by a significant amount.

In other words, there’s a spectrum of possible policy outcomes (I’ve also referred to this as the “socialism slide“) and it’s best to get as close to laissez-faire capitalism as possible.

Remember, even small differences in economic growth lead to big differences in long-run living standards. And the “size of the pie” is a good predictor of whether a nation enjoys broadly shared prosperity.

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Economists of all types agree with “convergence theory,” which is the notion that poor countries should grow faster than rich countries.

Though they are usually wise enough to also say “ceteris parisbus,” which means the theory applies if other variables are similar (the translation from Latin is “other things equal”).

I’m very interested in this theory because we can learn a lot when we look at nations that don’t have “equal” policies.

And the biggest lesson is that you have divergence rather than convergence if one nation follows good policies and the other one embraces statism.

Take a look, for instance, at what’s happened to per-capita economic output (GDP) since 1950 in Taiwan and Cuba.

The obvious takeaway from these numbers from the Maddison database is that Taiwan has enjoyed spectacular growth while Cuba has suffered decades of stagnation.

If this was a boxing match between capitalism and socialism, the refs would have stopped the fight several decades ago.

By the way, some folks on the left claim that Cuba’s economic misery is a result of the U.S. trade embargo.

In a column for the Foundation for Economic Education, Emmanuel Rincón explains the real reason why these two jurisdictions are so wildly divergent.

…the Communist Party of Cuba has blamed the United States for Cuba’s misery and poverty, alluding to the “blockade” that the U.S. maintains against Cuba. However, …the rest of the world can trade freely with the island. …Taiwan’s economy is one of the most important in the world, with a poverty rate of 0.7%, as opposed to Cuba, which has one of the most depressed economies on the planet and 90% of its population living in poverty. What is the difference between the two islands? The economic and political model they applied in their nations. …Taiwan has the sixth freest economy according to the Index of Economic Freedom… While Taiwan took off with a capitalist model, Cuba remained anchored in the old revolutionary dogmas of Fidel Castro… With popular slogans such as redistribution of wealth, supposed aid to the poor, and socialism, Fidel Castro began to expropriate land and private companies to be managed by the state…today the GDP of the Caribbean island is five times less than that of Taiwan, and 90% of its population lives in poverty, while in the Asian island only 0.7% of its population is poor. It is definitely not the fault of the “blockade”, but of socialism.

To be sure, Cuba would be slightly less poor if there was unfettered trade with the United States, so maybe Taiwan would only be four and one-half times richer rather than five times richer in the absence of an embargo.

The moral of the story is that there’s no substitute for free markets and small government.

P.S. Though I appreciate the fact that our friends on the left are willing to extol the virtues of free trade, at least in this rare instance.

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Two years ago, I wrote that China needed to choose between “Statism and Stagnation or Reform and Prosperity.”

Sadly, as I noted last month in Part I of this series, it seems that President Xi is opting for the former.

Which is unfortunate since China needs a lot more growth to get anywhere near U.S. levels of prosperity.

Yet that’s not very likely when the United States is ranked #6 and China is ranked #116 for economic liberty.

For what it’s worth, China’s score is likely to drop in future years rather than rise, and I’m certainly not the only one to notice that China has economic problems.

Writing for the Atlantic, David Frum looks at the country’s shaky economic outlook.

China’s economic, financial, technological, and military strength is hugely exaggerated by crude and inaccurate statistics. Meanwhile, U.S. advantages are persistently underestimated. The claim that China will “overtake” the U.S. in any meaningful way is polemical and wrong… China misallocates capital on a massive scale. More than a fifth of China’s housing stock is empty—the detritus of a frenzied construction boom that built too many apartments in the wrong places. China overcapitalizes at home because Chinese investors are prohibited from doing what they most want to do: get their money out of China. …More than one-third of the richest Chinese would emigrate if they could, according to research by one of the country’s leading wealth-management firms.

David mentioned “inaccurate statistics,” which is a big problem in China.

But I also worry about bubble statistics, which is an issue the Wall Street Journal editorialized about earlier this year.

…credit has exploded, with total public and private debt expected to exceed 270% of GDP in 2020, up 30 points in one year. Most of that has gone to state-owned firms and exporters. Smaller, more productive private companies that serve the domestic market report credit shortages. This undermines long-term growth… Unless China can unlock and expand its productive private economy, it will never be able to manage the burden of the debt Beijing has created.. China’s unbalanced recovery represents an enormous lost opportunity for the Chinese people.

David Ignatius of the Washington Post opines on President Xi’s embrace of bad policy.

President Xi Jinping has moved down a Maoist path this year toward tighter state control of the economy — including “self-criticism” sessions for Chinese business and political leaders whose crime, it seems, was being too successful. Xi’s leftward turn represents a major change… The result is a severe squeeze on what Xi views as “undisciplined” entrepreneurs. …Xi’s crackdown has rocked the Chinese economy. The top six technology stocks have lost more than $1.1 trillion in value over the past six months… Xi is animated by what he has called his “China Dream,” of a nation of unparalleled wealth and power — and also the egalitarian ideals of socialism.

In a column for the Wall Street Journal, Dennis Kwok and Johnny Patterson warn that private investors should not trust the Chinese government.

Beijing’s crackdown on private businesses has wiped out hundreds of billions of dollars in market value in the past two months. Under the policies of “advancement of the state, and retreat of private enterprises” and “common prosperity,” the state’s tightening of control will increase. …Beijing assails “foreign forces” for seeking to curb China’s rise as a great nation. That refrain is constantly pushed by state media… Investors and shareholders of Wall Street firms must understand that there has been a paradigm shift in Mr. Xi’s China. Long gone are the days of pragmatism. What the Chinese state wants, the Chinese state gets.

In an article for the Atlantic, Michael Schuman explains how China’s heavy subsidies for electric cars haven’t produced vehicles that can compete with Tesla and other western  vehicles.

Do Chinese state programs actually work? …bureaucrats have never stopped meddling with markets. State direction, state money, and state enterprises remain core features of the Chinese economic model. President Xi Jinping has even reversed the trend toward greater economic freedom, notably with a hefty dose of state-led programs aimed at accelerating the progress of specific sectors. …China’s industrial program has resulted in a lot of production, but only questionable competitiveness. Even Beijing’s spendthrift bureaucrats seem to have awoken to that—sort of. They’ve been rolling back direct subsidies to carmakers, with an eye on eliminating them.

In other words, industrial policy is backfiring on China.

The former Prime Minister of Australia, Kevin Rudd, opined for the Wall Street Journal about China’s resurgent statism

In recent months Beijing killed the country’s $120 billion private tutoring sector and slapped hefty fines on tech firms Tencent and Alibaba. Chinese executives have been summoned to the capitol to “self-rectify their misconduct” and billionaires have begun donating to charitable causes in what President Xi Jinping calls “tertiary income redistribution.” China’s top six technology stocks have lost more than $1.1 trillion in value in the past six months… Mr. Xi is executing an economic pivot to the party and the state… Demographics is also driving Chinese economic policy to the left. The May 2021 census revealed birthrates had fallen sharply to 1.3—lower than in Japan and the U.S. China is aging fast. The working-age population peaked in 2011… While the politics of his pivot to the state may make sense internally, if Chinese growth begins to stall Mr. Xi may discover he had the underlying economics very wrong.

That final sentence is key.

Free enterprise is only tried-and-true recipe for economic prosperity. Chinese leaders are wrong to think they can get faster growth with more intervention.

Simply stated, China appears to be moving further left on this spectrum when it desperately needs to move to the right.

The bottom line is that I’m not optimistic about the future of China.

The country needs a Reagan-style agenda (the approach used by Singapore, Hong Kong, and Taiwan) to achieve genuine convergence.

P.S. Amazingly, both the IMF and OECD are encouraging more statism in China.

P.P.S. I used to be hopeful about China. During the 1950s, 1960s, and 1970s, China was horrifically impoverished because of socialist policies. According to the Maddison database, the country was actually poorer under communism than it was 1,000 years ago. But there was then a bit of economic liberalization starting in 1979, which generated very positive results. As a result, there was a significant increase in living standards and a huge reduction in poverty. But that progress has ground to a halt.

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The Fraser Institute in Canada has released its latest edition of Economic Freedom of the World, an index that measure and ranks nations based on whether they follow pro-growth policy.

Based on the latest available data on key indicators such as taxes, spending, regulation, trade policy, rule of law, and monetary policy, here are the top-20 nations.

You may be wondering how Hong Kong is still ranked #1.

In this summary of the findings, the authors explain that EFW is based on 2019 data. In other words, before Beijing cracked down. This means Hong Kong will probably not be the most-free jurisdiction when future editions are released.

The most recent comprehensive data available are from 2019. Hong Kong remains in the top position. The apparent increased insecurity of property rights and the weakening of the rule of law caused by the interventions of the Chinese government during 2020 and 2021 will likely have a negative impact on Hong Kong’s score, especially in Area 2, Legal System and Property Rights, going forward. Singapore, once again, comes in second. The next highest scoring nations are New Zealand, Switzerland, Georgia, United States, Ireland, Lithuania, Australia, and Denmark.

The United States was #6 in last year’s edition and it remains at #6 this year.

There are some other notable changes. The country of Georgia jumped to #5 while Australia dropped to #9.

Perhaps the most discouraging development is that Chile dropped to #29, a very disappointing result (and perhaps a harbinger of further decline in the nation that used to be known as the Latin Tiger).

And it’s also bad news that Canada has deteriorated over the past five years, dropping from #6 to #14.

The good news is that the world, on average, is slowly but surely moving in the right direction. Not as rapidly as it did during the era of the “Washington Consensus,” but progress nonetheless.

By the way, the progress is almost entirely a consequence of better policy in developing nations, especially the countries that escaped the tyranny of Soviet communism.

Policy has drifted in the wrong direction, by contrast, in the United States and Western Europe.

Indeed, the United States currently would be ranked #3 if it still enjoyed the level of economic liberty that existed in 2000.

In other words, the BushObamaTrump years have been somewhat disappointing.

Let’s look at another chart from the report. I’ve previously pointed out that there’s a strong relationship between economic freedom and national prosperity.

Well, here’s some additional evidence.

Let’s close by considering some of the nations represented by the red bar in the above chart.

You probably won’t be surprised to learn that Venezuela is once again ranked last. Though it is noteworthy that its score dropped from 3.31 to 2.83. I guess Maduro and the other socialists in Venezuela have a motto, “when you’re in a hole, keep digging.”

Argentina isn’t quite as bad as Venezuela, but I also think it’s remarkable that its score dropped from 5.88 to 5.50. That’s a big drop from a nation that already has a bad score.

Given these developments (as well as what’s happening in Chile), it’s not easy to be optimistic about Latin America.

P.S. There isn’t enough reliable data to rank Cuba and North Korea, so it’s quite likely that Venezuela doesn’t actually have the world’s most-oppressive economic policies.

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What motivates the tax-and-spend crowd? Why do they want high tax rates and a big welfare state?

The most charitable answer is that they don’t want anyone to suffer from poverty and they mistakenly think big government can solve problems.

But there’s another answer that may be more accurate.

As Margaret Thatcher observed about three decades ago, it seems that many folks on the left are primarily motivated by jealousy and resentment against their successful neighbors.

I realize I’m making an ugly accusation. But in my defense, I’m simply reporting what they write. Or what they admit to pollsters.

And now we have another example. Christine Emba of the Washington Post opined earlier this year that politicians should somehow put a ceiling on how much wealth any American can create.

The most shocking thing about ProPublica’s extensive report on the leaked tax returns of the super-rich wasn’t what the report contained — it was the fact that we’re barely shocked anymore. …we, as a society, let them do it. …every billionaire is a policy failure. But more than that, every billionaire is a failure of our own moral imagination. …Should we tax capital gains at a higher rate? Raise the corporate tax rate? Create a wealth tax? (I’d vote yes to all three.) But these debates are small bore. …Instead of debating tweaks at the edges of our tax system, what we should be…focused less on what is “allowed”… Such a philosophy already exists. It’s called limitarianism. …Just as there is a poverty line under which we agree that no one should fall, limitarianism holds that one can construct a “wealth line” over which no one should rise, and that the world would be better off for it.

Ms. Emba doesn’t explain how her “limitarian” policy might be implemented.

But since she’s embraced a wealth tax, the simple way to achieve her goal would be adding a 100 percent rate to that levy for any taxpayers who create so much wealth for society that they wind up with assets of $1 billion.

In case you think I’m joking, here’s part of her conclusion.

…the prospect of having “only” $999 million dollars would not stop innovators in their tracks. And even if it did stop some, would the trade-off be so bad?

I’ll close this column by answering her rhetorical question.

The trade-off wouldn’t just be bad, it would be terrible. A wealth tax (or any other possible policy to achiever her “limitarian” utopia) necessarily would reduce saving and investment.

And that would mean less innovation, slower (or negative) productivity growth, and wage stagnation (or decline).

Which is a good excuse to recycle my Eighth Theorem of Government.

Simply stated, here’s little reason to think that the folks who hate their successful neighbors actually care about their poor neighbors.

P.S. The New York Times also has published a column embracing the resentment-fueled limitarian notion.

P.P.S. Plenty of folks on the left explicitly argue that government has first claim on income. And that you’re the beneficiary of a favor if you get to keep some of what you earn. Once again, I’m not joking.

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Long-time readers know that I periodically pour cold water on the notion that China is an economic superstar.

Yes, China did engage in some economic liberalization late last century, and those reforms should be applauded because they were very successful in reducing severe poverty.

But from a big-picture perspective, all that really happened is that China went from terrible policy (Maoist communism) to bad policy (best described as mass cronyism).

Economic Freedom of the World has the best data. According to the latest edition, China’s score for economic liberty rose from a horrible 3.69 in 1990 to 6.21 in 2018.

That’s a big improvement, but that still leaves China in the bottom quartile (ranking #124 in the world). Better than Venezuela (#162), to be sure, but way behind even uncompetitive welfare states such as Greece (#92), France (#58), and Italy (#51).

And I fear China’s score will get even worse in the near future.

Why? Because it seems President Xi is going to impose class-warfare tax increases.

In an article for the Guardian, Phillip Inman shares some of the details.

China’s president has vowed to “adjust excessive incomes” in a warning to the country’s super-rich that the state plans to redistribute wealth… The policy goal comes amid a sweeping push by Beijing to rein in the country’s largest private firms in industries, ranging from technology to education. …Xi…is expected to expand wealth taxes and raise income tax rates… Some reforms could be far reaching, including higher taxes on capital gains, inheritance and property. Higher public sector wages are also expected to be part of the package.

And here are some excerpts from a report by Jane Li for Quartz.

Chinese president Xi Jinping yesterday sent a stark message to the country’s wealthy: It is time to redistribute their excessive fortunes. …Another reason for the Party’s focus on outsize wealth is to reduce rival centers of power and influence in China, which has also been an impetus for its crackdown on the tech sector… China already has fairly high income tax rates for its wealthiest. That includes a top income tax rate of 45% for those who earn more than 960,000 yuan ($150,000) a year… Upcoming moves could include…a nationwide property tax.

These stories may warm the hearts of Joe Biden and Bernie Sanders, but they help to explain why I’m not optimistic about China’s economy.

If you review the Economic Freedom of the World data, you find that China is especially bad on fiscal policy (“size of government”), ranking #153.

That’s worse than China does even on regulation.

Yet the Chinese government is now going to impose higher taxes to fund even bigger government?!?

Is the goal to be even worse than Venezuela and Zimbabwe?

P.S. Many wealthy people in China (maybe even most of them) achieved their high incomes thanks to government favoritism, so there’s a very strong argument that their riches are undeserved. But the best policy response is getting rid of industrial policy rather than imposing tax increases that will hit both good rich people and bad rich people.

P.P.S. I’ve criticized both the OECD and IMF for advocating higher taxes in China. A few readers have sent emails asking whether those international bureaucracies might be deliberately trying to sabotage China’s economy and thus preserve the dominance of Europe and the United States. Given the wretched track records of the OECD and IMF, I think it’s far more likely that the bureaucrats from those organizations sincerely support those bad policies (especially since they get tax-free salaries and are sheltered from the negative consequences).

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As I’ve repeatedly pointed out, capitalism (oops, I mean free enterprise) is far superior than the various forms of statism.

Just last month, I shared a video with 20 example of market-friendly jurisdictions growing much faster than government-dominated nations.

But markets aren’t just superior at producing mass prosperity. Or at reducing mass poverty (the normal state of human existence).

Free enterprise also is the best option for dealing with a pandemic.

I wrote back in March about how free markets saved the day after the coronavirus struck.

In a column for the Wall Street Journal, Walter Russell Mead further elaborates on this theme.

The World Health Organization has been a shame and a disgrace, from its initial silence over China’s coverup of early data on the outbreak through its unreasoning hostility toward Taiwan and its collusion with Beijing’s efforts to discredit the lab-leak hypothesis. The premier international health agency has failed. Covax, the much-touted international program aimed at providing vaccines to citizens of countries too poor to purchase adequate supplies on the open market, has also fallen abysmally short. …What’s worked in the pandemic so far has been the dog everyone wants to kick: Big Pharma. Pfizer, Moderna, AstraZeneca and Johnson & Johnson succeeded where the internationalists failed. Scientists in free societies working with the resources that capitalism provides have given the world hope. The WHO, Covax, the Chinese and Russian vaccines, and the “global community,” not so much.

Amen. Let’s be thankful for pharmaceutical companies. Their pursuit of profit is what led to the vaccines that have saved millions of lives.

By contrast, the WHO has been very unhelpful.

And America’s domestic bureaucracies, the FDA and CDC, have arguably been harmful.

Notwithstanding this track record, the Biden Administration wants to weaken the private sector.

The Biden administration…seems to believe that the best response…is to sabotage the American pharmaceutical industry. The U.S. development bank—the International Development Finance Corp.—will provide billions of dollars to firms based in countries like Brazil, Rwanda, Senegal, South Africa and South Korea that agree to manufacture Covid-19 vaccines. Meanwhile, the State Department’s coordinator for global Covid response, Gayle Smith, said last week that she wants to push Big Pharma to share its technology with its new government-subsidized foreign competitors. …one wonders exactly how President Biden squares subsidizing cheap overseas competition for one of the most successful industries in the U.S. with promoting jobs for the American middle class.

This proposal is nuts.

Only curmudgeonly libertarians will get upset about an effort to subsidize vaccines for the developing world.

But every rational person should be horrified about a plan that would weaken one of America’s most successful industries.

P.S. Moreover, we should reject short-sighted policies such as European-style price controls on drug companies. Such an approach would undermine our ability to deal with future pandemics and also reduce the likelihood of new and improved treatments for things such as cancer, dementia, and heart disease.

P.P.S. I like pharmaceutical companies when they are being honest participants in a free market. I don’t like them when they get in bed with big government.

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It’s been almost three months since I shared some satiric images about government.

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

We’ll start with some very wise words from Forest Gump (not the imposter).

The second item in today’s collection sort of reminds me of this “shovel” cartoon about Keynesian economics.

Both involve pointless gestures that will never produce results.

I don’t think I need to add any commentary to this next photo.

I shared a cartoon many years ago suggesting that organized crime and government have a lot in common.

Here’s a different view.

Per tradition, I’ve saved my favorite example for the conclusion.

The lower-right frame may not be proof of a stroke, but it’s definitely evidence of brain damage of some kind.

Remember, you’ve asked a very strange question if government is the answer.

P.S. My full collection of amusing images (and cartoons) about government can be viewed here.

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Economists widely agree with the theory of “convergence,” which is the (mostly true) idea that poor nations should grow faster than rich nations.

This means that we can learn important lessons by looking at examples of “divergence,” and I provide 20 examples in this presentation.

The above video is an excerpt from a presentation I made earlier this week to a seminar organized by the New Economic School in the country of Georgia.

While it seems like I was making the same point, over and over again (and I was), I wanted the students to understand that the real-world evidence clearly shows that good policy is critical if less-developed nations want convergence.

And I also wanted them to realize that there are many examples of free market-oriented nations growing much faster than anti-market countries.

But, by contrast, there are not examples that go the other way.

I’ve challenged my leftist friends to cite one case study of a poor nation that became a rich nation with big government.

Or to cite a single example of an anti-market nation that has grown faster than a market-oriented country.

Especially when using decades of data, which means there’s no ability to cherry-pick the data and create a misleading impression.

Needless to say, I’m still waiting for them to give me an answer.

Here are the background stories from the examples of divergence in my presentation.

My last example showed important examples of convergence.

  • Example #20: United States vs. Hong Kong, Singapore, and Switzerland

And here are a few other examples of divergence that I didn’t include in my presentation.

Shifting back to convergence, my column on breaking out of the “middle income trap” also has very interesting data on how Hong Kong, Singapore, Ireland, and Taiwan have closed the gap with (or even exceeded) the United States.

I also recommend this column which looks at a wide range of nations that are converging with, diverging from, or staying flat compared with the United States, as well as this column showing how Ireland has caught up and surpassed other European nations.

The moral of the story is that there’s a very simple recipe showing how poor nations can become rich nations.

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When writing about economic policy in Latin America, Chile gets lots of attention because it’s a remarkable story of success.

Similarly, Venezuela gets lots of attention because it’s a remarkable story of failure (with Argentina also deserving condemnation for its downward slide).

But we can also learn from other Latin nations.

For instance, I wrote back in 2016 that Peru was one of the world’s “overlooked success stories” because of a big increase in economic liberty back in the good ol’ days of the Washington Consensus.

The huge increase in economic liberty that began in the mid-1980s has subsequently been followed by a period of stability.

Policy is not perfect in Peru, especially with regards to regulation and the legal system.

But it is #29 in the world according to the most-recent edition of Economic Freedom of the World, which puts the country in the “most free” quartile.

Not bad for a nation that was in the “least free” quartile as recently as 1990 (and among the five-lowest-scoring nations in 1985).

Perhaps more important, the economic liberalization in Peru is paying dividends.

Looking at the Maddison data on per-capita GDP (adjusted for inflation), you can see that living standards have basically doubled this century.

In this case, “not bad” would be an extreme understatement. Peru deserves to be viewed as a success story.

Now for some bad news.

While Peru has made great progress in recent decades, the nation may be on the verge of slipping into Venezuelan-style economic mismanagement following the recent election of Pedro Castillo, who campaigned on a far-left platform.

Surprisingly, the Washington Post has a superb editorial on this topic.

Now, the question is whether Mr. Castillo will seek to undermine…the country’s free market economy, or pursue or a more moderate course. At stake is whether the South American country of 32 million will follow the disastrous example of Venezuela, whose autocratic socialist regime has destroyed its prosperity, or continue what, until the covid-19 pandemic, was a record of steadily rising living standards. …Mr. Castillo, who was nominated by a Marxist-Leninist party founded by a Cuba-educated hardliner, says he is not a Communist. He campaigned on nationalizing the mining companies that are the foundation of the economy and summoning a constituent assembly to rewrite the constitution, the political tactic pioneered by Venezuelan strongman Hugo Chávez. But the head of his economics transition team has said there will be no nationalizations, expropriations, or exchange and price controls, and Mr. Castillo has indicated he will leave the conservative president of the central bank in place.Given that the president’s party lacks the parliamentary majority it would need to authorize a new constitution or change foreign investment laws… Venezuela’s implosion, which has caused 5 million people to flee the country for its neighbors — including 1 million in Peru — has demonstrated the consequences of leftist misrule for the region.

Wow, that’s a great defense of free markets that shows a great understanding that statism is a recipe for disaster.

I only wish the Washington Post was similarly concerned about “leftist misrule” in the United States (a.k.a., the Biden-Bernie agenda).

But I’m digressing. For purposes of today’s analysis, let’s simply hope that soon-to-be President Castillo doesn’t wreck Peru’s progress.

After all, we know the recipe for growth and prosperity, so it makes sense to worry when politicians want to do the opposite.

P.S. Let’s similarly hope that Chile’s progress isn’t undone by a new, dirigiste constitution.

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Part I of this series looked at socialism’s track record of failure, while Part II pointed out that greater levels of socialism lead to greater levels of misery.

For Part III, let’s start with this video on the economics of socialism.

If the world was governed by logic, there would be no need to address this topic for a third time.

After all, the evidence is overwhelming that capitalism (oops, I mean free enterprise) does a better job than socialism.

But it seems that we don’t live in a logical world. We have too many people who have an anti-empirical belief in bigger government.

And, if the polling data is accurate, the problem seems especially acute with young people.

I’ve wondered whether sub-par government schools are part of the problem. Are they mis-educating kids?

I don’t know if that was a problem in the past, but Richard Rahn warns in the Washington Times that it will probably be a problem in the future.

Recent polls have shown rising support for socialism and an increasingly negative view of capitalism, particularly among the young.  …Most of those who say they support socialism are probably unaware that it has failed every place and time that it has been tried. …They may also not be aware that socialism relies on coercion to function… By contrast, capitalism relies on the voluntary exchange of goods and services… Last week at the NEA’s annual meeting, the delegates demanded that the union issue a study criticizing, among many things, “capitalism.” Has anyone thought through the alternatives – a system based on slavery or serfdom…? Under capitalism, investment and productive labor are allocated by individual consumer choice. …Under socialism, there is no good mechanism for meeting consumer demand; the socialist leaders decide what the people should have. There is no mechanism for creating and encouraging innovation – that is why socialist states normally only produce something new after it has already been produced in a capitalist country… So why then are the teachers’ unions advocating that capitalism be attacked, and socialism be applauded? The answer is simple, willful ignorance.

I’ve always supported school choice because I want better educational outcomes, especially for poor and minority students.

In recent months, I’ve wondered we also need school choice because of what teacher unions are doing on issues such as critical race theory and school re-openings.

Now it seems we need choice simply to protect kids from the risk of being propagandized.

P.S. Or protect kids from nonsensical forms of discipline.

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One week ago, I shared five images that capture the essence of government.

Today, we have another collection, starting with a reminder of, in the words of Ronald Reagan, the most terrifying words in the English language.

Next, we have warning signs about all sorts of things, but not about the the biggest threat we face.

Our third item captures what happens over time as a small government becomes medium-sized government and then evolves into big government.

Here’s a succinct explanation of how government and organized crime are similar (though here’s a cartoon reminding us how they are different).

Here’s my favorite, though given the spending proclivities of many Republicans, it should simply read “politicians promising everything for ‘free’.”

You get the same message from this Glenn McCoy cartoon and this Michael Ramirez cartoon.

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My approach during the Trump years was very simple.

Other people, however, muted their views on policy because of their partisan or personal feelings about Trump.

I was very disappointed, for instance, that some Republicans abandoned (or at least downplayed) their support for free trade to accommodate Trump’s illiteracy on that issue.

But those people look like pillars of stability and principle compared to the folks who decided to completely switch their views.

Max Boot, for instance, is a former adviser on foreign policy to Republicans such as John McCain and Marco Rubio, who has decided that being anti-Trump means he should now act like a cheerleader for high taxes and big government.

Here’s some of what he wrote in a column for today’s Washington Post.

Republicans accuse President Biden of pursuing a radical agenda that will turn the United States into a failed socialist state. …It’s true that Biden is proposing a considerable amount of new spending… But those investments won’t turn us into North Korea, Cuba, Venezuela or the Soviet Union — all countries with government ownership of industry. …with proposals such as federally subsidized child care, elder care, family leave and pre-K education — financed with modest tax increases on corporations and wealthy individuals — Biden is merely moving us a bit closer to the kinds of government services that other wealthy, industrialized democracies already take for granted. …That’s far from radical. It’s simply sensible.

Part of the above excerpt makes sense. Biden is not proposing socialism, at least if we use the technical definition.

And he’s also correct that Biden isn’t trying to turn us into North Korea, Cuba, Venezuela, or the Soviet Union.

But he does think it’s good that Biden wants to copy Europe’s high-tax welfare states.

…by most indexes we are an embarrassing international laggard. …the United States spends nearly twice as much on health care as a percentage of gross domestic product than do other wealthy countries… The United States is also alone among OECD nations in not having universal paid family leave. …Our level of income inequality is now closer to that of developing countries in Africa and Latin American than to our European allies. …it’s possible to combine a vibrant free market with generous social welfare spending. In fact, that’s the right formula for a more satisfied and stable society. In the OECD quality-of-life rankings — which include everything from housing to work-life balance — the United States ranks an unimpressive 10th.

Mr. Boot seem to think that it’s bad news that the United States ranks 10th out of 37 nations in the OECD’s so-called Better Life Index.

I wonder if he understands, however, that this index has serious methodological flaws – such as countries getting better scores if they have bigger subsidies that encourage unemployment? Or countries getting better scores if they have high tax rates that discourage labor supply?

But the real problem is that Boot seems oblivious to most important data, which shows that Americans enjoy far more prosperity than Europeans.

And he could have learned that with a few more clicks on the OECD’s website. He could have found the data on average individual consumption and discovered the huge gap between U.S. prosperity and European mediocrity.

The obvious takeaway is that big government causes deadweight loss and hinders growth (as honest folks on the left have always acknowledged).

P.S. I can’t resist nit-picking four other points in Boot’s column.

  1. As show by this Chuck Asay cartoon, you don’t magically make government spending productive simply be calling it an “investment.”
  2. Like beauty, the interpretation of “modest” may be in the eye of the beholder, but it certainly seems like “massive” is a better description of Biden’s proposed tax hikes.
  3. It’s worth noting that Europe became a relatively prosperous part of the world before governments adopted punitive income taxes and created big welfare states.
  4. America’s excessive spending on health is caused by third-party payer, which is caused by excessive government intervention.

P.P.S. I’ve wondered whether the OECD (subsidized by American taxpayers!) deliberately used dodgy measures when compiling the Better Life Index in part because of a desire to make the U.S. look bad compared to the European welfare states that dominate the organization’s membership? That certainly seems to have been the case when the OECD put together a staggeringly dishonest measure of poverty that made the U.S. seem like it had more destitution than poor countries such as Greece, Portugal, and Turkey.

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Since more than 100 million people have been killed by communist regimes, should we conclude that Karl Marx is the worst person in world history?

To address that question, let’s start with this video from Prager University, which is narrated by Professor Paul Kengor of Grove City College.

At the risk of understatement, the video is a damning indictment of Marx’s legacy.

His political ideas provided the justification for the genocides of dictators such as Stalin, Mao, and Pol Pot.

His economic ideas led to policies that produced mass deprivation, starvation, and immense human suffering.

Now let’s take a closer look at Marx rather than just his ideas.

Was he a good person who simply had some horribly misguided ideals?

Hardly. Everything we know suggests he was a sickeningly despicable excuse for a human being.

Professor Richard Ebeling has some of the sordid details in an article for Intellectual Takeout.

Karl Marx was born on May 5, 1818, in the Rhineland town of Trier. …he was generally a lazy and good-for-nothing student. …Marx’s only real jobs during his lifetime were as occasional reporters for or editors of newspapers and journals most of which usually closed in a short period of time… He had sex enough times with the family maid that she bore him an illegitimate son… He often used racial slurs and insulting words to describe the mannerisms or appearance of his opponents in the socialist movement.  …In Marx’s mind, the Jew in bourgeois society encapsulated the essence of everything he considered despicable in the capitalist system… Marx’s caricaturing description of the asserted “Jewish mindset” rings amazingly similar to those that were later written by the Nazi “race-scientists” of the 1930s.

All told, it appears that Marx lacked a single redeeming feature. He was a very bad person with very bad ideas.

Indeed, it’s safe to assume that the best thing he did in his life occurred on March 14, 1883.

P.S. For those seeking more economic analysis, Marx advocated for the pure version of socialism, meaning government ownership of the means of production (state factories, collective farms, etc).

P.P.S. It’s disgusting that there’s a statue of Marx in his birth city and it’s equally disgusting that the former President of the European Commission went there to celebrate the 200th anniversary of his birth.

P.P.P.S. Marx gets featured frequently in my collection of jokes mocking communism.

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What nation serves as the most powerful example of how statism can wreck an economy and impoverish people?

Those are all good choices, but perhaps Argentina is the best example (or should we say worst example?).

If you go back 100 years, Argentina was one of the world’s richest nations. And, as recently as the late 1940s, it still ranked in the top 10 for per-capita economic output.

But then the nation veered to the left. Whether you call it Peronism or democratic socialism, there was a huge increase in the size and scope of government.

As you might expect, the results were terrible. Argentina since then has been the world’s worst-performing economy.

But things can always get worse.

In an article for National Review, Antonella Marty points out that President Fernandez is doing his part to continue the awful pattern of statism-generated crises in Argentina.

…it was already challenging for Argentines to maintain businesses and overcome the endless regulations and bureaucratic hurdles that comprise everyday life…the government of Alberto Fernández and Cristina Fernández de Kirchner has made matters worse… In brief: …The Argentine economy has been in recession since 2018. …Argentina ranks 126th in the World Bank’s Doing Business index, between Paraguay and Iran. It takes about five months to open a business in Argentina. …Argentina has public debt approaching 90 percent of GDP. …Argentina has one of the highest inflation rates in the world: 36.6 percent over the past year. Every month, wages steadily decline, and every 10 or 12 years, like clockwork, the Argentine peso crashes, diminishing household savings. …Argentine debt still trades at a steep discount, because investors rightfully recognize the dim prospects for a government that limits the creation of wealth through aggressive taxation, price controls, currency regulation, and skyrocketing levels of public spending. Argentina still does not realize the problem that has trapped us in a cycle of repeated crises for decades: the government. …The “solutions” invoked by left-wing Peronists — the progeny of the populist 20th-century president Juan Perón — always involve increased state intervention in the economy. Alberto Fernández has done nothing different. …As always, Argentina cannot solve the problem of big government with more government.

Perhaps the worst policy under Fernandez is the new wealth tax.

In an article for the Washington Post, Diego Laje and Anthony Faiola look at Argentina’s embrace of this destructive levy.

At least as far back as the 1940s, …class conflict has lingered just below the surface of this chronically indebted South American state. To dig itself out of a gaping fiscal hole made worse by the pandemic, Argentina is issuing a clarion call now echoing around the globe: Make the rich pay. …So why not, proponents argue, foist the cost of the epic global recession caused by the pandemic onto those who can most afford it? …Argentina, saddled with crippling debt exacerbated by the pandemic, adopted a one-time special levy on the rich in December, demanding up to 3.5 percent of the total net worth of citizens who hold at least $3.4 million of assets. …Argentina is turning to its wealthiest citizens after having lost the faith of foreign investors, and with little other means to plug financial holes. …fearful Argentines hoarded U.S. dollars, and the government, as it so often has in the past, turned to the printing press to make ends meet. Now Argentina is seeking another major bailout from the IMF… In recent months, Walmart, Latam Airlines, Uber Eats, Norwegian Airlines and Nike have reduced operations in Argentina or left the country. …Argentina crashed from its place at the top of the global wealth chain long ago, in a succession of economic crises, dictatorships and bruising political battles between the ruralistas and the Peronistas. 

The reporters don’t make the obvious connection between Peronist policies and the economy’s decline, but at least readers learn that Argentina hasn’t been doing well.

And the authors deserve credit for acknowledging that there are serious concerns about how wealth taxes can undermine prosperity.

But wealth taxes are notoriously tricky to get right, and they have a history of deeply negative side effects that can seriously undermine their intent. In France, for instance, a long-standing wealth tax, repealed in 2018, was blamed for an increase in tax dodging and the flight of thousands of the country’s richest citizens. …A decade ago, 12 of the world’s most-developed countries had wealth taxes on the books. The number has fallen to three.

I’m tempted to say the big takeaway from today’s column is that wealth taxes are a bad idea.

That’s true, of course, but the bigger lesson we should absorb is that a rich nation can become a poor nation.

Simply stated, if a government imposes enough bad policies – as has been the case in Argentina – then it’s just a matter of time before it declines relative to nations with sensible policies.

Perhaps there’s a lesson there for Joe Biden?

P.S. I sometimes fantasize that Argentina can experience a Chilean-style economic revitalization, but that seems very unlikely since even supposedly right-wing politicians pursue statist policies.

P.P.S. Though there is a small sliver of libertarianism in Argentina.

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Two years ago, I explained that socialism is an economic failure, regardless of how it is defined.

In today’s follow-up column, let’s start with an excellent video from John Stossel.

Before addressing the three myths mentioned in the video, it’s worth noting that there’s a technical definition of socialism based on policies such as government ownershipcentral planning, and price controls, and a casual definition of socialism based on policies such as punitive tax rateswelfare state, and intervention.

I don’t like any of those policies, but they are not identical.

That’s why I came up with this flowchart to help illustrate the different strains of leftism (just as, on the other side of the spectrum, Trumpism is not the same as Reaganism is not the same as libertarianism).

Now that we’ve covered definitions, let’s dig into Stossel’s video. He makes three main points.

  1. Socialist policies don’t work any better if imposed by governments that are democratically elected. Simply stated, big government doesn’t magically have good consequences simply because a politician received 51 percent of the vote in an election.
  2. Scandinavian nations are not socialist. I’ve addressed this issue several times and noted that countries such as Sweden and Denmark have costly welfare states, but they are based on private property and rely on private markets to allocate resources.
  3. Socialism has a lot in common with fascism. Stossel could have pointed out that Hitler was the head of the National Socialist Workers Party, but he focused on the less inflammatory argument that socialism and fascism both rely on government control of the economy.

By the way, Stossel also narrated an earlier video on this same topic that addressed two other topics.

First, he countered the argument that we can’t learn anything from the failure of nations such as the Soviet Union and Cuba because they did not have not “real socialism.” My two cents on that topic is to challenge socialists (or anyone else on the left) to answer this question.

Second, he addressed the specific argument that Venezuela can’t teach us anything because its collapse has nothing to do with socialism. The New York Times may want people to think Venezuela’s failure is due to factors such as low oil prices, but the real reason is that economic liberty has been extinguished.

The bottom line is that socialism doesn’t work. Regardless of how it’s defined, it’s both immoral and a recipe for economic decline.

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The economic disintegration of Venezuela is a powerful example how socialism fails. Even in a nation with massive oil wealth.

This video from Reason tells the tragic story.

I think long-run data is especially valuable when assessing a nation’s economic performance.

And Venezuela definitely looks terrible when looking at decades of data on per-capita economic output.

Especially when compared to a pro-market nations such as Chile.

Not that we should be surprised. This is what we find anytime capitalist-oriented counties are compared with statism-oriented countries.

And there are many other case studies.

But let’s re-focus on the problems of Venezuela. In one of her Wall Street Journal columns, Mary Anastasia O’Grady analyzes the government-caused crisis. She starts by describing what happened.

Efforts to guarantee outcomes are at odds with what it means to live in a free society where equality under the law is the guiding principle. …Hugo Chávez…promised to make everyone in his country equally well-off. The concept sold in a nation that believed it was infinitely rich because it was swimming in oil. …stick it to the haves. When he did, they packed their bags and left. …it is the flight of the knowledge worker that has done the most harm to the nation. …The Bolivarian revolution’s earliest large-scale assault on know-how came during a lockout at the monopoly oil company Petróleos de Venezuela (PdVSA) in December 2002. …the regime used it to purge at least 18,000 PdVSA and related-company employees, gutting the industry of most of its experienced personnel. By replacing fired workers with political loyalists, Chávez believed he was protecting his golden goose. …In 2009 the regime expropriated Venezuelan companies that served the oil industry.

And she concludes by describing the consequences.

as long as oil prices were high, the costs of such recklessness was hidden. The party ended when prices tanked in 2014, government revenues dropped precipitously, and central bank money-printing led to a mega-devaluation of the bolivar. …another wave of oil engineers—this time led by a younger generation—went abroad to work. In the years that followed, more oil technicians threw in the towel on life in Venezuela. This vicious circle of declining revenue and human-capital flight has brought the once-mighty Venezuelan petroleum powerhouse to a standstill. 

In other words, exactly as depicted in the video at the start of this column.

No wonder Venezuelans are eating their pets.

Or joining gangs simply as a strategy to get food.

The bottom line is that socialism doesn’t work. Even in a country that has massive reserves of oil.

Sooner or later, the attempt to achieve coerced equality will mean that too many people are on the dole and too few people are producing. Which brings to mind Margaret Thatcher’s famous observation.

P.S. The New York Times actually wrote a big story about Venezuela’s collapse and somehow never mentioned socialism.

P.P.S. Here are four other videos about the impact of socialism in Venezuela.

P.P.P.S. The situation has become so dire that even some socialists are disavowing Venezuela.

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Back in 2018, I shared five images that accurately capture leftism, which is the Mussolini-ish notion of “All within the state, nothing outside the state, nothing against the state” (one of the images was subsequently deleted, so you can enjoy this column if you want five of them).

Today, we’re going to look at five more example that reveal the statist mindset.

We’ll start with this algorithm showing how our leftist friends analyze real and imagined problems.

It’s especially frustrating that they inevitably decide that the proper response to government-caused problems is more power for government.

Anyhow, here’s a picture of two of those leftists.

Speaking of government, here’s a cartoon showing the attitude statists have when they obtain power.

Yes, there are serious ways of explaining why the private sector does a better job, but sometimes humor is an effective way of making that point.

Next, we have this clever meme.

The opposite of libertarianism, to say the very least.

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

By the way, I’ve never considered Dwight Eisenhower to be a great president like Reagan or Coolidge, but he made a similar point about prison being an ideal leftist world.

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Even if these things are simply click-bait, I can’t resist taking online tests and quizzes that ostensibly reveal a person’s philosophical outlook.

Today, I’m writing about another version. It’s called the Six-Triangle Test and it’s supposedly special because you get three-dimensional analyses of your approach to various issues.

You can take a 72-question test or a 144-question test, depending on how much time you have (or your tolerance level).

As is often the case, I think some of the questions are poorly worded. For instance, there are people in Bangladesh who presumably work much harder than any of us, yet they don’t make much money because what actually matters is productivity per hour worked. So this question left me with mixed feelings. I assume I should answer “strongly agree,” but that’s not technically accurate.

Likewise, I wanted to answer “strongly disagree” on this next statement because I assume that would be the most pro-free market answer. That being said, while I view capitalism as a system that generates mass prosperity, doesn’t the existence of “public goods” suggest that it’s not the answer to everything?

I also wasn’t sure how to respond to this statement about international cooperation. Does that mean open trade? If so, my response is “strongly agree.” But if cooperation means a global tax cartel, my answer is “strongly disagree.”

Here’s one more example. Does free education mean dumping kids into sub-par government schools? Or does it mean comprehensive school choice? Needless to say, there are wildly different answers depending on how the statement is interpreted (for what it’s worth, I’m assuming “strongly agree” is interpreted as a left-wing answer).

I realize that I’m being somewhat pedantic, but I figure I should share my concerns.

In any event, before giving my results, I want to nit-pick one other aspect of the test.

It’s designed to measure your ideology on six different issues – economics, personal freedom, culture, equality, government, and foreign policy. And it uses three different ways of measuring those six issues.

In many cases, such as the approach to economics, I think this makes a lot of sense. Your answers determine whether you want socialism (“control”), laissez-faire (“markets”), or a mixed approach (“regulation”).

That being said, I don’t like how they measure responses to equality. More specifically, “burden” implies that if you oppose redistribution, then you somehow don’t want others to succeed.

At the risk of stating the obvious, redistribution tends to trap people in poverty and dependency. At the very least, the description is misguided.

With that final bit of grousing out of the way, here are my results.

But that doesn’t tell you much unless you know what the symbols mean.

So here are my results for each category, based on the three variables.

Other than my already-discussed qualms about the way equality is measured, I’m happy with the results. I am a fanatic for markets over government, I have a minarchist view of government as opposed to statism (or anarcho-capitalism), and otherwise believe in freedom.

Regarding the results for equality, I am pleased that I got 0% for equality of outcomes. In other words, nobody can accuse me of having Kamala Harris’ warped point of view.

P.S. Here’s the link again to the test if you want to take it. Feel free to share your results in the comments section, along with any analysis.

P.P.S. I don’t object to “moderate isolationism” as a summary of my views on foreign policy, but don’t understand why I got 31.3 percent for “imperialism” and also wonder whether they use the right definition of globalism (i.e., globalization rather than global governance).

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I’ve written a couple of times about a disturbingly large share of young people support statist economic policies.

A good example can be seen in this polling data from the Pew Research Center (relevant data circled in red).

Christopher Ingraham wrote about this survey in the Washington Post.

According to the Pew Research Center, 39 percent of adults younger than 30 support the view that people whose personal fortunes exceed $1 billion “is a bad thing,” while 16 percent say billionaires are good for society. …These attitudes were likely sharpened by the Democratic presidential campaign, which at one point pitted a multibillionaire (Mike Bloomberg) against a socialist senator who says that billionaires shouldn’t exist (Bernie Sanders)…the Pew data…suggest that young Americans are concluding that billionaires have amassed their wealth “through their rigging of the tax code, through legal political bribery, through their tax avoidance in shelters like the Cayman Islands, and through lobbying for public policy that benefits them privately.” …“The billionaire class is ‘up there’ because they are standing on our backs pinning us down,” Giridharadas said. …Among respondents 50 and older, just 15 percent say billionaires are a bad thing.

This is depressing data, just like the views of America’s young people in the GIEM survey I wrote about recently.

Some of them don’t like capitalism and wealth even when they’re beneficiaries.

The New York Times has a report on “socialist-minded millennial heirs” who want to use the money they inherited to undermine free enterprise.

“The wealth millennials are inheriting came from a mammoth redistribution away from the working masses, creating a super-rich tiny minority at the expense of a fleeting American dream that is now out of reach to most people,” said Richard D. Wolff, a Marxist and an emeritus economics professor at University of Massachusetts Amherst…he has been professionally arguing against capitalism’s selling points since his teaching career began, in 1967, but that his millennial students “are more open to hearing that message than their parents ever were.” …an individual act of wealth redistribution does not, on its own, change a system. But these heirs see themselves as part of a bigger shift, and are dedicated to funding its momentum. …In short, this means using their money to support more equitable economic infrastructures. This includes investing in or donating to credit unions, worker-owned businesses, community land trusts, and nonprofits aiming to maximize quality of life through democratic decision making, instead of maximizing profits through competition.

Here are three examples from the story.

Sam Jacobs has been…trying to gain access to more of his $30 million trust fund. At 25, he…wants to give it all away. “I want to build a world where someone like me, a young person who controls tens of millions of dollars, is impossible,” he said. A socialist since college, Mr. Jacobs sees his family’s “extreme, plutocratic wealth” as both a moral and economic failure. He wants to put his inheritance toward ending capitalism.

Rachel Gelman, a 30-year-old in Oakland, Calif., who describes her politics as “anticapitalist, anti-imperialist and abolitionist.” …“My money is mostly stocks, which means it comes from underpaying and undervaluing working-class people, and that’s impossible to disconnect from the economic legacies of Indigenous genocide and slavery,” Ms. Gelman said.

Pierce Delahunt, a 32-year-old “socialist, anarchist, Marxist, communist or all of the above,” has a trust fund that was financed by their former stepfather’s outlet mall empire. (Mx. Delahunt takes nongendered pronouns.) “…I think about intersectional oppression,” Mx. Delahunt said. There’s the originally Indigenous land each mall was built on, plus the low wages paid to retail and food service workers, who are disproportionately people of color, and the carbon emissions of manufacturing and transporting the goods. With that on their mind, Mx. Delahunt gives away $10,000 a month, divided between 50 small organizations, most of which have an anticapitalist mission.

There’s certainly nothing wrong with giving away one’s inheritance.

Since I’ve (sadly) never inherited any money, I haven’t had any reason to ponder the issue, but one of my dreams would be to use a windfall of money to help finance school choice so poor kids could escape failing government schools.

Needless to say, I wouldn’t finance anti-capitalist groups, like the folks described above.

But I’m digressing. Let’s return to the issue of misguided young people.

In a column for Law & Liberty, Professor John McGinnis offers suggestions about how to rescue them from statism.

…young voters are America’s future, and even if a few years in the workforce brings some greater political wisdom, many people still stick with their youthful paradigms unless some political shock disrupts them. For those who would try to change the mind of this generation (and the following one), it is important to understand how our education, occupational licensing, and entitlement policies are driving them to socialist views which break sharply with America’s political traditions of liberty. …It is not surprising that this structure prompts some young people to demand that the government pony up money for them… More generally, why not vote for radicals in the hope of shaking up the system on the assumption that it can’t get worse for them than it is now? …The classical liberal alternative is clear: reduce the transfers from the young to the old and eliminate those unnecessary barriers to career entry that privilege incumbents.

Here are the reforms that Prof. McGinnis believes would make young people more favorable to liberty.

Reform of the universities thus must be a priority. But it is very difficult. …they are getting worse by the decade if not by the year. Alternative institutions are probably the only answer. …Online education will allow for new challengers to rise, ones who are not as likely to be wedded to political correctness as the incumbents.

…our entitlement structure is currently designed to take from the younger generation and give to the elderly. Social security is a pay-as-you-go system. And given that social security is not actuarially sound, most of the current elderly will get more than they pay in. It is the payment of the young that makes up the difference. Medicare too is a government program from which the elderly benefit at the expense of the young.

The costs of occupational licensing also fall disproportionately on the young. Of course, that burden occurs in part because their elders already have their licenses. But more importantly, the barriers to entering many occupations have grown more expensive over the years.

Since I’ve written about the failures of higher education, the need for entitlement reform, and the downsides of licensing, I obviously have no reason to disagree with any of his suggestions.

But there’s something else that’s needed, especially when you contemplate the Pew data cited at the start of today’s column.

Supporters of free enterprise need to go after cronyism. And not just because the economy will perform better, but also because it’s morally offensive for people to line their pockets thanks to government coercion.

Indeed, half of the main message to young people (and everyone else) should be that honestly earned wealth is great, because that means (as Walter Williams sagely observed) someone accumulated lots of money by serving the needs of others.

And the other half of the main message is that it’s bad to have rich people who obtain loot with subsidies, handouts, protectionism, and other forms of cronyism.

P.S. Before giving up and wondering if young people are simply too stupid to vote, watch this video showing that young people reject socialism when they understand the implications.

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China is a success if you consider how economic freedom increased after Mao’s death and hundreds of millions of people were lifted out of unimaginable poverty. But I explain in this interview that China is also a failure because the reforms were too limited and the country may now be drifting in the wrong direction.

All you really need to know is that China only ranks #124 in the Fraser Institute’s Economic Freedom of the World. To be sure its score is much higher than it was back in the 1970s, but it’s still way behind even nations such as Greece.

And China is paying a price for excessive government. This chart shows data on economic freedom and economic prosperity for Taiwan, South Korea, Japan, and China – and you can see how China’s growth isn’t so impressive when compared to the more market-oriented nations of East Asia.

I wrote way back in 2010 that Americans don’t need to fear the “Chinese Tiger, and it seems I’m not the only one to peruse the data and express skepticism about China’s economic outlook.

In an article for the Atlantic, Michael Schuman explains that China is unlikely to catch the United States.

Can China do better? Sure, it will almost certainly continue to gain wealth and influence. But to become No. 1, Beijing must overcome hurdles…the U.S. has retained a host of advantages that are often overlooked or underappreciated. …The total output of the U.S. economy was $20.5 trillion in 2018, significantly larger than China’s $13.6 trillion. Calculated on a per-person basis, the gap is even more glaring. …a much better comparison is of national wealth… By this metric, Americans remain significantly richer than the Chinese. In one estimate, U.S. household wealth was $106 trillion in mid-2019…compared with an estimated $64 trillion for China. …China is vulnerable to falling into the “middle-income trap.” That’s where many high-growth, emerging economies tend to end up: After reaching a comfortable level of income, they stall and struggle to leap into the ranks of the world’s most advanced economies… Only a small handful of developing nations, including South Korea and Singapore, have managed that jump in recent times. …China could get stuck in this snare. The heavy hand of the state in China’s economy—a source of envy for many U.S. policy makers—may be dragging it down. Bureaucrats direct bank loans, subsidies, and other resources to notoriously bloated and inefficient state-owned enterprises, loss-making “zombie” companies, and useless infrastructure projects, amassing a potentially destabilizing mountain of debt and killing off much-needed productivity gains.

In a column for the Wall Street Journal, former Secretary of State George Shultz opines on China’s challenges.

People are justifiably worried about China. It is wrecking Hong Kong… Xi Jinping’s statist economic strategy has returned to the Maoist model, putting private enterprise under the thumb of the Communist Party… China’s next 20 years are unlikely to repeat its past 20. Take the labor force. Growth in gross domestic product is a factor of a country’s labor-force and productivity growth. …But the labor force of Mr. Xi’s China is now declining… local governments and businesses are now swamped in contingent debts, often off-book. An example is high-speed rail. State-owned China Railway took on nearly $1 trillion in debt… we should recall…Ronald Reagan and Margaret Thatcher’s calls for markets and personal freedom as engines of human prosperity… Mr. Xi’s campaign to stamp out intellectual discourse in China has threatened…the country’s economic prospects.

In another piece for the Wall Street Journal‘s editorial page, Kevin Rudd (former Prime Minister of Australia) and Daniel Rosen also paint a less-than-optimistic picture of what’s happening in China.

Despite repeated commitments from Chinese authorities to open up and address the country’s overreliance on debt, the China Dashboard has observed delayed attempts and even backtracking on reforms. …An honest look at the forces behind China’s growth this year shows a doubling down on state-managed solutions, not real reform. State-owned entities, or SOEs, drove China’s investment-led recovery. In the first half of 2020, according to China’s National Bureau of Statistics, fixed-asset investment grew by 2.1% among SOEs and decreased by 7.3% in the private sector. …Perhaps the most significant demonstration of mistrust in markets is the “internal circulation” program first floated by President Xi Jinping in May. …expect more subsidies to producers and other government interventions, rather than measures that empower buyers. Dictating to markets and decreeing that consumption will rise aren’t the hallmarks of an advanced economy. …For years, the world has watched and waited for China to become more like a free-market economy…the multiple gauges of reform we have been monitoring through the China Dashboard point in the opposite direction. China’s economic norms are diverging from, rather than converging with, the West’s. …Though Beijing talks about “market allocation” efficiency, it isn’t guided by what mainstream economists would call market principles. The Chinese economy is instead a system of state capitalism in which the arbiter is an uncontestable political authority.

The most impressive evidence comes from an article in the Journal of Applied Corporate Finance.

Authored by Professor Michael Beckley from Tufts University, it’s a comprehensive explanation of why China is lagging.

China’s economy is big but inefficient. It produces vast output but at enormous expense. Chinese businesses suffer from chronically high production costs… The United States, by contrast, is big and efficient. American businesses are among the most productive in the world… China’s economy is barely keeping pace as the burden of propping up loss-making companies and feeding, policing, protecting, and cleaning up after one-fifth of humanity erodes China’s stocks of wealth. …To become an economic superpower, a country needs to amass a large stock of wealth—and to do that it must be big and efficient. It must not only mobilize vast inputs, but also produce significant output per unit of input. …How productive is China’s economy? Remarkably, nearly all of China’s economic growth since 2007 can be attributed to inputs: hiring workers and spending money. China’s productivity growth has not only been unspectacular; it has been virtually nonexistent.5 By contrast, productivity improvements have accounted for roughly 20% of U.S. economic growth over the past decade, as it has for most of the past 100 years.

Here’s some additional data on problems with China’s state-driven economic system.

China’s private sector is relatively efficient, but it is shackled to a bloated state sector that destroys nearly as much value as it creates. Private firms generate roughly two-thirds of China’s wealth and an estimated 80% of its innovations, but the Chinese government prioritizes political control over economic efficiency and thus funnels 80% of loans and subsidies to state-owned enterprises. As a result, state zombie firms are propped up while private companies are starved of capital. All told, more than one-third of China’s industrial capacity goes to waste and nearly two-thirds of China’s infrastructure projects cost more to build than they will ever generate in economic returns. Total losses from this waste are difficult to calculate, but the Chinese government estimates that it blew nearly $7 trillion on “ineffective investment” between 2009 and 2014. …At $40 trillion and counting, China’s debt is not only the largest ever recorded by a developing country, it has risen faster than any country’s, nearly quintupling in absolute size between 2007 and 2019. …the U.S. stock of human capital is several times greater than China’s. China has four times the population of the United States, but the average American worker generates seven times the output of the average Chinese worker. …China also loses 400,000 of its most highly educated workers every year to foreign countries in net terms, including thousands of scientists, engineers, and “inventors” (people that have registered at least one patent). The United States, by contrast, nets one million workers annually from all foreign countries, including roughly 20,000 inventors and 15,000 scientists and engineers, 5,000 of whom come from China. …The United States generates roughly 40% more wealth per unit of energy than China.

We’ll close with this chart from Professor Beckley’s article.

The bottom line is that China is not close to the United States. It’s not even catching up.

P.S. I want China to liberalize and prosper. That would be good for the people of China and it would be good for the world. I’m simply pointing out we won’t get that happy outcome if China persists is following bad ideas such as central planning and industrial policy.

P.P.S. Sadly, China will move further in the wrong direction if it takes awful fiscal advice from the International Monetary Fund or Organization for Economic Cooperation and Development.

P.P.P.S. If you want an example of sloppy and/or malignant media bias, check out how the New York Times tried to blame free markets for the failure of China’s government-run health system.

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Joe Biden has a very misguided economic agenda. I’m especially disturbed by his class-warfare tax agenda, which will be bad news for American workers and American competitiveness.

The good news, as I wrote earlier this year, is that he probably isn’t serious about some of his worst ideas.

Biden is a statist, but not overly ideological. His support for bigger government is largely a strategy of catering to the various interest groups that dominate the Democratic Party. The good news is that he’s an incrementalist and won’t aggressively push for a horrifying FDR-style agenda if he gets to the White House.

But what if Joe Biden’s health deteriorates and Kamala Harris – sooner or later – winds up in charge?

That’s rather troubling since her agenda was far to the left of Biden’s when they were competing for the Democratic nomination.

And it doesn’t appear that being Biden’s choice for Vice President has led her to moderate her views. Consider this campaign ad, where she openly asserted that “equitable treatment means we all end up at the same place.”

The notion that we should strive for equality of outcomes rather than equality of opportunity is horrifying.

For all intents and purposes, Harris has embraced a harsh version of redistributionism where everyone above average is punished and everyone below average is rewarded.

This goes way beyond a safety net and it’s definitely a recipe for economic misery since people on both sides of the equation have less incentive to be productive.

I’m not the only one to be taken aback by Harris’ dogmatic leftism.

Robby Soave, writing for Reason, is very critical of her radical outlook.

Harris gives voice to a leftist-progressive narrative about the importance of equity—equal outcomes—rather than mere equality before the law. …Harris contrasted equal treatment—all people getting the same thing—with equitable treatment, which means “we all end up at the same place.” …This may seem like a trivial difference, but when it comes to public policy, the difference matters. A government should be obligated to treat all citizens equally, giving them the same access to civil rights and liberties like voting, marriage, religious freedom, and gun ownership. …A mandate to foster equity, though, would give the government power to violate these rights in order to achieve identical social results for all people. 

And, in a column for National Review, Brad Polumbo expresses similar reservations about her views.

Whether she embraces the label “socialist” or not, Harris’s stated agenda and Senate record both reveal her to be positioned a long way to the left on matters of economic policy. From health care to the environment to housing, Harris thinks the answer to almost every problem we face is simply more government and more taxpayer money — raising taxes and further indebting future generations in the process. …Harris…supports an astounding $40 trillion in new spending over the next decade. In a sign of just how far left the Democratic Party has shifted on economics, Harris backs more than 20 times as much spending as Hillary Clinton proposed in 2016. …And this is not just a matter of spending. During her failed presidential campaign, Harris supported a federal-government takeover of health care… The senator jumped on the “Green New Deal” bandwagon as well. She co-sponsored the Green New Deal resolution in the Senate that called for a “new national, social, industrial, and economic mobilization on a scale not seen since World War II and the New Deal era.” …she supports enacting price controls on housing across the country. …The left-wing group Progressive Punch analyzed Harris’s voting record and found that she is the fourth-most liberal senator, more liberal even than Massachusetts senator Elizabeth Warren. Similarly, the nonpartisan organization GovTrack.us deemed Harris the furthest-left member of the Senate for the 2019 legislative year. (Spoiler alert: If your voting record is to the left of Bernie Sanders, you might be a socialist.)

To be fair, Harris is simply a politician, so we have no idea what she really believes. Her hard-left agenda might simply be her way of appealing to Democratic voters, much as Republicans who run for president suddenly decide they support big tax cuts and sweeping tax reform.

But whether she’s sincere or insincere, it’s troubling that she actually says it’s the role of government to make sure we all “end up at the same place.”

Let’s close with a video clip from Milton Friedman. At the risk of understatement, he has a different perspective than Ms. Harris.

Since we highlighted Harris’ key quote, let’s also highlight the key quote from Friedman.

Amen.

P.S. It appears Republicans will hold the Senate, which presumably (hopefully?) means that any radical proposals would be dead on arrival, regardless of whether they’re proposed by Biden or Harris.

P.P.S. Harris may win the prize for the most economically illiterate proposal of the 2020 campaign.

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The good thing about being a libertarian is that real-world events repeatedly demonstrate that your skepticism of big government is fully justified.

  • Nations that adopt dirigiste policies don’t do well.
  • States that adopt dirigiste policies don’t do well.
  • Localities that adopt dirigiste policies don’t do well.

The bad thing about being a libertarian is that there are very few governments that even partially follow laissez-faire policies.

Moreover, there’s always a risk that those few governments with reasonably good policy will veer in the wrong direction.

I worry that’s happening in Hong Kong, and I fear it may happen today in Chile if voters make the wrong choice in a national referendum.

In a column for Quillette, Axel Kaiser from Chile’s Adolfo Ibaniez University analyzes what is happening.

In an extraordinary development, Chileans are deciding whether they want to create an entirely new constitution from scratch or preserve the existing one. …Chileans will also vote on whether the new constitution will be drafted by a mixed constitutional convention of politicians and elected representatives from the citizenry, or a constitutional assembly composed entirely of citizens. In either case, decisions by the body would require a two-thirds majority, and its deliberations must be completed within a year. …the new process portends a period of political instability, and the specter of open-ended conflicts and stand-offs between different branches of government. …To many outside Chile, it may seem strange that what has been arguably the most stable and prosperous country in Latin America would circumvent its institutions in this way… But in fact, the creation of an entirely new constitutional order has long been an ambition of the Chilean Left. …Revolutionary efforts to upend existing constitutional schemes have been a common feature in Latin America since the 19th century. …The idea that a new constitution will provide Chile with an instant solution…various forms of social conflict has become an attractive delusion. Yet the more likely scenario is that it will simply legally encode the unrealistic ideological demands that brought Chile to this point in the first place. ……many voters seem…swayed by extravagant promises of the future benefits they will enjoy under a new (and as yet undrafted) constitution. …56 percent of Chileans believe that a new constitution would lead to higher pensions, better education, and superior health care, among a long list of other improvements.

And he also explains why voters should be big fans of the current constitution.

At least if they care about good results, especially for those with lower incomes.

Under the period covered by the current constitution, inflation—which had peaked at over 500 percent in 1973—fell below five percent by the 2000s. Between 1980 and 2015, per-capita income in Chile quadrupled to $23,000—the highest growth rate in Latin America. More importantly, life expectancy rose from 69 to 79, and levels of housing overcrowding fell to one-quarter of its pre-1980 levels. The middle class, as that category is defined by the World Bank, grew from 24 percent of the population in 1990 to 64 percent in 2015. Extreme poverty fell from 34 percent to less than three percent. Between 1990 and 2015, the income of the richest 10th of the population grew a total of 30 percent, while the income of the poorest 10th saw an increase of 145 percent. The Gini index, a widely used statistic that measures income inequality, fell from 52 in 1990 to about 48 in 2015. Chile also held the highest position among Latin American nations in the 2019 UN Human Development Index.

Mary Anastasia O’Grady, in her Wall Street Journal column, is concerned that Chileans may be poised to make a big mistake.

Chile is on the cusp of collective political and economic suicide… On Oct. 25 Chileans will vote on whether the country needs a new constitution. Polls indicate that the “yes” vote will prevail even as the process of rewriting the highest law in the land is shaping up to be a disaster.A new constitution is likely to put at risk the model of democratic capitalism that brought Chilean poverty to below 10% in 2018, from nearly 70% in 1990. Chile also had the highest social mobility in a 2018 Organization of Economic Cooperation and Development study of 16 member countries. …Many Chileans seem to believe that a new constitution will make things right, à la Hugo Chávez’s Venezuela circa early 2000s. …Referendum backers say it is a “democratic” process. It is certainly majoritarian. But Chileans are bound to be disappointed if higher living standards and greater opportunity are the goal. The nation will be lucky if it finishes the exercise on par with the impoverished Argentine welfare state. …expect a document that reads like a litany of unattainable aspirations.

Some people favor majoritarianism, of course, especially if the result is a new set of “positive rights” to other people’s money.

In a column for the New York Times, Professor Michael Albertus hopes a new constitution will incorporate statist economic policy.

Chileans will vote to reject or approve the start of creating a new constitution. The citizens of more countries should do the same. The country’s current Constitution…has protected conservative interests and the military and has suppressed political dissent for 40 years. …The vote to convene a constitutional assembly in Chile could lead to a new document that brings the leadership closer to the people… It could also enshrine greater rights for labor unions, establish health care and education as fundamental rights… Most of Chile’s protesters and their supporters are largely motivated by bread and butter issues like higher pay, gender equity, improved health care access and quality medical care, pension reform, more rights for Indigenous peoples, access to affordable public transportation and free public education. …Protesters view a new constitution as key to delivering on these demands.

So why might Chileans be willing to gamble with their nation’s prosperity?

Early this year, Axel Kaiser offered some insight in a column in the Wall Street Journal.

He blames a left-leaning former government for creating economic malaise.

The economic pain started with the antimarket reforms of the previous government under Socialist President Michelle Bachelet, from 2014-18. Ms. Bachelet increased corporate taxes by 30%; signed a law banning the replacement of workers on strike, thereby dramatically increasing the costs of labor; increased public spending at three times the economic growth rate; and unleashed armies of regulatory bureaucrats on the private sector. Capital investment fell in each year of her term. Such a consistent reduction in investment hasn’t happened since data was first collected, in the 1960s. Economic growth collapsed from an annual average of 5.3% under the previous government of Mr. Piñera (2010-14) to 1.7% under Ms. Bachelet. Real wage growth took a 50% hit.

By the way, I take no pleasure in having predicted that Ms. Bachelet’s tenure would yield bad results.

But let’s not focus on her mistakes.

Indeed, Mr. Kaiser thinks her bad policies (and the anemic Bush/Macri/Sarkozy-type approach of the current government) are largely a reflection of a bigger problem.

The policies result from a profoundly false narrative Chilean elites tell themselves about the country. Over the past 20 years, intellectuals, media personalities, business leaders, politicians and celebrities in this Latin American nation have marketed the myth that Chile is an extreme case of injustice and abuse. It began at the universities, where progressive ideologues spread the idea that there was nothing to feel proud about when it came to Chile’s social and economic record. …Ms. Bachelet’s second term and her social justice-driven agenda were the inevitable result. …The free market didn’t fail Chile… The central problem is that a large proportion of the elites who run key institutions—especially the media, the National Congress and the judiciary—no longer believe in the principles that made the country successful. The result is a full-blown economic and political crisis. Other nations should take note: This is what elite self-hatred can do for you.

I wonder if Alex is referring to the United States when warning other nations about the danger of “elite self-hatred.”

It’s certainly true that many elites in America are quite disdainful of the nation’s economic system. Which has always mystified me since that system enabled their success – or the success of their parents, which allows them to lead very comfortable (albeit guilt-ridden) lives.

More important, it enabled ever-higher living standards for ordinary people, which should please folks on the left, at least if we believe their rhetoric (though I fear many of them are more motivated by hostility to the rich rather than love for the poor).

But let’s not digress. I want to close by noting that poor people have been the biggest winners from Chile’s free-market reforms.

This tweet from Professor Daniel Lacalle is a perfect example. It shows how poverty has plummeted, regardless of which measure is used.

The bottom line is that lower-income people have enjoyed the biggest income gains. And that bit of data is especially impressive given how fast income has grown for the entire country.

P.S. I’ve already written that the most important referendum for 2020 is the upcoming vote whether to retain the Illinois flat tax. Perhaps I should have listed today’s vote in Chile?

July 29, 2021 Addendum: This chart is further evidence that Chile should not reverse the reforms that have done so much to promote prosperity.

Notice how growth exploded after reforms were implemented in the 1980s.

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Earlier this month, as part of my ongoing series about convergence and divergence, I wrote about why South Korea has grown so much faster than Brazil.

My main conclusion is that nations need decent policy to prosper, and Johan Norberg shares a similar perspective in this video.

Let’s see what academic researchers have to say about this topic.

In an article for the Journal of Economic Literature, Paul Johnson and Chris Papageorgiou have a somewhat pessimistic assessment about the outlook for lower-income countries.

In its simplest form, convergence suggests that poor countries have the propensity to grow faster than the rich, so to eventually catch up to them. …there is a broad consensus of no evidence supporting absolute convergence in cross-country per capita incomes—that is poor countries do not seem to be unconditionally catching up to rich ones. …Our reading of the evidence…is that recent optimism in favor of rapid and sustainable convergence is unfounded. …with the exception of a few countries in Asia that exhibited transformational growth, most of the economic achievements in developing economies have been the result of removing inefficiencies, especially in governance and in political institutions. But as is now well known, these are merely one-off level effects.

Here’s a table from their study.

As you can see, high-income countries (HIC) generally grew faster last century, which is evidence for divergence.

But in the 2000s, there was better performance by middle-income countries (MIC) and low-income countries (LIC).

That seems to be evidence that the “Washington Consensus” for pro-market policies generated good results.

Indeed, maybe I’m just trying to be hopeful, but I like to think that the last several decades have provided a roadmap for convergence. Simply stated, nations have to shift toward capitalism.

For another point of view, Dev Patel, Justin Sandefur and Arvind Subramanian have a somewhat upbeat article published by the Center for Global Development.

…the basic facts about economic growth around the world turned completely upside down a quarter century ago—and the literature doesn’t seem to have noticed. …While unconditional convergence was singularly absent in the past, there has been unconditional convergence, beginning (weakly) around 1990 and emphatically for the last two decades. …Looking at the 43 countries the World Bank classified as “low income” in 1990, 65 percent have grown faster than the high-income average since 1990. The same is true for 82 percent of the 62 middle-income countries circa 1990. …It’s not “just” China and India, home to a third of the world’s population on their own: developing countries on average are outpacing the developed world.

Here’s a pair of graphs from the article. On the left, we see nations of all income levels grew at roughly the same rate between 1960 and today.

But if we look on the right at the data from 2000 until the present, low-income and middle-income countries are enjoying faster growth.

That article, however, doesn’t include much discussion of why there’s been some convergence.

So let’s cite one more study.

In a report for the European Central Bank, Juan Luis Diaz del Hoyo, Ettore Dorrucci, Frigyes Ferdinand Heinz, and Sona Muzikarova look for lessons from European Union nations.

…sound policymaking plays a key role in the attainment of real convergence, primarily via adequate measures and reforms at national level. …for a given euro area Member State to achieve economic convergence it needs to improve its institutional quality, i.e. that of those institutions and governance standards that facilitate growth… some euro area countries have not met expectations in terms of delivery of sustainable convergence… in the period 1999-2016 income convergence towards the EU average occurred and was significant in some of the late euro adopters (the Baltics and Slovakia), but not in the south of Europe. …Several low-income euro area members have, in fact, only just maintained (Slovenia and Spain) or even increased (Greece, Cyprus and Portugal) their income gaps in respect of the EU average.

Let’s close with two charts from the ECB study.

First, look at this chart tracking the relative performances of Italy, Spain, Portugal, Greece, and Ireland compared to the average of Western European nations.

What stands out is that Ireland went from being a relatively poor nation to a relatively rich nation.

Needless to say, I would argue that Ireland’s dramatic improvement is closely correlated with a shift toward free markets that began in the 1980s.

Indeed, Ireland currently has the 10th-highest level of economic freedom for all countries.

Next, here’s a chart reviewing how various European nations have performed since 1999.

Ireland grew the fastest, given where it started. But notice how Slovakia and the Baltic nations also have been star performers.

So the nations that have adopted free-market reforms have grown faster than one might expect based on convergence theory.

And you won’t be surprised to see that the nations that have lagged – Greece and Italy – are infamous for statist policies and an unwillingness to reform.

The bottom line – assuming you want to improve the lives of people in poor nation – is that the world needs more capitalism and less government.

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Traditional economics, specifically convergence theory, tells us that poor nations should grow faster than rich nations.

I’m more interested, however, in why convergence often doesn’t happen, or only partially happens.

And I’m extremely interested in why we often see divergence, which occurs when two countries are at a similar level of development, but then one grows much faster than the other.

Let’s consider the example of Brazil vs, South Korea.  has an interesting article, published by the Center for Macroeconomics and Development, that looks at how the two countries have diverged over the past 50 years.

Here’s the chart that depicts the dramatic difference.

The author analyzes many of the reasons that South Korea has enjoyed faster growth.

It’s especially worth noting that Brazil’s protectionism has been self-defeating.

The “middle-income trap” has captured many developing countries: they succeeded in evolving from low per capita income levels, but then appeared to stall, losing momentum along the route toward the higher income levels… Such a trap may well characterize the experience of Brazil and most of Latin America since the 1980s. Conversely, South Korea maintained its pace of evolution, reaching a high-income status… The path from low- to middle- and then to high-income per capita corresponds to increasing the shares of population moved from subsistence activities to simple modern tasks and then to sophisticated ones. …South Korea relied extensively on international trade to accelerate their labor transfer by inserting themselves into the labor-intensive segments of global value chains… with the “helping winners and saving losers” of Brazil’s industrial policies…, the temptation to use surpluses to accumulate wealth in ways to maximize frontiers of interaction with the public sector prevails… Brazil’s long-standing high levels of trade protection and closure also favored such an option… The Brazilian economy pays a price in terms of productivity foregone because of its lack of trade openness.

As a big fan of trade, I obviously agree with this analysis.

But I also think that’s not the full story.

If you compare the scores the two countries get from the most-recent edition of Economic Freedom of the World, you’ll find that South Korea scores better on trade.

But you’ll also notice that there are much bigger gaps when looking at scores for size of government, legal system and property rights, and regulation (and the gaps for the latter two indices have existed for decades).

The bottom line is that there are many policy reasons why Brazil lags behind South Korea.

So if Brazil wants to break out of the “middle-income trap,” it needs to follow the tried-and-true recipe for growth and prosperity (what used to be known as the “Washington Consensus“).

P.S. And that means ignoring poisonous advice from the International Monetary Fund and Organization for Economic Cooperation and Development.

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There are many reasons to be depressed about Italy.

Bad policy is part of the problem, of course, but this chart shows that the country also is facing a demographic crisis. The blue lines show that there are now more deaths than births.

The chart comes from a Bloomberg column by Flavia Rotondi and Giovanni Salzano, and they explain some of the adverse consequences of this demographic change.

Italy isn’t just in an economic slump, its population is also sagging, pushing the country into its biggest demographic crisis in more than a century. The number of people in the country fell for a fifth year in 2019, and deaths exceeded births by almost 212,000, the biggest gap since 1918. …Italy already has huge long-term economic challenges, and the population trends, if they continue, are going to make surmounting them even harder. Italy won’t have enough young workers, and funding a rapidly aging population will strain an already stretched fiscal situation. Pension costs now amount to almost 17% off the economy. …“With an aging population and a consistent decrease of workers who pay taxes, our retirement system may go haywire” said Pietro Reichlin, a professor of economics.

Politicians naturally will want to compensate for these changes by raising the tax burden.

But Italy already is at a breaking point because of punitive taxation. Writing for the Foundation for Economic Education, Daniel Di Martino discusses that nation’s dirigiste system.

Italy’s problem, similar to many of its southern European neighbors, is an oppressively high tax burden, irresponsible welfare programs that encourage high measured unemployment and increase the debt, and high levels of regulation. …the share of average wages collected by the Italian government via income and social security taxes is 48 percent, among the highest in the Organization for Economic Co-operation and Development (OECD). In addition, Italy imposes a value-added tax of 22 percent on most goods and services, one of the highest in Europe. Plus, Italy’s corporate, capital gains, gift, and myriad other taxes are passed on to individuals and borne directly by workers. …At the same time, Italy’s complex regulations are a barrier to starting or continuing productive activities. A study by economist Raffaela Giordano of the Bank of Italy concluded that the main reason behind Italy’s underperformance was burdensome regulations and corrupt and inefficient government structure.

Adam O’Neal makes similar points about bad policy in a column for the Wall Street Journal.

Even before the pandemic, Italy hadn’t recovered fully from the 2008-09 financial crisis. Unemployment hovered around 10% in 2019. Adjusting for inflation, the average Italian worker earned the same as he did 20 years ago. Italian banks were Europe’s weakest. …What ails Italy? …Italy’s greatest challenge is a gargantuan government that destroys wealth as efficiently as the private economy creates it. …In 2018 government revenue was 42% of GDP, nearly 8 points above the Organization for Economic Cooperation and Development average. Yet profligate outlays—Rome spent 16.2% of GDP on public pensions in 2015—brought debt to about 135% of GDP last year.

The net effect of all this misguided policy is that Italy’s economy is moribund.

In his column for Bloomberg, Professor Tyler Cowen summarizes the problem.

One striking fact about Italy is that, over the last 20 years, growth in per capita income has been close to zero. …a zero-growth environment cannot be stable forever. …If the pie doesn’t grow, eventually it becomes harder to sustain productive activity… Aging is another reason economic growth is necessary. …many countries (including Italy) have expensive pension systems. Someone has to pay the bill, and without innovation and economic growth, taxes will have to rise. That in turn discourages work, pushing people into untaxed black-market activity, necessitating higher tax rates, and the vicious cycle starts again.

And when you combine bad demographics and bad policy, that not only means stagnation in the short run, it also could mean fiscal crisis in the long run.

Except “long run” may be just around the corner.

Desmond Lachman of the American Enterprise Institute warns that an Italian fiscal crisis will make the mess in Greece seem trivial by comparison.

…markets are displaying remarkable complacency toward a rapidly deteriorating Italian political and economic situation. They are doing so in a manner that is painfully reminiscent of how complacent they were in 2009 on the eve of the Greek sovereign debt crisis. This could have major consequences for global financial markets considering that the Italian economy…has around 10 times as much public debt as Greece had at the time of its crisis. …One has to hope that while markets might be turning a blind eye to Italy’s deteriorating economic and political fundamentals, global economic policymakers are not. As experience with the Greek sovereign debt crisis reaffirmed, crises often take a lot longer than one would have thought to occur, but when they do occur they do so at a very much faster rate than one would have expected.

Some people argue that a fiscal crisis can be avoided if the European Central Bank buys up Italy’s government debt.

That certainly can avert a panic, at least for a while, but this approach can cause a different set of problems.

Joseph Sternberg opines for the Wall Street Journal that the European Central Bank’s easy-money policy has backfired by giving politicians in Rome the leeway to postpone desperately needed reforms.

If the ECB had not stepped in as a buyer of government debt, Rome long since would have faced fiscal catastrophe. Only a miracle—or €365 billion in ECB purchases of Italian sovereign debt since 2015—can explain how in recent years a country whose debt has ballooned to 130% of gross domestic product paid nearly the same interest rate as Germany… Even after selling so many sovereign bonds to the central bank, Italy’s banks continue to be large holders of their government’s debt. Such bonds constitute around 10% of Italian bank assets, nearly three times the eurozone average. …Mr. Draghi hoped his interventions would give wayward governments such as in Rome breathing room to overhaul the supply side of their economies—deregulating markets, privatizing state assets, trimming welfare programs and the like. But Rome has mainly slid backward.

While intervention by the European Central Bank isn’t the solution to Italy’s problems (and may actually make problems worse), this is also a good opportunity to make the related point that the euro currency also shouldn’t be blamed for the nation’s stagnation.

I’m not a big fan of the European Union and the crowd in Brussels, but Italy’s challenges overwhelmingly are the fault of policies adopted by Italian politicians.

Indeed, if you look at the data from the most-recent edition of the Fraser Institute’s Economic Freedom of the World, you can see monetary policy isn’t a problem. Instead, the nation’s big impediment to prosperity (highlighted in red) is terrible fiscal policy.

To put this data in perspective, Italy has the next-to-lowest-ranked economy in Western Europe, with only Greece having less economic liberty.

The numbers from the Heritage Foundation’s Index of Economic Freedom tell a very similar story.

If you peruse the data from the most-recent edition of that publication, you’ll see that Italy gets weak scores for its approach to labor issues, the judiciary, and taxes.

But it gets an utterly dismal score (highlighted in red) for government spending.

Sadly, there’s no political party in Italy that wants to solve the problem of excessive spending – even though I explained how it could be done while in Milan many years ago. And without spending restraint, that means it’s almost impossible to adopt pro-growth tax reform.

P.S. No wonder some people in Sardinia want to secede from Italy and instead become part of Switzerland.

P.P.S. Amazingly, a New York Times’ columnist actually argued that the United States should be more like Italy.

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It doesn’t get as much attention as basket-case nations such as Venezuela, North Korea, Zimbabwe, or Cuba, but Argentina is one of the world’s worst-governed nations.

Though the most damning indictment, in my humble opinion, is that Argentina in the late 1940s used to be one of the world’s 10-richest nations.

But beginning in 1946 under Juan Peron’s statist presidency (much beloved by Pope Francis for inexplicable reasons), policy shifted to the left and Argentina become one of the world’s least market-oriented nations.

Not surprisingly, the country’s relative living standards then began a steady decline, thus providing us with a painful lesson that rich nations that adopt bad policy don’t remain rich.

Recent history hasn’t made things better. Populist-left governments were in charge from 2003-2015, followed by an ineffective right-reformist government (akin to Nixon-Bush-Trump-style Republicanism) from 2015-2019, and now the left is back in charge.

But one thing that hasn’t changed is that Argentina has bloated, corrupt, and ineffective government.

Here are some details from a column that wrote last September for Project Syndicate.

Argentina has fallen back into crisis for the simple reason that not enough has changed since the last debacle. …Argentinian authorities succumbed to the same temptation that tripped up their predecessors. In an effort to compensate for slower-than-expected improvements in domestic capacity, they permitted excessive foreign-currency debt, aggravating what economists call the “original sin”: a significant currency mismatch between assets and liabilities, as well as between revenues and debt servicing. …Undeterred by Argentina’s history of chronic volatility and episodic illiquidity – including eight prior defaults – creditors gobbled up as much debt as the country and its companies would issue… The search for higher yields has been encouraged by unusually loose monetary policies… Then there is the IMF, which readily stepped in once again to assist Argentina… So far, Argentina has received $44 billion under the IMF’s largest-ever funding arrangement.

This latest bailout is a classic case of throwing good money after bad, which seems to be the IMF’s primary purpose – especially with regards to Argentina.

Later that same month, Anne Krueger weighed in with another column for the same publication.

Argentina is…chronically overspending and over-regulating until it is forced to go to the International Monetary Fund for a new round of treatment. In 2001, the country suffered a major crisis, and…entered into an IMF loan program. But its debt restructuring was messy, and policies to address its underlying structural problems – lowering trade barriers, allowing public-utility prices to rise – were pursued halfheartedly or not at all. …government spending and fiscal deficits began to increase once again. Consolidated public expenditures rose from a low of 22.9% of GDP in 2002 to 30.1% of GDP in 2008, and to 42.2% in 2015. …For an economy as distorted as Argentina’s, there is no medicine that can prevent a period of painful adjustment. …By early 2018, Argentina was in another crisis. …in June 2018 the IMF approved a $50 billion loan program, the largest in the Fund’s history. …The problem, once again, is that the medicine was not strong enough. At the patient’s insistence, the measures were too mild to be effective, and more difficult structural reforms were delayed. …the country needs structural reforms, especially a further reduction in the size of the government sector, starting with pensions. More gradualism will only prolong the pain and allow political opposition to mount.

Ms. Krueger is correct. Only good policy will cure Argentina’s woes.

Sadly, bailouts actually undermine that goal give the country’s awful politicians an excuse to postpone necessary reforms.

Though there is a silver lining to the dark cloud of Argentine statism. James Pethokoukis of the American Enterprise Institute pointed out earlier this year that we now have a real-world example of democratic socialism.

…the Nordic nations are “firmly rooted in capitalism and free markets,” wrote Michael Cembalest of JP Morgan Asset Management in a note last summer… The closest Cembalest could find to a true democratic socialist state, at least by his definition, is Argentina, “which has defaulted 7 times since its independence in 1816, which has seen the largest relative standard of living decline in the world since 1900, and which is on the brink of political and economic chaos again in 2019.” …Argentina met most of the following criteria: a) higher personal and corporate tax rates, and higher government spending; b) more worker protections restricting the ability of companies to hire and fire, and less flexibility for companies to set wages based on worker productivity and/or to hire foreign labor; c) more reliance on regulation, more constraints on real estate development; d) more anti-trust enforcement and more state intervention in product markets; and a shift away from a shareholder-centric business model; e) protections for workers and domestic industries through tariff and non-tariff barriers, and more constraints on capital inflows and outflows.

Not exactly a ringing endorsement of so-called democratic socialism.

If you prefer hard data, this chart shows that Argentina has the world’s worst economic performance over the past 100 years.

And I imagine the country would look even worse if 1945 was the base year.

Let’s close with this recently tweeted video from Human Progress, which shows relative levels of per-capita economic output over a 100-year period for 16 different nations.

Pay specific attention to how high Argentina was ranked in the late 1940s if you want to appreciate the awful consequences of Peronist statism.

P.S. Also make sure to note that Chile was in last place in the 1970s and then significantly improved in the rankings by liberalizing the economy and reducing the burden of government in the 1980s. Yet another reminder that the world is a laboratory and every experiment tells us the same thing: Statism produces bad results and markets deliver good results.

 

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Hardly anybody noticed because the nation has been focused on protests about police misbehavior, but Joe Biden officially clinched the Democratic nomination this past week.

And he’s now comfortably ahead in the political betting markets as well as public polling.

If Biden wins in November, what does that mean for the nation’s economic policy?

According to folks on the left, a Biden presidency means bigger government and more statism.

For instance, opining for the New York Times, Jamelle Bouie applauds Biden’s leftist agenda.

…if the goal is to move America to the left…then a Biden candidacy…represents an opportunity. …If Biden goes on to win the White House, there’s real space for the pro-Sanders left to work its will on policy. …It can fulfill some of its goals under the cover of Biden’s moderation, from raising the minimum wage nationally to pushing the American health care system closer to single-payer. …Biden…is a creature of the party. He doesn’t buck the mainstream, he accommodates it. He doesn’t reject the center, he tries to claim it. …the center of the Democratic Party as far left as it’s been since before Ronald Reagan, then Biden is likely to hew to that center, not challenge it.

His colleague at the NYT, Michelle Goldberg, is similarly enthused about the prospects for bigger government under a Biden Administration.

Biden’s proposals go far beyond his call for a $15 federal minimum wage — a demand some saw as radical when Sanders pushed it four years ago. While it’s illegal for companies to fire employees for trying to organize a union, the penalties are toothless. Biden proposes to make those penalties bite and to hold executives personally liable. …should Biden become president, progressives have the opportunity to make generational gains. …To try to unite the party around him, he’s making serious progressive commitments. …he’s moving leftward. Biden recently came out for tuition-free college for students whose families earn less than $125,000. He endorsed Elizabeth Warren’s bankruptcy plan…His climate plan already went beyond any of Barack Obama’s initiatives, and he’s pledged to make it even more robust.

According to (supposedly) neutral analysts, a Biden presidency means bigger government and more statism.

In an article for Newsweek, Steve Friess discusses Biden’s shift to the left.

Being stuck running for the presidency from the basement of his home in Wilmington, Delaware, had given the former vice president a lot of time to think, he told them, and he wanted bigger ideas. Go forth, he urged his financial brain trust, and bring back the boldest, most ambitious proposals they’d ever dreamed of to reshape the U.S. economy… Biden began issuing a raft of new proposals that move his positions closer to the progressive wing of the Democratic Party, with a promise to unveil an even more transformative economic plan this summer. …It’s a yes to adding $200 a month to Social Security benefits and lowering the qualifying age for Medicare from 65 to 60. Yes to trillions in new spending, yes to new regulations on banks and industry, yes to devil-may-care deficits. …the leader he most often invokes—in interviews, in public addresses, on his podcast—is no longer Barack Obama but Franklin Delano Roosevelt. …Biden has already made a series of significant leftward policy shifts since effectively sewing up the nomination in March.

Perry Bacon, in a piece for fivethirtyeight, analyzes Biden’s statist agenda.

…if Biden is elected in November, the left may get a presidency it likes after all…if American politics is moving left, expect Biden to do the same. …Biden’s long record in public office suggests that he is fairly flexible on policy — shifting his positions to whatever is in the mainstream of the Democratic Party at a given moment. …Biden is likely to be a fairly liberal president, no matter how moderate he sounded in the primaries. …Biden’s 2020 primary platform…adopted fairly liberal policies…more liberal than his pre-campaign record suggested. The Democratic Party is more liberal now than it was when Bill Clinton took office, or even when Obama was inaugurated, and Biden’s platform reflects that shift. …Biden and his advisers are now…rolling out more liberal policy plans, speaking in increasingly populist terms and joining forces with the most progressive voices in the party. …“Joe Biden is running on the most progressive platform of any Democratic nominee in recent history. But given the pandemic, he has to look at the New Deal and Great Society traditions in the Democratic Party and go bigger,” said Waleed Shahid, the communications director for Justice Democrats, a left-wing group aligned with Ocasio-Cortez.

Writing for the Washington Post, Sean Sullivan documents Biden’s leftward drift.

Joe Biden sought to appeal to liberal supporters of Sen. Bernie Sanders on Thursday with a pair of new proposals to expand access to health care and curtail student loan debt. Biden proposed lowering the eligibility age for Medicare coverage from 65 to 60. He also came out in favor of forgiving student loan debt for people who attended public colleges and universities and some private schools and make up to $125,000 a year. …In another peace offering to liberals, Biden proposed paying for his student debt plan by repealing a provision in the recent coronavirus legislation that Congress passed and President Trump enacted. “That tax cut overwhelmingly benefits the richest Americans and is unnecessary for addressing the current COVID-19 economic relief efforts,” he wrote… Biden endorsed a bankruptcy plan put forth by Sen. Elizabeth Warren (D-Mass.), another rival who ran to his left.

And, according to more market-friendly sources, a Biden presidency means bigger government and more statism.

The Wall Street Journal editorialized about Biden’s leftist agenda.

Already Medicare is scheduled to be insolvent by 2026. …In 1970, life expectancy in the U.S. was 70.8. Now it’s about eight years longer. By lowering the age of eligibility instead, Mr. Biden would begin shifting Medicare’s focus from seniors to everybody else. Don’t worry about the funding, he insists, since the extra costs would be “financed out of general revenues.” …Mr. Biden’s new left turn on student loans is equally sharp. …Cancel all federal undergraduate tuition debt for many borrowers who went to public schools, including four-year universities. This forgiveness would be given to anyone who earns $125,000 a year or less. …How much would it cost? There’s no explanation.

Jeff Jacoby analyzed Biden in a column for the Boston Globe.

Biden…is running on a platform far more progressive — i.e., far less moderate — than any Democratic presidential nominee in history. …on issue after issue, Biden has veered sharply from Obama’s path. On health insurance, for example, Obama rejected a public option as part of the Affordable Care Act and repeatedly stressed the importance of maintaining private coverage. But Biden favors a public option open to everyone… Biden supports government-funded health care even for unauthoritzed immigrants, something Obama never came close to proposing. …No Democratic presidential nominee ever endorsed anything like the radical Green New Deal, with its price tag in the tens of trillions of dollars and its goal of eliminating the use of all fossil fuels. But Biden does. No Democratic nominee ever called for a national minimum wage of $15 an hour. But Biden does. …Sanders may not end up on the November ballot, but it will unmistakably reflect his influence. For he and his band of progressives have pushed their party to the left with such success that even the “moderate” in the race would be the most liberal Democrat ever nominated for president.

Here’s some of what Peter Suderman wrote for Reason.

Biden is a moderate compared to Sanders, but he is notably to the left of previous Democratic standard-bearers. …Biden has proposed a significant expansion of the Affordable Care Act that his campaign estimates would cost $750 billion over a decade… Biden has proposed a $1.7 trillion climate plan that is similar in scope to many candidates on his left and a $750 billion education plan… He favors an assault weapons ban and other gun control measures, a national $15 minimum wage, and a raft of subsidies, loans, and other government-granted nudges designed to promote rural economies. Has proposed $3.4 trillion worth of tax hikes—more than double what former Secretary of State Hillary Clinton proposed when she ran in 2016. …Biden’s leftward drift is thus the party’s leftward shift…, a big-government liberal, a candidate whose current incarnation was shaped and informed by progressive politics, if not wholly captured by them.

The Tax Foundation examined the former Vice President’s tax plan and the results are not encouraging.

Former Vice President Joe Biden would enact a number of policies that would raise taxes, including individual income taxes and payroll taxes, on high-income individuals with income above $400,000. …According to the Tax Foundation’s General Equilibrium Model, the Biden tax plan would reduce GDP by 1.51 percent over the long term. …The plan would shrink the capital stock by 3.23 percent and reduce the overall wage rate by 0.98 percent, leading to 585,000 fewer full-time equivalent jobs. …On a dynamic basis, we estimate that Biden’s tax plan would raise about 15 percent less revenue than on a conventional basis over the next decade. …That is because the relatively smaller economy would shrink the tax base for payroll, individual income, and business income taxes. …The plan would lead to lower after-tax income for all income levels.

Here’s a table summarizing the findings.

So what does all this mean?

At the risk of oversimplifying, Biden unquestionably would move tax policy to the left (he actually said higher taxes are patriotic, even though he engages in aggressive tax avoidance), and the same thing would happen on regulatory issues.

His spending agenda is terrible, though it’s worth noting that Democrat presidents usually don’t spend as much as Republicans (with the admirable exception of Reagan).

And, to be fair, there’s no way he could be as bad on trade as Trump.

Let’s close by looking at some hard data. Back in January, I sifted through the vote ratings prepared by the National Taxpayers Union and the Club for Growth and showed that Biden was not a Bill Clinton-style moderate.

I went back to those same sources an put together this comparison of Biden and some other well-known Democrats (scores on a 0-100 scale, with zero being statism and 100 being libertarian).

In both measures, he’s worse than Crazy Bernie!

Moreover, a lifetime average of zero from the Club for Growth is rather horrifying. His average from the National Taxpayers Union isn’t quite so bad, but the trend is in the wrong direction. Biden’s post-2000 average was less than 10, while his score for the preceding years averaged more than 23.

That being said, my two cents on this topic is that Biden is a statist, but not overly ideological.

His support for bigger government is largely a strategy of catering to the various interest groups that dominate the Democratic Party.

The good news is that he’s an incrementalist and won’t aggressively push for a horrifying FDR-style agenda if he gets to the White House.

The bad news is that he will probably allow Nancy Pelosi and other statist ideologues to dictate that kind of agenda if he wins the presidency.

P.S. My collection of Biden-oriented humor is rather sparse (see here, here, here, and here), an oversight that I’ll have to address in the near future.

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I sometimes wonder why libertarians aren’t more persuasive given that there’s so much evidence for our economic and social views.

The answer may have something to do with matters such as psychology. Let’s take a closer look at this issue, starting with a video from Johan Norberg.

Johan’s point is that the real gap is between classical liberals (i.e., libertarians) and statists.

Though most of the research and analysis is based on potential differences between conservatives and liberals, as conventionally defined.

For instance, in a column for the U.K.-based Guardian, Arlie Hochschild writes about differences in awareness on the right and left.

…what’s startling is the further finding that higher education does not improve a person’s perceptions – and sometimes even hurts it. In their survey answers, highly educated Republicans were no more accurate in their ideas about Democratic opinion than poorly educated Republicans. For Democrats, the education effect was even worse: the more educated a Democrat is, according to the study, the less he or she understands the Republican worldview. “This effect,” the report says, “is so strong that Democrats without a high school diploma are three times more accurate than those with a postgraduate degree.” …Even more than their Republican counterparts, highly educated Democrats tend to live in exclusively Democratic enclaves. The more they report “almost all my friends hold the same political views”, the worse their guesses on what Republicans think. …Although in principle more tolerant of political diversity, highly educated – and mostly urban – Democrats live, ironically, with less of it.

And here’s a tweet about educated folks on the left being more likely to live in a bubble.

Regarding the issue of how different ideologies respond to external threats (supposedly a major driver of philosophical differences), Ross Douthat analyzed how conservatives responded to coronavirus in a column for the New York Times.

…an influential body of literature has attempted to psychologize the partisan divide — to identify conservative and liberal personality types, right-wing or left-wing minds or brains… In its crudest form this literature just amounts to liberal self-congratulation, with survey questions and regression analyses deployed to “prove” with “science” that liberals are broad-minded freethinkers and conservatives are cramped authoritarians. But…Haidt argues that conservatives actually have more diverse moral intuitions than liberals, encompassing categories like purity and loyalty as well as care and fairness, and that the right-wing mind therefore sometimes understands the left-wing mind better than vice versa. …the political responses to the pandemic have put these psychological theories to a very interesting test.

He then applies this analysis to the coronavirus.

If there was ever a crisis tailored to the conservative mind-set, surely it would be this one, with the main peril being that conservatives would wildly overreact to such a trigger. …As the disease spread and the debate went mainstream, liberal opinion mostly abandoned its anti-quarantine posture and swung toward a reasonable panic, while conservative opinion divided, with a large portion of the right following the lead of Trump himself, who spent crucial weeks trying to wish the crisis away. …figures like Rush Limbaugh and Sean Hannity manifested a conservatism of tribal denial, owning the libs by minimizing the coronavirus threat. …one might say that the pandemic illustrates the power of partisan mood affiliation over any kind of deeper ideological mind-set. Or relatedly, it illustrates the ways in which under the right circumstances, people can easily swing between different moral intuitions. (This holds for liberals as well as conservatives: A good liberal will be as deferential to authority as any conservative when the authority has the right academic degrees…) …what we call “American conservatism” is probably more ideologically and psychologically heterogeneous than the conservative mind-set that social scientists aspire to measure and pin down. In particular, it includes an incredibly powerful streak of what you might call folk libertarianism… This mentality, with its reflexive Ayn Randism and its Panglossian hyper-individualism, is definitely essential to understanding part of the American right. But…I’m doubtful that it corresponds to any universal set of psychological tendencies that we could reasonably call conservative.

By the way, a new study by four social scientists, published in Nature, casts doubt on the earlier research regarding ideological differences in threat perception

About a decade ago, a study documented that conservatives have stronger physiological responses to threatening stimuli than liberals. This work launched an approach aimed at uncovering the biological roots of ideology. Despite wide-ranging scientific and popular impact, independent laboratories have not replicated the study. We conducted a pre-registered direct replication (n = 202) and conceptual replications in the United States (n = 352) and the Netherlands (n = 81). Our analyses do not support the conclusions of the original study, nor do we find evidence for broader claims regarding the effect of disgust and the existence of a physiological trait.

And another study by three social scientists in the Personality and Social Psychology Bulletin also casts doubt on the earlier research.

One consistent finding is that conservatives show higher disgust sensitivity than liberals. This finding, however, is predominantly based on assessments of disgust to specific elicitors, which confound individuals’ sensitivity and propensity to the experience of disgust with the extent to which they find specific elicitors disgusting. Across five studies, we vary specific elicitors of disgust, showing that the relations between political orientation and disgust sensitivity depend on the specific set of elicitors used. We also show that disgust sensitivity is not associated with political orientation when measured with an elicitor-unspecific scale. Taken together, our findings suggest that the differences between conservatives and liberals in disgust sensitivity are context dependent rather than a stable personality difference.

So maybe there’s not a meaningful difference between right and left with regards to matters such as disgust and threats.

But there seems to be plenty of evidence that there are differences in other areas.

Depending on political affiliation, Americans shop differently, as reported by Suzanne Kapner and Dante Chinni in the Wall Street Journal.

Consumer research data show Democrats have become more likely to wear Levi’s than their Republican counterparts. The opposite is true with Wrangler, which is now far more popular with Republicans. There is no simple explanation behind those consumer moves. Some of it is due to social and political stances companies are taking, such as Levi’s embrace of gun control. …the country is becoming more polarized along political lines, which is having an effect on brands that choose to stay out of the political fray. …Nearly 60% of 1,000 Americans surveyed by Edelman last year said they would choose, switch, avoid or boycott a brand based on its stand on societal issues. That is up from 47% in 2017.

Some of this makes sense to me. I have dramatically reduced my purchases at Dick’s, for example, because of the company’s opposition to the 2nd Amendment.

Here’s a graphic from the story. The self-selection of Fox and CNN viewers is especially noteworthy.

Folks on the right and left may even sleep differently, according to research published in the Journal of Politics by Aleksander Ksiazkiewicz at the University of Illinois.

This article proposes that chronotype (a person’s time-of-sleep preference) is a previously unidentified psychological correlate of political ideology. Chronotype may lead to political ideology through a motivated social cognitive process, ideology may shape sleep patterns through a desire to align with social norms, or ideology and chronotype may arise from common antecedents, such as genetics, socialization, or community influences. Analyses demonstrate a link between a morningness and conservatism in seven American samples and one British sample. This relationship is robust to controls for openness, conscientiousness, and demographics, including age, sex, income, and education.

Last but not least, Justin Lehmiller of the Kinsey Institute, in a column for Politico, says Republicans and Democrats have different fantasies.

I surveyed 4,175 adult Americans from all 50 states about what turns them on…one of the more intriguing things I uncovered was the political divide in our fantasy worlds. While self-identified Republicans and self-identified Democrats reported fantasizing with the same average frequency—several times per week—I found that Republicans were more likely than Democrats to fantasize about a range of activities that involve sex outside of marriage. Think things like infidelity, orgies and partner swapping… By contrast, self-identified Democrats were more likely than Republicans to fantasize about almost the entire spectrum of BDSM activities, from bondage to spanking to dominance-submission play. The largest Democrat-Republican divide on the BDSM spectrum was in masochism, which involves deriving pleasure from the experience of pain. …What connects Republicans and Democrats, I believe, is that their fantasies are at least partly driven by what they can’t have. …Interestingly, the single most commonly fantasized-about politician among both parties was the same: Sarah Palin (though Republicans were much more likely to have Palin fantasies than Democrats). Following Palin, the next most frequently mentioned politicians in Republicans’ fantasies were John F. Kennedy, Bill Clinton and Nikki Haley. While, after Palin, Democrats fantasized about Barack Obama, Bill Clinton and Hillary Clinton.

Maybe I’m strange, but I’ve never met or seen an American politician that piqued my interest.

Though I will confess to occasionally having quirky libertarian fantasies, one of which does involve sex.

Speaking of quirky, folks on the left appear to have more issues with mental health.

Since I’ve asserted that folks on the left are “neurotic” and “guilt-ridden,” part of me agrees with these findings.

Though, to be fair, maybe they’re just more likely to visit healthcare providers.

I’ll conclude with what I will conveniently characterize as the most insightful research.

Three scholars, in an article for Current Psychology, find that libertarians are the smartest.

Previous studies consistently showed that analytic cognitive style (ACS) is negatively correlated with social conservatism, but there are mixed findings concerning its relation with economic conservatism. Most tests have relied on a unidimensional (liberal-conservative) operationalization of political orientation. Libertarians tend not only to identify themselves as conservative on this scale but also to score higher on ACS than liberals and conservatives.

Here’s the relevant chart from the study, courtesy of Rolf Degen.

Liberals can take some solace in that they score above conservatives, though there’s not much that can be said for self-identified moderates.

P.S. I started this column by noting that I want to understand how to be a more persuasive advocate for liberty. I don’t know if that will ever happen, but at least I can take comfort in that I will never be as deluded as this columnist who thinks he has discovered a way of becoming a more persuasive advocate for statism.

P.P.S. If you like this type of research, my previous columns on supposedly innate differences across ideologies can be found here, here, and here.

P.P.P.S. And here’s the research on the differences between libertarians and conservatives.

P.P.P.P.S. Here’s a humorous look at the difference between conservatives, liberals, and Texans.

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