If the words “Norway” and “Sweden” prompt you to think about government control of people’s economic decisions, you might want to think again.
That was one of the most interesting takeaways from a recent lecture at Duke University.
“The northern European social democratic countries, in fact, have a lot of economic freedom,” said Robert Lawson, economics professor at Southern Methodist University. “They are all in the top 25 percent or maybe just outside of that. … Most of Europe is very market-[oriented}.”
“Think about what it’s like to live in Stockholm,” Lawson said. “It’s private cars and private businesses. Prices of products are unregulated. They export freely. Volvos are all around the world. This is a market economy. This is not a socialist economy.”
As self-proclaimed socialists like Alexandria Ocasio-Cortez play a more vocal role in today’s Democratic Party, it’s important to define what they mean when they refer to socialism. If they invoke Norway and Sweden as models for the United States of the future, Lawson suggests they’re not interested in real socialism.
“They’re market economies,” he said. “If you want to see the socialist economies, you go to Argentina or Brazil, where the government is infecting every aspect of business. You go to large parts of the continent of Africa, and you’ll see that’s actual operating socialism. You have governments operating enterprises.”
“Of course, Venezuela is the current standard-bearer there,” Lawson added. “Some people think socialism is Sweden. I’m going to say, ‘No, socialism is Venezuela.’”
Lawson should know the difference. He’s spent much of his career comparing economies around the globe. The result of that work is an annual Fraser Institute index titled “Economic Freedom of the World.”
The index measures freedom in five areas: government size, property rights, sound money, free trade, and regulatory burden. Once Lawson and his colleagues examine 42 variables under those broad categories, they rank 162 countries from top to bottom. The country with the most economic freedom ranks No. 1.
Hong Kong has occupied the top spot since rankings began. “The top tax rate in Hong Kong is 15 percent,” Lawson explained. “There are no property-rights problems. In fact, they have one of the greatest court systems in the world.”
“There are no inflation problems,” he continued. “There are no tariffs or quotas into or out of Hong Kong. It’s complete, absolute free trade.”
As for government red tape? “It takes 30 days to start a business in the United States — it takes one day, according to the World Bank, to start that same business in Hong Kong.”
Both Hong Kong and world No. 2 Singapore remind us that economic freedom doesn’t correlate exactly to political freedom. But most of the rest of the top performers could be characterized as “our liberal democracies,” in Lawson’s words. “We’re looking at Switzerland, New Zealand, Ireland, the United States, … the United Kingdom, Australia,” he said. “These are countries that are both market economies, … and they’re also good, sound, liberal democracies with freedom of speech and religion.”
On the other end of the scale sits Venezuela, which chose a socialist path in electing the late Hugo Chavez as president 20 years ago. Current leader Nicolas Maduro continues to follow Chavez’s policies.
Out of a possible 10 points for economic freedom, Venezuela scores 2.88. “I believe 2.88 is the lowest score on the economic freedom index ever recorded by any country ever,” Lawson said. “Even Zimbabwe I don’t think ever got down that low 10 or 15 years ago when it was at its bottom.”
There are good reasons for people to prefer a higher score and higher ranking on the economic freedom list. Countries with more freedom are “richer,” Lawson said. Within countries ranking in the Fraser index’s top 25 percent, average income totals $40,376. Among the bottom 25 percent, that number slumps to $5,649.
Socialists might respond that all of that extra income in economically free countries flows to the rich. In the critics’ preferred economic arrangements, they believe the most disadvantaged people secure a larger piece of the pie.
In countries with the most economic freedom, the poorest 10 percent of the population secures 2.74 percent of the income. That share drops to 2.47 percent within the countries with the least freedom. “There is no relationship between the level of economic freedom, as we measure it, and the degree of economic inequality around the world,” Lawson explained.
The freest countries also enjoy higher life expectancy and lower poverty and infant mortality rates. People in economically free countries are happier, too, according to Lawson’s assessment.
“The index allows us to unlearn some of the things we thought we knew,” Lawson said. If so, let’s get copies in the hands of AOC and the rest of today’s American socialists. Perhaps they will “unlearn” their support for an economic system that would make us all poorer, less healthy, and less happy.
Mitch Kokai is senior political analyst for the John Locke Foundation.