Wednesday, July 13, 2005

Those Falling Deficits, Outside my Window

The primary reason I became a capitalist is because it is reality. Every economic system that has been implemented otherwise has failed or failed to achieve similar standards of living for their people. Sure you have your Norway's and Luxembourg's (although different factors are afoot there), but by and large if you really care about society, you really care about your fellow man, you really care to eliminate poverty and increase standards of living for all, you will become the most ardent supporter of capitalism. End of story.

Thus, I like it when things like this happen. Empirical things that once again prove that capitalism and lowering taxes, and the very simple concept that if you allow people to have economic freedom they will produce more wealth than they would under economic tyranny or confiscation.

Seems that GW's tax cuts are starting to pay off. With 4 years of solid and higher than average-boom economic growth that the tax base has grown. It has grown so much that it's actually almost paying for all of GW's increased spending (WHICH IS A HECK OF A LOT and why I'm not terribly a big fan of Bush) not to mention the Iraq war/War on Terror. The deficit now sits at a roughly very low 2.5% of GDP while the left's darling children of Germany and France are seeing decifits in excess of 3% and climbing with NO economic growth.

No doubt the left will come up with some reason as to why there socialist economies look so sh!tty compared to the evil tyrannical capitalist fascist blah blah blah US economy.

4 comments:

Arcane said...

One quibble... Norway and Luxembourg are both capitalist. All of Europe is capitalist, just in a much more regulated form than what is practiced throughout the Anglosphere. The only two countries in Europe that I can think of off the top of my head that aren't capitalist is France, where more than 50% are employed by the government and over 52% of GDP is consumed by it, and Belarus, which is still a Soviet-style command economy for the most part with a few small businesses that are mainly responsible for the little bit of growth that they have.

The Nordic countries, traditionally the most socialist of the European ones, have been cutting taxes and privatizing pretty rapidly over the past decade, and are becoming more and more similar to the Anglosphere models. Germany's government only consumes 43% of GDP, which is just above what Britain's consumes, and will likely be below Britain once Angela Merkel passes her reform package after she gets elected this fall.

The EU is troubling, though. It's obsessed with regulation... but on the national level the future of Europe looks a bit brighter than it did a few years ago. I will say, however, that while the EU would hurt Anglosphere economic models, it will also force France to liberalize their economy more, which is a good thing.

Captain Capitalism said...

Ah, but the gague by which you measure whether a country is socialist or capitalist is off, although you mention it, government receipts (or spending) as a percent of GDP.

Regulation and state owned enterprises set aside, I prefer to use that measure to determine how "socialistic" "capitalistic" a country is.

Norway's and Luxembourg's governments consume 50% or more of their economies, by my definition, certainly socialist. And while the remnants of the economy that are private sector may be unregulated, privatized and relatively free, it doesn't change the fact that the government dominates the economy.

If you further study Norway and Luxembourg, you'll see why they are successful as they are despite such intervention from the government.

Arcane said...

I like to compare them with the most socialist economies in the world, such as North Korea, Cuba, and Belarus, with the most capitalist economies in the world, like Singapore, Chile (viva Pinochet!), and the United States, in order to measure which direction they lean in the most. In this case, the social democracies in Europe lean far more in the direction of the capitalists than they do in the direction of the socialists.

When I go on the Party of European Socialists website and read a pamphlet talking about socialist reform which says, "Learn to love the market," I can't help but smile. With the exception of the EU bureaucracy and France, the national economies in Europe are becoming more and more capitalist.

So that gets to what you were alluding to with Norway and Luxembourg... while I'm not sure what reason you're mentioning, I would guess that the reason involves exports and the banking sector, but that's just a guess. And that's not mentioning that Luxembourg is so small with so few people... comparing Luxembourg with the rest of the world is absurd, and I don't know why they do it. Why not compare Greenwich with the world?

I mostly get my economic freedom info from Heritage Foundation and Fraser Institute publications. Perhaps you can do a post explaining why?

Captain Capitalism said...

No, you're right, compared to the few remaining stalinist regimes Europe is certainly more capitalistic, but that still doesn't make them capitalist economies.

The thing is there is no set defined line that determines a socialist economy from a capitalist one from a communist one. Is 70% government as a percent of GDP socialist or communist? Who knows.

What I'm saying is I like the measure of government as a percent of GDP because regardless of whether the private sector economy is reasonably unregulated, the government still takes a significant sum through taxation, and ultimately would have ramifications on foreign investment. In otherwords, it's a succinct number that provides a specturm measure as to just "how capitalist" or "how socialist" an economy is. Now the Freedom Index put out by the Heritage Foundation certainly is just a good of measure, but I don't care how "free" a country is or how easy it is for me to set up a business when at the end the government comes in an progressively taxes me at 70%. Big whoop if it was easy for me to set up a business, I can only keep 30% of my profits.

You are correct on Luxembourg in part, there is another reason for their success. Norway is a bit easier if you look up their economy. You adjust for this one item and Norway is no different than Sweden or Finland.