Monday, October 31, 2016

Socialism Makes You Poor--Here's How

The following is a summary of a class discussion. 

In 2013 The Economist, a British magazine, reported on an Organization of Economic Cooperation and Development (OECD) study of how measures of GDP per capita or wealth per person by country compare to measures of the welfare of each country’s bottom ten percent. The study found that there is a close correlation between GDP per capita and how well-off the bottom ten percent is. See .

Among the countries studied, the US performed fourth best, after Canada, Sweden, and Australia.  According to the Heritage Foundation’s ranking of economic freedom--or absence of socialism and regulation--Canada ranks six, Sweden ranks 26, and Australia ranks five in terms of economic freedom.  In contrast, the US ranks 11 in terms of economic freedom.   In other words, two of the three countries studied in which the bottom ten percent are best off have LESS SOCIALISM and regulation than the United States does.

At the bottom of this email, I list the 25 most-free countries and their wealth ranks (average wealth rank= 38) and of the 25 most-socialist countries and their wealth ranks (average wealth rank=154). 

After that I list the 13 countries with populations of 100 million or more.  The wealthiest of the countries with 100 million or more population is the US, with an economic freedom ranking of 11 and a wealth rank of 19, and Japan, with an economic freedom ranking of 22 and a wealth rank of 43.  The other 11 countries with over 100 million population have a mean economic freedom ranking of 109 and a mean wealth ranking of 129.  Large countries tend to adopt socialism, and as a result they tend to be poor.

The Scandinavian countries are in flux, and have a split personality.  Student K-S is right that Denmark, Sweden, Norway, and the other Scandinavian countries still have high welfare benefits.  However, in many ways they have become or are becoming less regulated than the US, which has caused sharp increases in their wealth or GDP per capita. This article by the Foundation for Economic Education gives an overview:

The author writes:

Scandinavia is in the midst of an economic transformation. Thanks to tax reform, openness to investment/trade, sound property rights, little corruption, and continuing efforts to privatize, economies there have made great strides toward liberalization. Denmark, Finland, Iceland, and Sweden have been rated “free” economies by the Heritage Foundation’s 2006 Index of Economic Freedom (online at Norway lags behind with a “mostly free” rating.  Norway has had fewer incentives to liberalize because of its large oil endowment.

 I looked up the current rankings of GDP per capita by the CIA, which is available at
As well, I looked up the economic freedom (lack of socialism and lack of regulation) rankings by the Heritage Foundation for the 25-freest countries and the 25 least-free countries.
The five economically freest, least socialist countries--Hong Kong, Singapore, New Zealand, Switzerland, and Australia--have an average wealth ranking of 23.4, which puts them in the top 10% in terms of wealth.  The five most socialist or least economically free countries—Turkmenistan, Zimbabwe, Venezuela, Cuba, and North Korea---have an average wealth ranking of 149.2, which puts them in the bottom 20% in terms of wealth.  Socialism causes suffering of the poorest people in those countries.

I have tabulated the list of the 25 -freest (least socialist) countries and the 25 least-free countries as compiled by the Heritage Foundation (see ) along with GDP per capita as compiled by the CIA.  The list is. The mean wealth rank for the 25-freest countries is 38.  The mean wealth rank for the 25 least-free countries, the most socialist, is 154.

If one looks at the CIA rankings of the richest countries, one sees that special considerations characterize most of the 20 richest.  These include oil exporters--Qatar, Kuwait, Norway, Brunei, and UAE; small countries with wealthy part-time residents, banking, or gambling—Macau, Luxembourg, Lichtenstein, Monaco, Bermuda, and Sint Maarten; and small countries that are dependent on larger ones—Isle of Man, San Marino, Jersey, and the Falkland Islands.  If one removes those, the remaining top-20 wealthiest countries are Singapore, Ireland, Switzerland, Hong Kong, and the United States.  These are among the freest countries, with a mean freedom rank of 5.2.  The mean for the five is raised somewhat by the US, which had the freest economy until the 1960s or so, and has been in decline since it increased the degree of socialism under Lyndon Johnson and Richard Nixon; more recently, George W. Bush and Barack H. Obama have also increased the degree of socialism, so one can expect further decline in the US.

Here are lists of the 25 most-free countries and their wealth ranks (average wealth rank= 38) and of the 25 most-socialist countries and their wealth ranks (average wealth rank=154). 
After that I list the 13 countries with populations of 100 million or more. 

25 Most-free countries: Mean wealth rank 38
1. Hong Kong                     Wealth rank 18
2. Singapore                        Wealth rank 6
3. New Zealand                   Wealth rank 51
4. Switzerland                      Wealth rank 16
5. Australia                           Wealth rank 26
6. Canada                             Wealth rank 31
7. Chile                                 Wealth rank 80
8. Ireland                              Wealth rank 14
9. Estonia                             Wealth rank 64
10. United Kingdom            Wealth rank 40
11. United States                  Wealth rank 19
12. Denmark                        Wealth rank 30
13. Lithuania                        Wealth rank 65
14. Taiwan                            Wealth rank 29
15. Mauritius                        Wealth rank 87
16.  The Netherlands            Wealth rank 23
17. Germany                         Wealth rank 28
18. Bahrain                           Wealth rank 23
19. Luxembourg                   Wealth rank 3
20. Iceland                            Wealth rank 32
21. Czech Republic               Wealth rank 59
22. Japan                               Wealth rank 43
23. Georgia                            Wealth rank 139                               
24. Finland                            Wealth rank 41
25.  United Arab Emirates    Wealth rank 12

25 Least-free countries.  Mean wealth rank  154

154 Algeria                                   Wealth rank 112
155. Laos                                       Wealth rank 164
156. Angola                                   Wealth rank 156
157. Belarus                                  Wealth rank 94
158. Burma                                   Wealth rank 163
159. Ecuador                                 Wealth rank 128
160. Bolivia                                   Wealth rank 154
161. Solomon Islands                    Wealth rank 204
162. Ukraine                                 Wealth rank 148
163. Democratic Republic of Congo  Wealth rank 226
164 Chad                                       Wealth rank 196
165 Kiribati                                   Wealth rank 209
166 Uzbekistan                             Wealth rank 160
167. Timor-Leste                          Wealth rank 172
168. Central African Republic     Wealth rank 228
169 Argentina                              Wealth rank 85
170 Equatorial Guinea                 Wealth rank 36
171 Iran                                        Wealth rank 95
172 Republic of Congo                Wealth rank 156
173. Eritrea                                  Wealth rank 219
174. Turkmenistan                       Wealth rank 98
175. Zimbabwe                            Wealth rank 205
176. Venezuela                            Wealth rank 96
177. Cuba                                     Wealth rank 137
178. North Korea                         Wealth rank 210

13 Countries with over 100 million Population

Mean freedom excluding US and Japan:  109

Mean wealth rank excluding US and Japan 129

US:  freedom rank 11 and wealth rank of 19

Japan freedom rank of 22 and wealth rank of 43

1. China                                       Freedom ranking   144     wealth ranking  113
2. India                                        Freedom ranking     123   wealth ranking  158
3. United states                            Freedom ranking      11    wealth ranking   19
4. Indonesia                                 Freedom ranking     99      wealth ranking  131
5. Brazil                                       Freedom ranking  122      wealth ranking 103
6. Pakistan                                   Freedom ranking    126     wealth ranking  171
7. Nigeria                                     Freedom ranking   116      wealth ranking  159
8. Bangladesh                              Freedom ranking    137     wealth ranking  179
9. Russia                                      Freedom ranking    153      wealth ranking   73
10.  Mexico                                 Freedom ranking      62       wealth ranking  91
11. Japan                                      Freedom ranking   22          wealth ranking  43
12. Philippines                              Freedom ranking  70         wealth ranking  153

13. Ethiopia                                 Freedom ranking    148       wealth ranking  208