The Power of Economic Freedom

Cato economist Dan Mitchell has a new blog post about the power of economic freedom in Europe. The first picture in his post details living standards across Europe, and the leaders wont surprise those who’ve been in favor of free markets.

Just a quick glance would suggest there is a correlation between economic freedom and prosperity. The eastern nations, who for decades languished under communist rule, are the poorest, whereas the wealthiest have had quasi-free markets for decades or, in the case of the Anglo nations, centuries.

Next, Mitchell went to Fraser’s economic freedom index. Here’s the list.

As you can see, the top ten wealthiest nations in Europe also happen to all be in the top 31 nations on Fraser’s economic freedom index. The two wealthiest nations in Europe, Switzerland and Luxembourg, have very low taxes and are tax havens. Mitchell believes all nations should follow their example and strive to have lower tax burdens.

For the other nations, while they have higher than optimal taxation and spending, they make up for it in other areas. These nations generally have open trade, a strong rule of law, and private property protection, for example.

The only nation in the top ten in Europe that is not in the top 31 is Sweden, but as I have noted elsewhere, Sweden is still not a liberal utopia, and has some things we should emulate (like universal school choice, free trade, and low corporate taxation).

The lesson from these images is clear: We need more economic freedom, not less. But we shouldn’t necessarily aim to be more like Switzerland or the UK. We should probably aim to be more like Hong Kong and Singapore. But that’s a discussion for another day.

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