So it shows the US as the 2nd most competitive economy in the world and the most competitive large economy. That's hardly a slam on the US or an endorsement of socialism.
The Scandinavian countries are more socialist then the US, but public spending as a % of GDP is not the only measure of how the government interferes negatively in the economy, and even in this measure there has been a reduction from former high levels. There is also the regulatory burden, labor law flexibility, and many other factors. And government is not the only factor. Except in a truly socialist/communist state the goods and services are produced by the private sector and while obviously the government has an impact (sometimes a large impact) on the private sector, it isn't the only thing that determines competitiveness.
Finland's top individual tax rate is 35% It's capital gains rate is 29% and their are exemptions and deductions from that of up to 50% or the prurcahse price (and the tax is 0% for residences that are owned for long enough). That isn't a wildly high rate that imposes a lack of competitiveness. They would be likely to do even better if the government was even less involved in their economy but it isn't a crippleing burden. In recent years (since 1995) they have cut the top tax rate and government spending as a % of GDP and their competitiveness has improved. In 1993 their unemployment rate was 17.6% a rate not seen in the US since the great depression (when the rate might have been around 25%), in 1995 it was still 15%. It seems while Finland can deal with a higher level of government involement in the economy than what we have in the US it reached its limit in the 90s and if it didn't pull back it could have really been in trouble.
worldwide-tax.com
oldfraser.lexi.net
I think you get a better picture (even if it is a less detailed one) if you look at the world as a whole rather then just a few countries.
freetheworld.com (PDF file)
more at freetheworld.com
Shows a strong corelation between economic freedom and growth rates.
Going back to the Finland example. It has a high "legal system rating" (showing a legal structure that doesn't interfere with growth and respects property rights). Its rating is 8th highest in the world in this area. And its overall rating has been improving.
To use another example you can look at China. It isn't the most free country but its level of economic freedom has increased greatly as it has removed controls and bariers that had held back the productive efforts of the Chinese people.
Also see
"...The authors also compared developed countries with the smallest increases in the size of government between 1960 and 1996 to those with the largest increases and looked at their growth rates. In 1960, government spending as a percentage of GDP in the U.S., Iceland, Ireland, United Kingdom and New Zealand averaged 28.9 percent. The growth rate for those countries in 1960 averaged 4.3 percent. In 1996, government spending in those countries rose, averaging 39.1 percent, and their growth rates fell, averaging 2.7 percent.
Developed nations with the largest increases in government size between 1960 and 1996 were Portugal, Spain, Greece, Finland, Sweden and Denmark. In 1960, those governments spent an average of 28.1 percent of their GDP and their growth rates averaged 6.4 percent. In 1996, government spending averaged 54.5 percent of GDP and their growth rates fell to an average of 1.2 percent. From their statistical estimates, Gwartney, Holcombe and Lawson show that for each 10 percent increase in government spending, there's a one percent decrease in the rate of growth..."
gmu.edu |
