The Correlation of Rich and Free

For a long time, it has baffled me how so many people in this world can ignore evidence that is right in front of their eyes.  It just shows the power of propaganda.  Specifically, I don’t understand how so many people can advocate socialistic policies and not think they will lead to bad results.

Economics can be tough in that it is hard to find evidence based on real world events.  While some economists think you can use mathematical formulas to study economics, it is really about reasoning and studying human action.  But if you make specific economic claims, it is usually hard to prove your point with an example.

For example, you could say that an increase in the minimum wage will likely lead to higher unemployment.  But you can’t test this in a vacuum.  You can’t test any economic theories in a vacuum because we don’t live in a vacuum.

The saying is “if all else stays the same.”  An increase in the minimum wage will likely lead to higher unemployment, if all else stays the same.  The problem here is that everything else does not stay the same.  Almost nothing stays the same.  When you have many variables contributing to a certain outcome, it becomes hard to test those variables on their effect.

With that said, I think we can use real life examples in demonstrating the horrible effects of socialistic policies.  Let’s look around the world.

First, let’s take three examples of places in the world where there is a relatively free market economy with low taxes, low government regulations, and strong property rights.  Three places that always come to my mind are Hong Kong, Singapore, and the United Arab Emirates.

These places are far from perfect.  I don’t think any of them rank as high as the U.S. in terms of social freedoms such as religious freedom and free speech.  And even economically speaking, all of these places have some central state planning involved.  It is just that these three places are economically free in comparison to most other places on the planet.

(As a side note, some people mistakenly believe that the United Arab Emirates is a wealthy place because of oil.  But oil actually makes up a fairly small percentage of the overall economy.  The UAE, and in particular Dubai, has tourism and international business as the main economic drivers.)

So while taxes and regulations are low in Hong Kong, Singapore, and the UAE, we also see some of the richest places in the world.  These are really wealthy countries and are quite attractive places to entrepreneurs and corporations.  A place like the UAE is also desirable for immigrants, as it is an opportunity for people from third-world countries to make a living.

So even the poor people in these countries will find better living conditions.  And many immigrants can work there and send money back to their families living in a poor country.

While there is certainly a great disparity in wealth and income, I would much rather be a poor person living in Dubai than a poor person living in India.  Your living conditions will be better in Dubai, and at least you have a chance to move up in the world.

And even though property prices are high in Singapore and Hong Kong, you will find a far higher standard of living in these places than almost anywhere else, but especially the third-world countries.

Compare these wealthy countries to almost anywhere in Africa and many places in Asia and South America.  They are different worlds.  Look at Venezuela and the horrible decline of that country from the socialist policies.  You can even look at Greece, a massive welfare state, where many people are struggling just to put a decent meal on the table.

The point here is that the countries that adopt free market capitalism are wealthy and the people there generally have a high standard of living.  In countries that turn away from free markets and resort to socialist policies and major central planning, we see massive poverty and a generally low standard of living.

I don't understand why so many people can't see the obvious correlation.  If free markets lead to a better life and socialist/ interventionist policies lead to poverty and suffering, why do so many people still allow the government to enact these socialist and interventionist policies?