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The Poor in the US Are Richer than the Middle Class in Much of Europe

October 16, 2015 in Economics

By Ryan McMaken

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The Poor in the US Are Richer than the Middle Class in Much of Europe

October 16, 2015

We see immediately that income is higher for US households than most of the other countries. What about that high poverty rate, though? Well, we find that the poverty level in the US is still higher than numerous countries' median income level:

The green bar is the US income at poverty levels. So, this tells us that a person at 60% of median income in the US still has a larger income than the median household in Chile, Czech Rep., Greece, Hungary, Portugal, and several others. And the poverty income in the US is very close to matching the median income in Italy, Japan, Spain, and the UK.

Keep in mind that we're using median income here, and not GDP per capita, which means this isn't being skewed up by a small number of mega-wealthy households. So while the US may have a rather high poverty rate, we find that being poor in the US is similar to (at least in terms of income) being a median household in many other countries, including the UK and Japan.

So, yes, the US has a higher poverty rate than many other countries, but the standard of living available to a person at poverty levels in the US is higher than it is to a person at poverty levels in places like the UK, Spain, Italy, France, Japan, New Zealand, and others. Here are all countries at the 60% of the national median:

The relationships between the countries are the same as in the first graph, but the income levels are all lower. But again, here we see that the median incomes for people at poverty levels are higher in the US than in other countries.

Thus, the fact that the US has higher poverty rates says very little about the actual living standards of the poor. The poor have higher incomes in the US in …read more

Source: MISES INSTITUTE

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The United States Is Already at Least as Socialist as Denmark

October 16, 2015 in Economics

By Marian L. Tupy

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Marian L. Tupy

Perhaps unexpectedly, the beautiful northern European country of Denmark emerged as a topic of conversation during this week’s Democratic Party presidential debate. The small Scandinavian monarchy plays an important role in progressive mythology. It is a place many liberals want America to become, and both Bernie Sanders and Hillary Clinton sung its praises during the debate. A closer look at Denmark’s public policies is, therefore, warranted. It yields some surprising results.

First, in terms of national well-being, the United States performs slightly better than Denmark. The United Nation’s Human Development Index, a composite measure of human well-being based on educational attainment, life expectancy, and income, ranked the United States in fifth place and Denmark in eighth place in 2013. On a scale from 0 (worst) to 1 (best), the United States scored 0.91, while Denmark scored 0.9.

Second, in some important ways, Denmark is not the socialist paradise Sanders imagines. The World Bank’s “Doing Business” report measures the ease of doing business around the world on a scale from 0 (worst) to 100 (best). In 2015, Denmark scored 84.2, while the United States scored 81.98. As such, Denmark had the fourth most-welcoming business environment in the world and the United States the seventh. Put differently, Denmark is embracing the private sector with greater gusto than the land of the free and the home of the brave.

Similarly, the Fraser Institute’s 2015 “Economic Freedom of the World” report found that the overall level of economic freedom in the United States and Denmark is almost identical. The United States came in the fourteenth place, while Denmark was seventeenth. On a scale from 0 (worst) to 10 (best), the United States received 7.73, while Denmark received 7.63. If Denmark is socialist, then surely the United States is socialist, too.

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Crucially for Sanders, long an unabashed protectionist, and Clinton, who has recently backpedaled her support for trade liberalization, Danish trade with the rest of the world is much freer than America’s. Again turning to Canada’s Fraser Institute, Denmark had the world’s fourteenth most liberal trade regime in 2013. The United States came in a miserable forty-first place out of 115 countries surveyed.

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Of course, there are other important differences between the United States and Denmark. And none more relevant than the “size of government,” a proxy …read more

Source: OP-EDS

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No way, Norway!

October 16, 2015 in Economics

By Carmen Elena Dorobăț

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Free MarketsTaxes and SpendingAustrian Economics Overview

No way, Norway!

October 16, 2015

The Economist discussed recently the necessary ‘devolution’ of the Scandinavian model in Norway, following similar trends in Sweden and Denmark. The article makes several good points about the effects of bureaucratization and high-tax welfare on entrepreneurship and corporate culture in a country where the government owns 40% of the stock market and employs 33% of the workforce (almost double the percentage in OECD countries). With the drop in oil prices precipitating economic decline, Norwegians have recently voted for higher spending and no reform. But, as The Economist suggests, better long-term measures are those implemented by Sweden, which shrunk its state by “allowing private firms to run its schools, hospitals and surgeries, and reducing its tax burden.”

The discussion, however, relies on a premise too often heard and always wrong, that this change is needed despite the fact that “for decades this unusual economic model has served Norway well.” Many get the causal relationship wrong, connecting the appearance of a prosperous economy with the high taxes and government spending which happen to take place at the same time. As Mises explained, however, the latter type of policies amount to nothing more than capital consumption:

It may sometimes be expedient for a man to heat the stove with his furniture. But if he does, he should know what the remoter effects will be. He should not delude himself by believing that he has discovered a wonderful new method of heating his premises (Mises 1998, 650).

The long-run consequences of a welfare state are always a decline in prosperity leading to impoverishment, but their outward symptoms may often be misleading, if the market, while hampered, remains powerful enough to weather the taxes and still progress. Even if one inconspicuously burns only one piece of furniture every year, it does not mean the model is working, but only that the reveal of its inadequacy is postponed.

It is therefore crucial to inquire whether these models are working not by comparing static pictures of an economy, but by looking at its counterfactual evolution. How prosperous would …read more

Source: MISES INSTITUTE