Why I Will Never Believe in the Fallacy of ‘Limited Government’

Stockholm, Sweden. The dystopian capital of evil government coercion.

The Human Development Index (HDI) is a composite statistic created by the United Nations Development Programme that measures a country’s standard of living. It takes into account life expectancy, education, adult literacy, years of schooling, and income. Based on these figures, lists can be created that rank countries by their standard of living. The countries with the best HDI scores also tend to have the lowest crime rates and happiest citizens. In other words, the countries with the best HDI scores are, generally speaking, the best places to live on planet earth. 

Although numbers can sometimes be inaccurate, the great thing about combining all these different statistics into one number is that even if a few figures are off, on the whole we can still make a fair assessment of which countries provide the highest quality of life for their citizens. The development index also allows us to cut through ideological arguments and examine the simple facts.

Since the rankings change a bit each year, I will not pay too much attention to which country is 4 or 5 or 6, etc. Instead, I’ll look at the countries in groups of ten. The top 10 countries in the UN development index for 2011 are:

1. Norway

2. Australia

3. Netherlands

4. United States

5. New Zealand

6. Canada

7. Ireland

8. Liechtenstein

9. Germany

10. Sweden

There is also a second HDI ranking, which takes economic inequality into account. Some would argue that this is a better evaluation of the overall standard of living for a country. When adjusted for inequality, the top 10 countries are:

1. Norway

2. Australia

3. Sweden

4. Netherlands

5. Iceland

6. Ireland

7. Germany

8. Denmark

9. Switzerland

10. Slovenia

Notice the United States does not appear on this second list. When adjusted for inequality, the U.S. ranks at number 23.

The countries that appear in the top 10 on both lists are:







These 6 countries will be called our “All Star” nations. So what is it about these All Stars that makes them so successful? 

Let’s start by looking at health care, since the topic is hotly debated in America today.

Here’s a list of countries with universal health care systems. It specifies the start date and exact type of health care system (single payer, insurance mandate, or two tier). How many of our All Star nations have universal health care? All of them

1. Norway (1912, single payer)

2. Australia (1975, two tier)

3. Netherlands (1966, two tier)

4. Ireland (1977, two tier)

5. Germany (1941, insurance mandate)

6. Sweden (1955, single payer)

Notice that universal health care was implemented in all of these countries decades ago. In Norway’s case, a single payer system has been around for 100 years. This shows, at the very least, that a country can prosper for generations despite a “big government” solution to health care.

Health care is certainly not the only indicator of a country’s political philosophy. So let’s now look (courtesy of Wikipedia) more broadly at the type of government policies and economic models that exist in some of our All Star nations.

Norway:  The country maintains a Nordic welfare model with universal health care, subsidized higher education, and a comprehensive social security system. 

Netherlands: Both trade unions and employers organisations are consulted beforehand in policymaking in the financial, economic and social areas. They meet regularly with government in the Social-Economic Council.

Germany: The country has developed a very high standard of living and a comprehensive system of social security. Germany has a social market economy with a highly qualified labour force, a large capital stock, a low level of corruption,[90] and a high level of innovation.[91] 

Sweden: Sweden has the lowest Gini coefficient of all countries (0.23) which makes Sweden the most equal country on earth in terms of economic division. Sweden is an export-oriented mixed economySweden is currently leading the EU in statistics measuring equality in the political system and equality in the education system.[85] Sweden has the second highest total tax revenue behind Denmark, as a share of the country’s income. 

Please take note of some of the key terms and phrases in those descriptions, such as “Nordic welfare model,” “universal health care,” “subsidized higher education,” “comprehensive social security system,” “trade unions,” “social market economy,” “mixed economy,” and “highest total tax revenue.” None of these things, in theory or in practice, are consistent with the policies of small government conservatives and libertarians.

The two All Star nations not included above are Ireland and Australia. Both of these countries are much more similar to the United States in their political philosophy, but neither could be considered as being exemplars of limited government (again, both countries instituted universal health care decades ago). It should also be mentioned that Ireland is currently suffering from 14% unemployment and is dealing with the consequences of deregulated markets, just like America.

Having pointed out the correlation between liberal governments and high standards of living, I should add that correlation does not necessarily prove causation. Perhaps there are other factors at work here that are not obvious to outside examiners. And by no means am I suggesting that capitalism doesn’t work (it generates vast amounts of wealth) or that the market is never effective (Ireland grew substantially thanks to decreased protectionism) or that government should run everything (Cuba…need I say more?).

What I am suggesting is that all the world’s most developed and modern countries have found that government intervention and regulation, in a variety of areas, can work quite well, especially when combined with a competitive marketplace. 

So while I will always be willing to debate the merits of specific taxes and regulations, I will never be able to find merit in the idea that government should sit on its hands and do nothing. The modern world is center-left on the political spectrum and it’s time that the enemies of active governments start admitting it. 

105 Notes

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