Sweden and Hong Kong

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These two countries present a different, yet seemingly succesful way to run their countries.

On the one hand, Sweden has often been seen by many as a socialist utopia. The proof that a mixed economy can produce results that are efficient and egalitarian. So where does the secret lie behind Sweden’s success? What makes it different from the other mixed economy? In terms of size of government, the swedish occupies around 70% of the economy. The paradox, however, is that what is left of the the private sector, is relatively free and unregulated by the public sector. I call it a paradox because in fact the economy is not “mixed” in the sense that the private and public sector are clearly separated. Unlike in Spain, where the bureaucracy and intervention affect almost every aspect of “free” enterprise.

In this sense, the Swedish understand that the private sector is the one that produces the spoils that the State will later expropriate. Therefore, it is a case of not wanting to strangle the chicken that lays the Golden eggs.

However, this is not to say that a huge public sector which doesn’t intervene in private affairs is desirable or costless. In fact, much of Sweden’s relative superiority to its neighbouring countries, can be attributed to the fact that before 1970, Sweden had one of the most free economies, combined with one of the smallest governments. (occupying around 20% of GDP)

Under this regime, Sweden managed to achieve some of the biggest annual growth figures recorded in its history. Through the following years, as government size increased, economic growth decreased, outlining a clear inverse relation between the two.

The other case of study today, is Hong Kong, which due to its isolated location and origin as a British colony, has remained one of the most economically free countries and has a government size of only 19%. Needless to say, or perhaps not, Honk Kong is one of the wealthiest and most productive economies in the world. In fact, the dynamic study of the evolution of growth rates in Sweden and Honk Kong over the past three decades shows a very clear picture.

In fact, the evidence presented by Doctor Rallo in his book Una revolución liberal para España, shows the differences in income by income group, in Sweden, Hong kong and Singapore.The evidence he presents suggests that income in the lower end, people who earn less, was similar between the three countries, but the higher the income group, the higher the difference in income, with the ones in Honk Kong and Singapore doubling those in Sweden.

So a free society like Hong Kong does create more income “inequality” but is this necessarily bad? As the data proves, this did not come at the expense of the lower income groups, but rather, one should think that it acted in their benefit.

A free market simply allows people to be the best possible version of themselves. The fact that because of this, some may be earning ten times more than others is not a problem in itself. It doesn’t mean that anyone else has to be earning less. As we know, a free market is made up of voluntary, mutually beneficial arrangements, and for every millionaire that there is in Hong Kong, there are a million customers who have benefited and willingly rewarded him for his activity.

 

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