Stocks Of Socialized Countries Have Outperformed U.S. Since Reagan Era

Conclusion: "Countries with typically high levels of government involvement in the economy, such as Sweden, Denmark and Canada, do not appear to have experienced stifled economic growth relative to countries where government involvement is more limited, like the US.” Indeed, that is probably an important reason why Massachusetts, with its more progressive government, outperforms the vast majority of other U.S. states. And, of course, as is well known, the U.S. stock market does better under Democratic presidents than Republican ones. - promoted by Bob_Neer

http://www.huffingtonpost.com/2011/06/22/stocks-socialized-us-countries-reagan_n_882270.html

Ahem:

American traders aren’t likely to take kindly to the suggestion that big government might be good for the stock market. But data from a paper on the job- and income-growth of top earners shows that stock prices in some socialized countries, relative to themselves and adjusted for inflation, have done considerably better than those in the U.S over the last two and a half decades.

Specifically, during the twenty five years after Ronald Reagan took office — a pro-market honeymoon that Ryan Chittum of the Columbia Journalism Reviewthis week termed “the ascent of laissez-faire economic policies” — French stock prices have performed significantly better than Americans ones, according to the report by Jon Bakija, Adam Cole, and Bradley Heim.

further examination of the 39-year period extending from the end of the Nixon administration until 2008 shows the Swedish economy, known for its high taxes and heavy regulation, growing at a significantly higher rate than the US.

The authors conclude that big government might not actually stand in contradiction to a productive economy: “Countries with typically high levels of government involvement in the economy, such as Sweden, Denmark and Canada, do not appear to have experienced stifled economic growth relative to countries where government involvement is more limited, like the US,” the report says.

Just another reason for New England (and other sane parts of the US) to secede from the US and form a modern, reality-based country: it would be a boon for business.

Did you know that nanny-state Germany is the second largest net exporter in the world?  It was passed by China last year (but Germany only has 6% of China’s population).

Recommended by christopher, amberpaw, sue-kennedy.



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15 Comments . Leave a comment below.
  1. You can't draw any conclusions from this data

    Hong Kong (very free market) is number #1 and Italy (very socialist) is last.

    • well, you can draw the conclusion the author did

      “Countries with typically high levels of government involvement in the economy, such as Sweden, Denmark and Canada, do not appear to have experienced stifled economic growth relative to countries where government involvement is more limited, like the US,”

      They’re not saying the more government involvement, the better the outcome, they’re saying government involvement does not necessarily stifle economic growth.

      • Yes, this

        dhammer is right. I would also add that like with anything, when it comes to statistics, there are going to be outliers, often explainable for some other reason. Hong Kong’s a tiny, wealthy island with a lot going for it, while Italy’s long been a politically unstable mess.

        Yet, what we can look at is the general picture, as a whole: generally, democratic countries with strong social safety nets have done better economically than economically conservative countries that have eschewed social safety nets.

        RyansTake   @   Thu 23 Jun 7:28 PM
      • According to the Heritage Foundation...

        Canada and Denmark have more economic freedom than the US:

        http://www.heritage.org/index/ranking

    • Hong Kong has many socialist characteristics

      As just one of many examples, almost half of the population lives in some form of public housing. Wikipedia:

      Public housing in Hong Kong is a set of mass housing programmes through which the Government of Hong Kong provides affordable housing for lower-income residents. It is a major component of housing in Hong Kong, with nearly half of the population now residing in some form of public housing.[1] The public housing policy dates to 1953, when a fire in Shek Kip Mei destroyed thousands of shanty homes and prompted the government to begin constructing homes for the poor.

    • Eh..?

      Hong Kong (very free market) is number #1 and Italy (very socialist) is last

      Hong Kong is not a country and Italy is presently run by a media entrepeneur.

      Also, the “free market” flavor of Hong Kong stems from the long history of government involvement, specifically the administration of the British East India Company, sometimes in concert with and some times in tension with the Qing Dynasty, and the later colonisation by Britain during the Opium Wars in the 19th century. It is a mistake to hold up Hong Kong as somehow free from government involvement.

  2. Slim Whitman

    … outsold Elvis and the Beatles.

  3. unemployment consistently higher in the EU

    The EU has had a huge problem with unemployment, other than the great recession we have had a very low unemployment rate.

    Talking with EU companies they are very hesitant to hire, as employees are just about impossible to get rid of, if they don’t work out. So they don’t take any chances.

    Just an aside I would even think of stock indices as being indicative of wealth, it’s a poor metric.

    • Comparable Measures

      The EU countries have narrow and broad definitions of unemployment. It is important to understand the source of the data for the chart as well as the measures.

    • head scratch....

      Just an aside I would even think of stock indices as being indicative of wealth, it’s a poor metric.

      Good thing, then, that nobody is here using stock indices to track wealth.

      Stocks are, however, an excellent indicator of the health of a (public) company. And an overall rise in stock prices in a particular market means an overall rise in the health of the companies in that market. Stock prices are also directly tied to market capitalization (# of shares X share price = market cap) and so represents the growth of the market. If the market is growing the greater economy of which it is part is also likely to be growing.

  4. Capitalism is the most effective when protected from its own excesses

    You may – or may not – agree with my caption statement but, in fact, unbridled, unregulated racacious greed is destructive to the market, as well as to ordinary people and their lives and ability to care for their children.

  5. missing the big picture

    “Stock prices” (of existing companies) is sort of a weird claim.

    Sure, it could mean the whole economy is growing.

    But there’s another possibility.

    It could be that regulation makes it harder for new companies to enter the market. Therefore, an existing company would benefit and have higher profits and stock price. But consumers and job seekers would lose — anyone who benefits from the new companies that don’t get created.

    If this were true, you’d see the existing companies do reasonably well, but not overall economic output (how everyone does, put together).

    So let’s look big picture. US since Reagan doing okay in GDP, Europe shrinking a bit. Hard to argue this is “outperformance.”

    • stock prices hopeless metric

      You can’t assume all companies are public listed, they aren’t and a lot less companies are going public in the US due to the costs with Sarbanes–Oxley.

      GDP and unemployment are much better metrics. The US has had much lower unemployment and a slightly higher GDP than the EU (until our current recession).

  6. Our shibboleth of socialism has worked too well.

    We’ve a government that takes from some and gives to others. Perhaps it was intended that the more fortunate would benefit those less fortunate. As with so many government programs the opposite took place. Wealth is pooling into a small percentage of the populace. We got socialism, but not in the way it was expected.

    Could it be due to the economic power that controls politicians, media, military/industrial/security forces to their own benefit? In the more egalitarian countries you mention, I see a strong kinship between people and their government. Here, the people are untermensch to corporate, financial and government interests. They routinely violate laws and human rights, perpetuating frauds and operating the police state as they see fit.

    Can there be change?

    “As with the Christian religion, the worst advertisement for Socialism is its adherents.” –George Orwell

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