Click to get your own widget

Monday, August 24, 2009


I have blogged previously on this immensely valuable pdf document - a statistical analysis of what factors correlate with growth. It is worth doing it again & I am now going to reprint stuff from

Chapter 9 FACTORS AFFECTING GROWTH pdf page 53:

"resource-rich countries are usually slightly more prosperous than resource-poor ones. The problem is that they are not as prosperous as they should be"

"there is a great deal of evidence to the effect that governments tend to use resources less efficiently than entrepreneurs. The most significant point is that
what matters more than how much governments take in tax is what they do with it. The evidence suggests that governments are more likely to promote growth if they use their revenue primarily to:

build infrastructure, especially
transport infrastructure;

provide services, rather than
regulate economic activity;

do things that don’t duplicate
what the private sector can do,
specifically that they do not
compete with it; and

increase efficiency by outsourcing
and privatising." p54

"strong correlation between ‘business tax friendliness’ and growth. Tax friendliness measures the impact of tax complexity and incidence on business" p54

"governments are best advised to do less rather than more because the downside risk of what they do is greater than the upside potential" p55

"countries with the world’s smallest governments tend to be super-achievers" p55

"Notwithstanding a value-free approach, much of this report refers to indices of freedom defined in various ways (civil liberties, rule of law, economic freedom, political freedom et al). This was not contrived; it is simply that the factors that correlate most with prosperity happen to be indicators of some form of freedom. We expected other factors to present high positive correlations, such as natural resources, climate, history, culture, religion and governance. Neil van Heerden, former head of the SA Foundation, suggested that these ‘negative’ findings might be more instructive than positive correlations. Identifying the
extent to which people ‘know things that just ain’t so’ is essentially the falsification of hypotheses." p56

"key finding is that the least regulated economies (top quartile) grow 2.2% faster than those that are most regulated (bottom quartile)." p56

"It finds that efficient economies rely more on commonlaw than regulation, and that social democracies (like Denmark, Norway and Swede) benefit from streamlined business regulation, they offset the burden of welfare by liberating productive market forces" p57

"The world’s twenty least regulated economies are all (except Taiwan) rich first world countries, including all G8 countries" p57

"such as health and safety regulation, most of which has never been shown to have benefits exceeding costs, and all of which imposes enormous direct and indirect costs
on people at the expense of prosperity" p57

"A retreaded tyre regulation in the USA, for instance, was found to have cost a few million dollars for every sub-standard tyre identified by the measure" p57

"regulatory compliance (‘red tape’) cost South African businesses R79 billion in 2004, equivalent to 6.5 per cent of GDP" p57

"An OECD study found that over-regulation is the major cause of the slower rate of growth of the European Union compared to that of the USA. But what are the benefits of regulation? The study found ‘no quality benefits’. We all know that government is
costly, but a 75-country study found that regulations usually cost a country twenty times more than they cost the government" p58

"government may have a more intransigent problem with excess red tape than it realises. This is its fourth major attempt at systematic regulatory review. The first...The report was circulated through the Cabinet to all departments with a view to them addressing the problem in accordance with its recommendations.
... it was never heard of again. The second was to be undertaken by the Small Business Council, but it was dissolved. The third (full & never heard from again). It may be helpful to establish why isolated departments did succeed at substantial market liberalisation" p58


"sound policies can withstand almost any shock, and produce prosperity under almost any conditions." p59

"There is virtually no empirical evidence in favour of aid, subsidies, debt relief, technical assistance or protection" p59

"the Marshall Plan failed to generate prosperity. Furthermore, the UK received much more aid than Germany without achieving high growth. If anything, aid enabled it to perpetuate inappropriate policies." p59

"the relative size of education budgets does not correlate significantly with growth" p60

"highest growth countries cover the full range of possibilities, from poor (Trinidad & Tobago) to rich (Iceland), small (Luxembourg) to big (China), formerly capitalist(Ireland) to formerly socialist (Vietnam), resource-rich (Mozambique) to resource-poor (Finland), countries that were colonised until recent decades (Tunisia) and
ones that were not (Finland). There is also a wide range of cultural, religious, ethnic, historical and geographic diversity among high growth countries" p61

"experience of other countries is that it is likely to achieve and sustain high growth only if it resists the temptation faced by all governments to abandon a winning formula when sustained high growth is achieved. As this report shows, markets tend to respond enthusiastically to pro-market reforms" p62

"Trinidad & Tobago, shifted from one extreme to the other having elevated itself from the lowest to the highest growth rate group" p62


"The proverbial “bottom line” is that the world’s experience suggests that ........ is likely to prosper if, and only if, it:

1. reduces crime;
2. relaxes and preferably scraps exchange control;
3. reduces time people have to spend with bureaucracy;
4. relaxes or scraps insistence on centralised bargaining
5. shifts from spending on economic regulation and
parastatals to spending on transfers and subsidies...
6. the rule of law;
7. foreign trade liberalisation;
8. business liberalisation;
9. banking and financial market liberalisation.

And from p 44

"The world’s experience appears to support the view that economic freedom may be a necessary and sufficient condition for prosperity."

Labels: ,

Good stuff. Does the fact that you or I would have assumed this to be true invalidate it, though? Is it just confirming our prejudices?

PS, there's a typo on the post title.
It is something to be concerned about but mainly no. Firstly because it isn't us who did it but a bunch of South african economists & even more importantly was done on a statistical assessment of non-communist countries worldwide. That is a big enough statistical population to find general, though not fine tuned, results.

Secondly there are a few findings which might not fit libertarian prejudices - that there was not a hard negative correlation between government spending but only such a correlation in rich countries (which suggests government forms a useful role in the basics 7 in maintaining law) & that the only correlation betwen education & success was in adult male education (either that ed doesn't matter or that education spending doesn't correlate to results, & that people doing job training are really motivated.
The Marshall Plan also helped entrench leftism in Europe, which makes sense since the plan was administered by a leftist administration here in the United States.

In fact, the Democratic Party wanted to implement National Health before the war and instead ended up implementing it in Europe.
Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?

British Blogs.