Tuesday, March 17, 2009

Comparing Jamaica & Barbados

From Econlib, the recent study from Stanford University economists Peter Blair Henry and Conrad Miller seems to be pretty clear on how different policies shape economic outcomes (via Club for Growth):

Henry and Miller point out that in Jamaica, the People's National Party rose to power in the 1970s with the promise of "democratic socialism." Unfortunately, the PNP delivered, nationalizing companies, taxing trade, and imposing exchange controls. The PNP also distributed income through job-creation programs, schemes for housing development, and subsidies on food. Government spending rose from 23 percent of GDP in 1972 to 45 percent in 1978. The government financed much of its huge deficit by printing money, leading to 27 percent inflation by 1980.

The government of Barbados, by contrast, avoided nationalization and opened the country to trade. It also kept government spending under control although, unfortunately, Henry and Miller don't present data on government spending as a percent of GDP.

The economic results: between 1960 and 2002, real GDP per capita grew by an annual average of 2.2 percent in Barbados but only by 0.8 percent in Jamaica.

My question: how many examples like this do we need until we recognize that economic liberty (yes, that includes evil deregulation, lower taxes for rich people and free not just fair trade) and prosperity go hand in hand?

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