Canadian Commentary: International

The Myth of Anglo-Saxon Economics

October 1997

In recent years, right-wing commentators have been crowing over the economic statistics from the English-speaking industrialized nations - the U.S., Britain, and to a lesser extent Canada, Australia and New Zealand. These nations are supposedly converts to the low-regulation, low-government mantra spouted by free-market economists, who claim that the high growth and low unemployment they have recently enjoyed are a result of their right-wing policies. These "Anglo-Saxon" nations are contrasted with the continental European countries and Japan, whose government involvement in the economy and expensive social programs are supposedly responsible for unsuccessful economies, characterized by high unemployment and slow growth.

This convenient stereotype is shattered by some remarkable statistics published by Bruce Little in his "Amazing Facts" column in the Globe and Mail on Sept. 22. A study in the changes in Gross Domestic Product per capita in industrialized nations over the last seven years (1989-1996) showed an exactly reversed situation. Nations with high taxation, extensive social programs and much government involvement in the economy - Norway, the Netherlands, Japan, Denmark, Austria - showed the highest GDP per capita growth. By contrast, the Anglo-Saxon nations - the U.S., Britain and Canada - came in dead last (along with Sweden, which has been engaging in market-oriented reforms). Since GDP per capita is the most basic indicator of the increase in wealth of a nation's people, its increase must be among the most fundamental measures of a government's success. The "Anglo-Saxon" model does not seem to be working as well as advertised.

How is this possible? Norway's success is easy to explain - it has oil. According to right-wing theory, this should not be helping much as long as it maintains its social democratic economic policies - but obviously these policies are not getting in the way. One might point out that Alberta also benefits from oil, but this does not stop the right from holding it up as an example of ideal free-market policies. In fact, Alberta can only get away with its low-tax, low-government regime thanks to the benefits of oil. Without oil, the province would find itself forced to hike its taxes and strengthen its social policies until it was just like the rest of Canada's provinces.

It is harder to explain the other leaders of the GDP per capita race according to conventional free-market economics. One important point is that several of them are among the smaller European nations. The right tends to focus on Germany and France when making its anti-social democratic pitch. But both of these nations have been pursuing absurdly tight monetary policies for the past several years, which has much more to do with their stagnation than their social policies do. As a result, both are towards the middle of the GDP per capita growth ranks (though they are still ahead of the Anglo-Saxon nations). The fact that smaller social democratic nations are doing very well for their population shows that it is not the social-democratic economic model that is causing problems.

These statistics are not decisive, of course. The chart may be skewed by the fact that it starts in 1989, when the Anglo-Saxon nations began a deep recession. However, the free-market policies of the U.S. and U.K. had been fully implemented by that time, so their recessions must be considered by-products of these policies as much as their current performance. The primary point that has to be derived from the chart is that the economic statistics on which the right bases its arguments can be endlessly manipulated to show a wide variety of results. They cannot be relied on as decisive proof of the superiority of one economic and social system over another. The only true measure of the success of an economic system is the unquantifiable one of the happiness of a nation's population.

[See also The French]

Oct. 22, 1997

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