Frank notes:

Countries whose citizens have the most favorable opinions of their governments tend also to be ones with the best public goods and services, the lowest levels of perceived corruption, and the highest per-capita incomes.

In contrast, those with the weakest governments — think Haiti, Somalia, or Sudan — typically have poorly functioning markets, extremely low per-capita incomes, high levels of crime and violence, and citizens who regard their governments as ineffectual and corrupt.

Here is the sequence of events. In the beginning, the government of Waldavia is extremely limited according to the Constitution and public opinion. Free markets are unleashed which encourages rapid growth in the standard of living. Over decades and centuries of laissez-faire, a massive amount of wealth is created in Waldavia.

Then two developments take place, one OK, the other bad. First, certain luxury communal goods, provided almost always locally and often privately, such as nature preserves, very well-maintained cities roads, improvements in the quality of tap water, and suchlike, become “affordable.” Commonly owned spaces approach in their beauty those kept privately.

Staggering growth in private wealth is what causes good “public goods and services” in Waldavia.

The other, bad development, is an ideological change toward statism. People forget their economics. There is moral as well as intellectual decay, such that “legal plunder” becomes the order of the day. This decline is facilitated precisely by a high level of economic development: the more wealth there is out there, the more there is for the government to steal.

It is true that the government, having at length grown huge and powerful, now provides numerous “services.” But those services only drag the economy down. Despite this, economic progress still occurs. It is greatly slowed down, but the perception of the speed of improvement is hard to put into precise terms or compare inter-generationally. Moreover, where before incorruptibility of public officials was a boon, now the market wriggles through loopholes in the law: “But for the inefficiency of the law-givers and the laxity, carelessness, and corruption of many of the functionaries, the last vestiges of the market economy would have long since disappeared,” says Mises.

Perverse money and banking regime causes panics and financial crises one after another. Decent neighborhoods are wiped out after becoming the HUD’s “projects.” Disabled people can’t get jobs. Public education ruins the children’s minds and in fact is explicitly designed to do just that, for the sake of “equality,” and since everyone cannot be made equally sharp as tacks, it is much more feasible to make everyone equally dumb as doorknobs.

Now Haiti and Sudan are somewhat free from these ills, but only because the first step of extremely limited government lasting for centuries which allowed considerable capital accumulation never happened for them in the first place. Their people’s ideology has always been bad; while Waldavia has not always labored under interventionism and taxism.

We now have Waldavia, a husk, a mere shadow of its former glory, but still greatly exceeding Third World countries in material wealth thanks to what Mises called its “reserve fund.”

Finally, out pops Frank and announces that the Waldavian Third Way between capitalism and socialism is the best thing that can ever be. He fails to see the progress that could have but did not occur because of Waldavia’s long and ugly experiment with big government.


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