Saturday, July 11, 2015

Why is Greece such an economic success?

by Scott Sumner

Library of Economics & Liberty

July 11, 2015

Greece is widely viewed as an economic basket case. This recent article in the Financial Times discusses some fanciful proposals to fix the Greek economy. I don't doubt that Greece has performed poorly in recent years, but in one little known respect Greece is a shining star. In this post I will argue that it's by far the most successful economy in the world, of its type.

The italicized phase "of its type" is obviously the gimmick that I'm going to use to make my contrarian argument. But in the end I do have a serious point to make.

The Heritage Foundation publishes an annual ranking of 178 countries, in terms of economic freedom. This ranking has some flaws, but it gives a ballpark estimate of how "market-oriented" an economy is. Unfortunately its 10 categories include corruption and government spending, which may be only tangentially related to market freedom. Nonetheless, it's a useful place to start.

All the "normal" developed countries in the entire world except one have economic freedom index scores above 60. (By developed countries I mean IMF estimated GDP/person (PPP) for 2014 above $25,000. Seychelles is just barely developed but below 60. However it is a tourist island with less than 100,000 people. Equatorial Guinea is the other "developed" exception, but other than the massive oil production its citizens are desperately poor. So I excluded those two abnormal cases.)


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