Wednesday, January 21, 2015

State of the economy

Twenty-five years ago, Milton Friedman suggested that the U.S.was 45% socialist.  I prefer the label "crony capitalist" and the percentage may be higher than 45. Both of the major political parties are redistributionist; both want to redistribute in the direction of their political base. As office-seekers, and presiding over very large budgets, can they be anything else?  Perhaps we should not be surprised that the U.S. ranks 12th in the 2014 Heritage Index of Economic Freedom. Free the World also puts us at 12th. It would be nice for the U.S. to move up in both rankings.

Economically, we look much better.  According to comparisons shown in the 10th Annual Demographia International Housing Affordability Survey, as a nation, we are the best. The UBS Prices and Earnings report is my favorite. Their "Working time required to buy" table compares 72 of the world's major cities in terms of how many minutes or hours the average worker must work to purchase one Big Mac, one kg of bread, one kg of rice, or one iPhone 4S with 16GB.

Four U.S. cities are included, some of our most expensive places, Chicago, Los Angeles, Miami and New York.  But in the Bic Mac column, the U.S. cities are among the best, with the sole exceptions of Tokyo and Hong Kong. A Big Mac costs the average L.A. worker 11 minutes of work but it is just 9 minutes in Tokyo and 10 minutes in Hong Kong. The international range goes all over the place, mostly much higher.

We do pretty well in the bread and rice columns, but the U.S. and most of the other places listed have awful farm support policies.  We do very well in the time required to buy the iPhone; the U.S. four-city average is 31.25 minutes; only Geneva is better, at 23.5 minutes. Go figure.

All these comparisons and rankings are tricky and one has to be very careful.  But I caught parts of the State of the Union speech (and its reception) on TV last night. (John Stossel dreams of the speech he would have preferred.)  I did see the President take credit for the low price of gasoline.  No one laughed.

Considering our politics, the state of our economy is pretty good.