Monarchial Economic Success

Even tho' much of the Debt Crisis has passed, it is still true that generally, monarchies have much stronger economies than republics, whether socialist or 'free'.

From The Mad Monarchist (16 April 2012)

These are hard times for economies all over the world (I detest the phrase “global economy” though I suppose it exists) and people, especially in places like Greece, Italy, Spain, Portugal and Ireland, are looking for solutions. Some of the actions being taken, I think, are good. Any cut backs in government spending (austerity measures) should only be common sense at this point considering how massively in debt, well almost everyone in the world, is right now. However, on the whole, it seems to me that most of what these countries are doing makes no sense to me at all. Germany loaning more money to Greece? Further economic centralization in the European Union? Wasn’t this exactly what these countries had been doing before that got everyone into this terrible mess? Seems that way to me. However, what I really have a problem with, what really scares me, is the increasing number of people around the world who are now saying that the People’s Republic of China (the most murderous regime in human history in case anyone has forgotten) is the example that others should follow. After all, they’re doing great right?

First of all -no. They are not doing great, at least not anywhere near as great as most people think. In the first place, what economic progress there has been in China has been very limited in scope. The big urban centers on the coast are thriving but most of the rural areas in the interior are just as poor as they ever have been. Secondly, what economic progress there has been in these limited areas are (not surprisingly for a socialist country trying to allow limited capitalism) sustainable because they are basically tearing down certain areas to expand in other areas (which I don’t really have time to go into more at the moment). Finally, when you hear all of these reports with all the great numbers coming out of China, you should keep in mind that these reports telling you how great the state-run economy of China is … all come from the state of course. They have a vested interest in making things look as rosy as possible and we also know for a fact that they’ve been manipulating their currency, juggling the books and doing all sorts of tricks to make people think they are this big, economic powerhouse. Which, of course, is not to say that they are not, they are obviously a huge economy, however, everything is not nearly as good as many people outside of China seem to think.

If people wanted to look for some real examples of economic success they would do better to look to countries with a monarch. Here again, people on the left at least, tend to focus on and “play up” the very socialistic economies in kingdoms like Sweden or Belgium and so on. Many pointed to the Kingdom of Spain and the huge government investment in “green jobs” until that was proven to be a huge, embarrassing failure. However, a number of small but very successful monarchies have been overlooked in all of this. At least by some people. The proponents of state-controlled economies have not overlooked them as they have been very busy in recent years trying to bully them into getting on board the big-government run economic train. However, it does say something that when the American (and very republican) Heritage Foundation ranked the top ten countries in the world in terms of economic freedom, half of them were monarchies (3-Australia, 5-New Zealand, 7-Canada, 8-Denmark, 10-United Kingdom) and the top one on the list was the former Crown Colony of Hong Kong which has maintained the economy it had as a monarchy before being officially handed over to Red China.

The trouble is that in most countries maintaining a “free economy” is a constant struggle. When they hit a rough patch there are usually immediate calls for government intervention and yet when things are going well it makes people think the good times will last forever and they go on huge spending sprees. I’ve always said that one of the problems with capitalism is that it makes countries so rich that they think they can afford socialism. However, it seems clear from the numbers that the most prosperous countries are those in which taxes are low, regulations are few and people are able to keep more (or even most -imagine that) of what they earn. It makes me wonder at least why more people do not follow their example. Two places with a great deal of economic freedom, where investment is high and the environment is pro-business (and unemployment virtually unheard of) are the British Overseas Territory of the Cayman Islands and the Crown Dependency of the Isle of Man. Why wouldn’t the British at home want to emulate the success of these areas?

The Isle of Man is an interesting case. It is not part of the United Kingdom, nor a member of the European Union but the British Crown is directly responsible for its “good government”. It has no capital gains tax, wealth tax, stamp duty or inheritance tax and a top income tax rate of only 20% and there is a tax cap. Their government has made mistakes too of course but there is no one in poverty on the Isle of Man, unemployment is practically unheard of and even without all those taxes other places consider absolutely essential (you might want to sit down for this) the government still takes in more in revenue than it spends! Over on the Cayman Islands they have the highest number of registered businesses in the world. They enjoy the highest standard of living of any people in the Caribbean and yet they have no income tax, capital gains tax or corporation tax. Their small, unobtrusive royal government pays for itself mostly through service fees and import duties. Again, there is no one living below the poverty line, unemployment is miniscule as the lack of regulations allows for new businesses to be opening constantly and they too still manage to take in more revenue than they spend and unlike most other island countries they receive no foreign aid.

Some picky people might be inclined to point out that the areas mentioned are non-sovereign states without a resident monarch. In that case, we can see much the same success on the continent in places such as the Principality of Liechtenstein. In Liechtenstein (which is in a customs union with Switzerland) taxes are extremely low, regulation is very minimal and it is one of the most prosperous countries in the world. Almost during the reign of HSH Prince Hans-Adam II alone the little valley of Liechtenstein has gone from a country of subsistence farmers to a highly developed and modern economy with a very business-friendly environment that has attracted investors from around the world. The government takes in slightly more than it spends, unemployment is miniscule (crime virtually unheard of) and poverty is nonexistent. Banking has been a major industry in Liechtenstein because of the strict policy of respecting the privacy of customers but in recent years that has been changing, thanks mostly to threats from the European Union and other international bodies. Nonetheless, it remains one of the most free economies in the world and one of the most prosperous, a free market success story that has even caused many libertarians to marvel at this Catholic monarchy with a very powerful prince.

And, speaking of successful monarchies which retain a powerful monarch at the head of small governments, we have the Principality of Monaco. The Monegasque enjoy one of the highest standards of living in the world and Monaco is famous for having no income tax, extremely low business taxes and few interfering regulations. What has been the result of these policies? Monaco has the highest GDP per capita in the world, the lowest poverty rate in the world (as in “none”), no unemployment at all, the world’s highest life expectancy and more millionaires and billionaires per capita than any other country on earth. Living standards in Monaco are twice as high as comparable neighboring cities in the French Republic. Like Liechtenstein, Monaco has come under increased bullying in recent years but has, so far, been very spirited in defending their independence to do things their own way. Monaco is also a great example for refuting those who say that the arts and culture suffer where big-government spending is not around to fund these areas. The Grimaldis have long been great patrons of the visual arts and, since the days of Princess Alice particularly, also patrons of classical music, the ballet and opera. By economic policies that attract the very wealthy, Monaco has an overabundance of people with the means to support charitable and cultural activities on their own. When your people have the highest per capita income in the world, they have plenty of money to spend on causes that they think are important.

However, as we have touched on, monarchies such as Liechtenstein, Monaco, Andorra, the Cayman Islands and so on have all been attacked as “tax havens” with all sorts of unsavory business and/or banking practices being heavily implied about them. Relatively few people seem to notice how much envy probably has to do with this as such accusations are invariably made by countries which are bigger, more powerful but far, far less successful. In the case of Monaco it is a very old story with their status as a “tax haven” being used to criticize the principality just as the gaming industry once was when that was viewed as terribly distasteful and when Monaco was first given its famous description as “a sunny place for shady people”. Yet, instead of attacking these monarchial micro-states, other countries should instead be looking to their example. If they are upset that so many wealthy people and so many businesses are moving to Liechtenstein or Monaco they should perhaps try adopting some of the same policies to lure them back.

Here though is where we see the importance of the monarchy. It is not the only thing that matters of course, but it certainly is a major, major factor in the success of these countries. Why? Because in places like Liechtenstein and Monaco where the Sovereign Prince still has final say on what goes on, these countries can adopt economic policies that are stable because they are not subject to so much political meddling brought about by democratic changes in office-holders in republics (or even more limited monarchies). Starting in 1984, for example, Her Majesty’s Dominion of New Zealand turned its lackluster economy completely around by slashing regulations that were strangling existing businesses and making it almost impossible to start new businesses. In record time the economy surged back to life, the standard of living soared, the “brain drain” became the “brain gain” and unemployment plummeted. However, over the years new politicians were elected who tried to tweak this and change that and so there were some pretty rough bumps in the road though New Zealand still remains an overall success story and one of the most prosperous and economically vibrant countries in the world. Australia has, to a lesser extent, experienced the same back-and-forth as different political leaders have pursued very different policies concerning the economy.

None, however, have had such long-term success as the former British Crown Colony of Hong Kong. Today it is officially a part of the People’s Republic of China but, seeing how successful Hong Kong was, the Red Chinese were smart enough not to mess with a good thing and kill their golden goose by imposing their own policies on Hong Kong which has, instead, been left to carry on as it had been before (at least in the economic sphere) the handover. What was the secret to the success enjoyed by Hong Kong? The short answer is the long-standing policy (going back to the British colonial period) of “positive non-interventionism” which is a fancy way of saying that government was kept to a minimum and people were allowed to pursue success as they saw fit and reap the rewards of their own decisions. The record of Hong Kong has been one of unqualified success and it remains one of the most wealthy and prosperous places on earth. Milton Friedman once called Hong Kong the greatest capitalist experiment in the world. Obviously, anyone who doesn’t like capitalism will not be impressed by that but the numbers do not lie. Hong Kong has been a major success and it is because the Red Chinese have not interfered with the successful system they inherited from the days when Hong Kong was under the British monarchy.

That is my bottom-line at least. When it comes to arguing over what economic system is best, I tend to take a very practical approach. Look around, see what works, what doesn’t and do more of what works. There are those though, I know, who do not like laissez-faire capitalism no matter what their record looks like and there will also be those capitalists who would find impurities in all the examples I have talked about here. However, my only purpose in bringing these success stories to your attention is to show that, at a time when the world is still trembling over the economic crisis, there are other examples we could all be looking to rather than the People’s Republic of China. Big-government, tax-and-spend democratic socialism is not the only game in town and, it seems to me at least, is what brought Europe to the mess she currently finds herself in and, when it comes to America, to varying extents both liberal and conservative parties have followed this same model and today we are seeing the results. I think it at least worth considering that we take a more serious look at these micro-monarchies with small governments and big economies as perhaps being on to something.