Hi Bert and Jan,

Similar to the circumstance you describe, once you hire someone in France you're pretty much responsible for their well-being until they die of old-age. Okay, that may be a slight exageration, but only a little bit. And the unintended consequence is that you can't find anyone willing to create a new job in France. What's France's unemployment rate these days?



What's the unemployment rate in Slovakia and New Zealand?

In general, you will find that where government interferes the least in private sector affairs, nations grow the strongest economies. Conversely where government interferes the most in private sector affairs, nations grow the weakest economies. Even today, as Red China becomes more capitalistic it is growing a stronger more powerful economy, while the western nations are becoming more marxist, socialistic and facist, and are seeing the early signs of weakening economies (e.g. manufacturing jobs going overseas).

It's very much like the phenomenon of generating more tax revenue by cutting taxes. It has been well understood, and empirically proven without exception, since at least the early 1960s, that the U.S. government will generate more tax revenue by lowering the tax rate. Conversely, when the U.S. government increases the tax rate, there is a very short-lived increase in revenues which quickly drops off to less than it was at the lower rate. In a nutshell, the higher the tax rate the more people will work at avoiding tax liability. As the rate lowers, people are more willing to incur the liability and hence pay the taxes. Now clearly at some point, at some local maxima of the Tax Revenues as a function of Tax Rates curve, lowering the tax rate would indeed lower the tax revenues. Unfortunately we have absolutely no idea at how low a tax rate that local maxima would be.

And the Democrats in this country still insist on proposing some combination of more government and higher taxes as the solution to every problem. (The principal difference between Democrats and their Republican counterparts is the willingness to admit that they want more government and higher taxes. Neither will admit that we're all worse off for their efforts.)

Similarly, it is clearly the responsibility of all governments to govern the private sector. And at some point reducing the role of government would lead to anarchy (and yes, that would be bad). But long before government abdicates its responsibility to the anarchists, the government can best serve its constituency by staying out of the way.

It was well said by one much wiser than me that, "The government that governs least governs best."