China's middle class is below the US poverty line

See 2026’s Counter Tweet of the Year? by Dan Mitchell.

"Regarding Chinese economic policy, I’m both a cheerleader and a critic.

On the positive side, I applaud how hundreds of millions of people in China have escaped poverty.

On the negative side, I complain that the economy is operating way below its potential.

Here are four points I shared earlier this year, and they summarize my view on what’s good and bad.

Before the final point, I probably should have added another sentence, saying something like “China is now a middle-income country instead of a poor country.”

For today’s column, I want to provide some data to highlight the need for more economic freedom in China – assuming, of course, the goal if for China to become rich.

And I’m going to share two charts posted on Twitter/X by @3RenChengHu. I don’t know this person, so I normally would be reluctant to share a stranger’s data, but I am very familiar with Our World in Data, a group from Oxford University with very reliable numbers (and you can access the data in today’s column by clicking here).

Here’s the first chart, which shows the percentage of the Chinese population that it poor based on various measures (ranging from less that $3 per day to less than $40 per day).

I added (in green) my rough guess that the average person in China is at $15 per day.

As you can see, the Chinese numbers have improved dramatically since 1981.

But could they be better? I think the answer is yes, emphatically yes.

In part, this is because of the research I’ve shared showing how Chinese people are rich everywhere but China.

But let’s also look at the second chart shared by @3RenChengHu.

It shows the same poverty data, but for the United States instead of China.

And I’ve added my two cents (in green, again) to note that only a very tiny share of Americans live on $15 per day.

I’m not sharing all this data to be jingoistic. Just as I think China has bad policies that are restricting growth, the same is true for the United States.

But the relative rankings do show that the U.S. is benefiting from more economic freedom, both today and through history.

For what it’s worth, I would like policy makers in both countries to look at these numbers and have them decide that more economic liberty is the recipe for making their respective nations richer.

But I’m also sharing this data because @3RenChengHu’s tweet was actually a counter tweet. As you can see, he was responding to a silly tweet from @TheDanteMunoz about the supposed superiority of socialism. 

At the risk of understatement, @3RenChengHu slammed @TheDanteMunoz to the canvas.

P.S. Other counter-tweet-of-the-year contestants can be viewed here, here, here, and here."

Who Will Pay for Democratic Socialism’s $200 Trillion Cost?

By Adam N. Michel of Cato.

"The Democratic Socialists of America (DSA) propose new spending that could more than triple federal outlays. They propose the government pay for health care, housing, higher education, and electricity. Jobs are government-guaranteed, retirement benefits are expanded, paid family leave is universal, fossil fuels are eliminated, and reparations are paid. 

The DSA platform claims that the bill for all this will be sent to “the richest individuals and corporations.” Tally up that bill, and it ballparks between $71 trillion and $212 trillion in new spending over the next decade. Confiscating every dollar of high-end wealth and corporate profits would cover only a fraction of those costs. The DSA agenda necessitates high taxes on middle-class Americans. 

$200 Trillion in New Spending 

Totaling up nine of the largest proposals in the DSA platform would mean new federal spending equivalent to between 18 percent and 53 percent of GDP. 

Table 1 reports various low-end and high-end estimates of proposals for programs that approximate the DSA’s vague descriptions. Each proposal’s original spending estimate is converted to a share of GDP and then applied to the 2027–2036 projected GDP, so all estimates are in current dollars. 

  

Medicare-for-All-style proposals for universal healthcare would increase federal spending by $40 trillion to $75 trillion over 10 years. Reparations, a federal jobs guarantee, infrastructure, green energy investment, larger retirement benefits, free housing, paid family leave, and no-cost college would increase spending by tens of trillions of dollars more. In total, the DSA’s new spending would cost between $71 trillion and $212 trillion over the next decade. 

This exercise is inherently imperfect, which is why the estimates vary so widely and should be understood as orders-of-magnitude estimates. They likely overstate the cost where programs overlap with each other or existing spending. They understate the cost by failing to fully capture behavioral responses, broader economic effects, and the comprehensive scope contemplated by the DSA. Each estimate comes from different authors using different methods and assumptions, and builds on a similar methodology by David Burton. 

Internationally High Spending

In the US, federal, state, and local governments spent almost 40 percent of GDP in 2024. The average across the European Union is 49 percent, ranging from 58 percent in Finland to 22 percent in Ireland. 

Using the lower-bound estimates, the DSA agenda would raise US spending to more than 57 percent of GDP. Among large, industrialized countries, only Finland would have a larger government. France comes in a third of a percentage point under the US’s low estimate. Add the high-end estimates, and US government spending would reach 92 percent of GDP. 

No comparable country on Earth spends anywhere close to that amount. The DSA agenda’s spending could give the government a claim on national output much closer to estimates of state control under Soviet-style communism than to today’s European welfare states. 

 

 Who Pays? 

The federal government is projected to collect $70 trillion in taxes over the next decade, roughly 18 percent of GDP. Paying for the DSA agenda would require roughly doubling federal revenue at the low end and quadrupling it at the high end, in addition to the revenue needed to cover the Congressional Budget Office’s $24 trillion projected ten-year deficit. 

The DSA suggests that the richest Americans and corporations will pay for all these new outlays. The problem is, there simply aren’t enough resources at the top to make this plan work. 

 

The 400 wealthiest Americans were worth a record $6.6 trillion in 2025. Confiscating all of their wealth would cover only about 9 percent of the low-end revenue requirement and 3 percent of the high-end estimate. Their wealth could be seized only once, and attempting to liquidate trillions of dollars in assets would, in turn, drive their value down. 

Domestic corporate profits after federal taxes are projected to be about $35 trillion over the next decade. Seizing every additional dollar of corporate profits would fund half of the low-end estimate and 17 percent of the high end. This also assumes that firms continue operating normally while the government takes every cent of profit. Without a profit motive, businesses would cease to exist. 

Higher earners are also not a source of vast untapped revenue. A recent report by economists at the Joint Committee on Taxation concluded that raising top federal income tax rates to their revenue-maximizing level would result in revenue gains of less than 0.1 percent of GDP, equivalent to roughly $400 billion over a decade at today’s projected GDP levels. 

The entire wealth of the richest Americans, plus every dollar of corporate profit and maximum top income tax rates, still leaves the DSA agenda between $29 trillion and $169 trillion short. 

The only remaining source of revenue large enough to cover the DSA agenda is the same one every large European welfare state relies on: the middle class. France and Finland don’t fund their large governments by only taxing billionaires. They impose high income, payroll, and consumption taxes on ordinary households. 

To cover the DSA’s high-end spending estimate and current deficits, every $1 the federal government collects today would need to become about $4.36. Mechanically applying that increase to individual income-tax rates would push the 24 percent bracket above 100 percent and the top rate above 160 percent. 

The DSA is promising Americans a world in which someone else will pay for potentially hundreds of trillions of dollars in new benefits. The problem is that there aren’t enough rich people or corporations to pay for Democratic Socialism. Eventually, the bill will come for the rest of us."

What Mamdani Can Learn From Hugo Chávez's Government-Run Grocery Store Debacle

Venezuela’s government-run grocery stores led to endless lines, empty shelves, quotas, and corruption.

By César Báez in Reason. 

"New York City Mayor Zohran Mamdani held up a bunch of plantains at a press conference on Monday and promised that New York City shoppers would pay 30 percent less than "typical retail prices" when the city opens five government-run grocery stores at a cost to taxpayers of $70 million.

"How are you going to keep people from taking advantage of that deal?" one reporter asked the mayor. "Is there going to be a limit on the number of items that someone can take?"

"Our RFP [Request for Proposals] makes very clear that this is a program for New Yorkers to be able to put food on the table, not a program for people to be able to make a quick buck through reselling," the mayor responded, before turning it over to Jeanny Pak, the interim president of the New York City Economic Development Corporation. She said the city was looking into a "library card-esque" system that would allow the city to "manage who's buying," with a focus on "everyday New Yorkers."

The city's plan rests on the assumption that it can control who buys subsidized goods. Yet Venezuela's experience with government-run grocery stores suggests that assumption deserves scrutiny.

When Venezuela's socialist president, Hugo Chávez, created a nationwide network of government-run grocery stores called "Mercal" in 2003, he faced the same conundrum of how to control excess demand when prices are set artificially low.

At first, Mercal seemed to work. It quickly became one of Chávez's most popular social programs. In a 2007 episode of his talk show, Aló Presidente, Chávez compared Mercal's prices with those at a nearby grocery store. A kilo of sugar at Mercal cost 740 bolívares, compared with a price of 1,300 bolívares elsewhere. Chicken sold for 1,900 bolívares instead of 4,550. The discounts were roughly 43 percent to 62 percent below prices already regulated by the government. Chávez called Mercal an instrument for building "socialist commerce."

More than 70 percent of households reported buying at least one item at Mercal during the program's peak in popularity in 2005. But eventually artificially low prices led shoppers to clear out the shelves, and the stores became famous for lines that would wind around the block. The share of households shopping at Mercal plummeted below 40 percent by 2014.

The gap between Mercal's subsidized prices and prices at other grocery stores created an obvious resale opportunity. There were complaints of diverted goods, fictitious purchases, store clerks allowing their friends and relatives to jump the line, and corruption in procurement and distribution. Hauling food across the border to resell at market prices in Colombia became a booming industry. Black-market reselling even spawned a new profession: bachaqueo.

The government responded to the shortages with tighter controls. It capped purchases, assigned shoppers a weekday based on the final digit of their national ID number, and registered sales by ID and fingerprint. Some stores required shoppers to bring a baby or present a birth certificate before they could buy diapers.

Centralized procurement created another set of problems. In 2010, Venezuela's Comptroller General audited the state food distributor and found unjustified direct awards, food containers stored outdoors, damaged products, and major discrepancies between inventory and port warehouse records.

Mercal alone did not cause Venezuela's food shortages. It operated inside a larger system of national price and exchange controls, subsidized imports, expropriations, precarious property rights, monetary financing of government deficits, and declining oil production.

Thankfully, Mamdani's program is limited to New York City.

New York's experiment is local, far more limited, and therefore, lower-stakes. Private contractors will operate the stores, while auditors, courts, reporters, and the public can scrutinize the results. Chávez, by contrast, clamped down on the free press and suppressed reporting on his failed policies.

New Yorkers will also have plenty of alternatives. The city's five municipal stores will become part of a food retail market that includes more than 1,100 grocery stores and 10,000 bodegas. 

But the comparison is still useful because, like Chávez, Mamdani will find that he can't escape the laws of supply and demand. His evasive response to the reporter's question suggests that he hasn't given much thought to how the city would manage high demand for cheap groceries. One way or another, the program will require quotas. The alternative is to tolerate price-sensitive shoppers lining up outside stores to buy discount plantains.

The spectacle of food lines would be a public relations disaster for the media-savvy mayor, who has pointed to his policies as evidence that "socialists not only understand economics, just as well as the capitalists who came before." Mamdani's rhetoric evokes Chávez's, who called Mercal "an instrument" for proving that socialism works and that Adam Smith's theory of the invisible hand was a capitalist lie.

Like Chávez, Mamdani is a socialist, an economic populist, and a gifted politician. He understands the rhetorical power of holding up a bushel of plantains. A government can dictate the price, but it cannot guarantee that the plantains will still be there."

Why Capitalism Is the Most Moral Economic System

"Success comes from meeting the needs and wants of others," says businessman and publisher Steve Forbes.

From John Stossel. 

"I've failed!

I make the case for free markets. Young people elect socialists!

What are they thinking? Do they even think? Do they pay any attention to history? Or economics? Socialism always fails. Only markets create environments that let people prosper.

"Getting the right environment—this country's done it better than anyone else," says Steve Forbes in our full interview. "Give people a chance to be creative, experience liberty, and humanity moves forward."

His magazine has made that point for years.

"You and I are failures," I tell him. "We've tried to convince people about the benefits of free enterprise….[Yet] they embrace socialism," believing "posts from people like actor Mark Ruffalo: 'Capitalism today is failing us, killing us, and robbing from our children's future.'"

"Capitalism has done just the opposite!" replies Forbes. "Deaths from famines are down 99 percent in the last 60 years. Standard of living, 10 times better than it was 50 years ago around the world."

Can Socialists Support Commerce But Not Capitalism?

By Chris Freiman.

"Socialists often criticize US trade restrictions on Cuba. A recent example is the flotilla organized by activists attempting to deliver aid to the island that aimed to draw attention to the embargo. Participants and commentators often frame Cuba’s poverty as a direct result of US policy: lift the embargo, the argument goes, and Cuba will prosper.

What should we make of this argument? For one, the primary driver of Cuba’s persistent poverty is the Cuban government’s own economic policies, including state control, chronic misallocation, and long-standing restrictions on private enterprise. These institutional mistakes would keep Cuba poor even without the embargo.

That said, there’s little doubt that trade barriers cause economic harm, and socialists are right to recognize this. But here one might wonder: can socialists coherently object to trade restrictions while also opposing free market capitalism more broadly?

Many think the answer is yes. The socialist target isn’t free exchange as such, but private ownership of productive property. Socialists object to an economy where capitalists own the means of production and workers sell their labor for wages or a salary. Socialism, by contrast, would create a kind of “workplace democracy,” where firms are owned and operated by workers themselves. They’d collectively make decisions about production, investment, and distribution rather than take orders from a single boss. This could mean workers directly voting on major business decisions or periodically electing managers to act on their behalf. Suppose, for example, that a worker-owned pizzeria is deciding whether to shift from traditional pizza to a more upscale artisanal menu. In a traditional capitalist firm, the owner would have the final say. In workplace democracy, the cooks, servers, and other employees would collectively decide how to proceed. While there might be some conflicts between growth and equality, writes Mike Beggs at Jacobin, such a model would aim to “harmonize firm-level democracy with macroeconomic expansion and a solidaristic wage.”

Under this style of socialism, markets would still play an important role. Central planners wouldn’t decide how to allocate resources to the pizzeria or determine how many pizzas it has to bake. Instead, the pizzeria would compete with rival restaurants for customers just as it would under capitalism. The goal is to retain the information markets provide in the form of prices, profits, and losses while “socializing” ownership of firms.

At first glance, it seems as though this version of socialism is perfectly compatible with free trade. You could have an economy in which firms are democratically owned and still allow free trade both within and across borders.

That’s fine as far as it goes. But there’s a tension lurking in the background. Consider that a central justification for free trade is that it enables all parties to voluntarily enter into an economic agreement in the expectation of mutual benefit. As Adam Smith puts the point:

Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.

If I want the apples you have, and you want the oranges I have, we’re both better off as a result of a trade. Trade barriers — tariffs, quotas, embargoes, and the like — block these sorts of exchanges. That’s why critics of the Cuba embargo argue that it makes people worse off: it prevents them from engaging in mutually beneficial exchange, which an abundance of research shows is a source of human prosperity.

Once you see trade in this light, it becomes harder to draw a bright line between the kinds of exchanges socialists want to allow and the kinds they want to prohibit. As I mentioned earlier, to qualify as socialist, an economy must not permit capitalists to own the means of production and hire wage laborers. This means that a socialist economy must prohibit freely agreed-upon, mutually beneficial capitalist labor agreements. For instance, suppose Barry doesn’t want to take on the risks and responsibilities that come with being a co-owner of a coffee shop; he’d rather work for a steady wage as a barista for a corporate giant. Nevertheless, a socialist economy wouldn’t allow him to do so. (Otherwise, it would start drifting toward capitalism.)

It’s not clear why trading barista labor for money is all that different from trading apples for oranges. In both cases, people are making voluntary agreements in the expectation that they’ll be better off as a result. Here, then, is the tension. On the one hand, socialists criticize trade restrictions on the grounds that they block mutually beneficial exchange and thereby make people worse off. On the other hand, they want to restrict or eliminate capitalist employment of wage laborers — even when workers voluntarily choose those arrangements.

So something has to give. You can’t easily say, “Let people trade as they see fit because they expect it to benefit them,” while also saying, “But don’t let them sell their labor as they see fit, even when they expect it to benefit them.”

If mutual benefit justifies freely trading apples for oranges, it’s hard to see why it doesn’t also justify freely trading labor for wages. And if workers may trade their labor freely, they may trade it to capitalists — a conclusion that socialist defenders of free trade are sure to find unwelcome."

Who's Paying for the Discounts in Mamdani's City-Run Grocery Stores?

This week, Mamdani announced his city-run grocery stores will sell core goods at a 30 percent discount.

Meagan O'Rourke of Reason. 

"This week, New York City Mayor Zohran Mamdani gave more details about his administration's plan to open five city-owned, city-run grocery stores across all five boroughs. Although Monday's press conference provided some more clarity about the stores' discount rates and inventory, the plan is still no better than before (despite New York magazine's declaration that the stores "Sound Pretty Good").

The Mamdani administration has announced the locations of two stores: The first will open in Hunts Point in the Bronx by the end of next year, and another will open in East Harlem by 2029. In total, the city plans to spend $70 million in capital costs, with $30 million funding the ground-up construction of the East Harlem location. The city will cover the rent and property taxes for the five grocery stores located in each borough, and private operators will run the day-to-day operations of each store. Those operators will be "contractually required" to pass on savings to customers by offering discounts on a core basket of staples.

Until Monday's press conference, it was unclear which goods would be discounted and by how much. The core set of goods, Mamdani revealed, will include produce, meat, and seafood, along with 20 other items such as milk and bread. These items will be discounted by 30 percent compared to "typical retail prices" with "no exceptions, no gimmicks." Mamdani told reporters he arrived at the 30 percent figure because food prices have risen roughly 30 percent since 2019.

When asked whether the city-run grocery stores would threaten surrounding businesses, Mamdani told reporters that the city's stores would not pose a threat to bodegas and other grocery stores because they would not sell hot food or cigarettes, items he says drive revenue for existing bodegas and stores.

Even if the public stores do not threaten privately run businesses, there are few clear upsides to the plan. As philosophy and economics professor Daniel Muñoz noted on his Substack, if the goal of Mamdani's stores is progressive redistribution, a government-owned grocery store is an inefficient and "negative sum" solution.

"Notice that anyone can shop there—there is no means testing," Muñoz wrote. "By contrast, food stamps are designed to help the poor, and they don't cause long lines or put more efficient grocers out of business."

Mamdani has said that government intervention for food distribution is nothing new. On Monday, he explained that former New York City Mayor Fiorello La Guardia was inspired to create municipally owned markets after witnessing food riots several years earlier.

"He did so because he believed in a simple definition of the task of government to make people's lives better," Mamdani said.

La Guardia may have been partially motivated to create municipally owned markets to make goods affordable, but Mamdani conveniently left out another part of the story. La Guardia wanted to create municipal markets (like Essex Market in the Lower East Side) to get pushcarts off the streets.

According to a New York Times article from 1938, La Guardia wrote in a letter to commercial associations: "It is my policy, where a market is necessary, to build a proper covered market so that these same peddlers may be permanently placed in such market under proper and wholesome sanitary conditions." While municipal markets, like Essex Market, are still in use today, they are not proof of concept for city-run grocery stores. The vendors at Essex Market pay below-market rent, but the vendors are still private businesses subject to market fluctuations.

Even if the city-run stores push other grocers out of business, create resale markets, or produce other unintended consequences, the city will have little incentive to shut them down because taxpayers will always be there to foot the bill. Plus, the city can take credit for making life more "affordable" for New Yorkers."

Marian Tupy disabuses American socialists of their economically ignorant belief that successful entrepreneurs steal their wealth from workers and consumers

From Cafe Hayek.

"Marian Tupy disabuses American socialists of their economically ignorant belief that successful entrepreneurs steal their wealth from workers and consumers. Two slices:

Early economists, such as James Mill and David Ricardo, theorized that the physical labor exerted to create a good is the real measure of its value. Karl Marx took the concept to its extreme: If labor creates all value, then profit must require unpaid labor, making every employer an expropriator and every fortune a crime.

Then, beginning in 1871, economists countered the labor theory of value. Carl Menger, William Stanley Jevons and Léon Walras demonstrated independently that value resides not in hours of toil but in the judgments of consumers. Writing a 500-page novel takes the same amount of physical labor as typing out 500 pages of the word “banana” repeatedly. Only the novel commands a price. Value is created whenever someone rearranges the world into a shape that others want. It is measured by the buyer, not the worker.

Entrepreneurs are the arrangers. Economist Israel Kirzner argued that entrepreneurship is alertness — noticing an opportunity that nobody else has found. The entrepreneur sees that resources combined in a certain way and priced at a certain level can be recombined into something consumers will value even more. The gap between the two is profit. Nothing is taken from workers, who are paid the wage they agree to, or from customers, who buy the product only when the purchase leaves them better off.

…..

A movement that believes wealth is stolen will tax it, cap it and make everyone poorer. Ideas drive growth, and ideas come from people who can profit from them. A world that cherishes entrepreneurs will enjoy advanced chips and revolutionary cures. A world that punishes its innovators will at least enjoy plenty of slogans."

Socialism and the Decline of the Black Family

Children need fathers, but social fragmentation gives an advantage to those who seek centralized power

By Jason Riley. Excerpts:

"socialism’s impact on the traditional family structure is no less concerning. Children from intact families are more likely to finish school and avoid poverty. The absence of fathers is strongly correlated with teen parenthood, drug addiction and involvement with the criminal justice system. The cultural anthropologist Margaret Mead wrote that “every known human society rests firmly on the learned nurturing behavior of men” and that civilization “depends upon social inventions that will make each generation of males want to nurture women and children.”"

"socialists such as Karl Marx and Friedrich Engels dismissed the traditional family as a tool of oppression"

"many of the social and economic problems in low-income black communities stem from the sad fact that some 70% of black children are born to unwed parents and nearly 45% live with a single mother."

"Asians are the highest earners, followed by whites, Hispanics and blacks. Similarly, Asians have the highest marriage rates, followed by whites, Hispanics and blacks. Maybe it’s no coincidence."

"Following emancipation, one of the first things black people did was seek out spouses and children from whom they had been forcibly separated during slavery."

"Between 1890 and 1950, black men and women married earlier and were more likely to be married by 35 than their white peers, Mr. Squires writes. That suggests black attitudes toward marriage and child rearing today are the product of incentives and circumstances that developed long after the end of slavery. “More than 70 percent of black children were born to married parents in 1965—a century after the abolition of slavery,” Mr. Squires writes. “Today, only 30 percent are."

"The black family was more intact after three centuries of chattel slavery than after three generations of the federal government’s ‘war’ on poverty.”" 

Chronicle of Cuba’s Ruin Foretold

Little has changed since a leftist writer described the disaster on the island in 1970

By Mary Anastasia O’Grady. Excerpts:

"The basic creature comforts she (Alma Guillermoprieto) had taken for granted in New York, where she lived before departing to teach dance in Havana in 1970, were hard to come by"

"Cuban blackouts and brownouts date back decades. Even when fuel was readily available, a decrepit electrical grid caused regular power outages and daily life was consumed by the search for necessities."

"the ruling elite’s corrupt military conglomerate (Gaesa) controls the hard currency that comes into the country."

"Even the government isn’t allowed to audit those accounts."

"Fidel Castro had seized private property, instituted price controls, ended judicial certainty and imprisoned, executed or exiled the island’s most valuable human capital."

"The confiscation of farms, haciendas and ranches triggered an immediate contraction of the food supply. By 1960 there was a meat shortage"

"Per capita consumption of meat in 1958 was 112 pounds per year. The collectivization of the cattle industry created such disruption that not even a meager ration of 0.75 pounds of meat per week (39 pounds per year) could be met. This also applied to dairy products such as milk, butter, and cheese.”"

"in Castro’s utopia some pigs were more equal than others. Foreign guests of the regime enjoyed a privileged diet of fruits, vegetables and cheeses while in the school cafeteria she and her students met with “starch, grease and gruel.”"

"In June 2005 the national electricity system (SEN) was working at half capacity and blackouts lasted from 7 to 12 hours daily" 

Live Free and Prosper

Socialists claim they haven’t experienced American prosperity. All you have to do is look around

By Andy Kessler. Excerpts:

"Last month’s trial results of Lilly’s one-time gene-editing therapy showed it can lower LDL, “bad cholesterol,” by almost two-thirds. Could this be a heart-attack vaccine? It’s certainly a sign of a prosperous society." 

"Columbia University researchers successfully demonstrated base editing of “early human embryos” to replace specific genetic letters."

"the ability to identify and eliminate debilitating diseases—for example, hereditary blindness—is nothing short of amazing."

"GLP-1s may also help stroke, kidney and fatty liver diseases as well as sleep apnea, and research is under way to treat substance abuse, psychiatric and even neurodegenerative disorders."

"women 45 to 80 “who took GLP-1 medications were about 30 percent less likely to develop breast cancer"

"Palantir tapped AI to lower early death rates from sepsis at Tampa General Hospital by more than two-thirds." 

Mamdani vs. Bodegas

His socialist supermarkets could put New York’s little grocers out of business

By Faith Bottum of The WSJ. Excerpts:

"Many bodega owners say the mayor has betrayed them by pushing ahead with his plan to create city-owned supermarkets. The government “should be working with us,” says Francisco Marte, 59, owner of Green Earth Food in the Bronx and president of the Bodega and Small Business Association of New York. “That type of business run by the government, they never succeed. They always fail, and they fail big and with a lot of money that could have been used for something better.”"

"But five grocers are already within a two-block radius of that proposed Harlem store, with 10 more within five blocks."

Free market policies lowered poverty in Peru

See The Left Aims for an Andean Comeback by Mary Anastasia O’Grady. Excerpt:

"Peru’s shift over the past 20 years toward policies that support open markets, private initiative and macroeconomic stability has dramatically improved living standards. The share of Peruvians living below the poverty line fell to 25.7% in 2025 from 58.7% in 2004." 

Capitalism Delivers for Zohran Mamdani

His budget-balancing cuts to pension payments are made possible by strong stock-market returns

By Austin Berg. Excerpts:

"the single largest line item in his deficit-reduction plan: cutting the city’s payment to its pension funds by $2.3 billion over the next two years."

"The justification for changing this payment schedule is that New York City pension-fund investments have been booming"

"Investments held by New York City’s five pension systems have exceeded expectations for 10 years running, earning 10% returns last year and 7.7% over the past decade, compared with a 7% benchmark."

"What could have produced a boom of that scale? Not socialism."

"continued outperformance of the ‘Magnificent Seven’ stocks" (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla)

"Democratic socialists decry the evils of capitalism, yet they depend on strong economic growth as a magic beanstalk to pay down legacy debt" 

 

The Case Against Socialism, Part V

By Dan Mitchell. Excerpts: 

"here is the most compelling comparison of a pure socialist economy and a mostly capitalist economy."

 

The chart is based on the Maddison database, and there are data gaps during World War II as well as several decades of missing North Korean data.

But the lesson is blindingly obvious. South Korea has become a rich nation while North Korea is mired in grinding poverty. Heck, you can see the difference from outer space.

It makes the East Germany-West Germany comparison seem trivial by comparison.

South Korea is definitely not perfect and its long-run outlook is worrisome because of demographics.

But pretty good is definitely better than totally awful.

Another win for capitalism over socialism.

You can peruse previous editions in this series by clicking here, here, here, and here."

The World’s Most Surprising Capitalist Makeover Is Under Way in Sweden

The shake-up of cradle-to-grave care is lowering government spending, spurring innovation and stirring fears about those left behind

By Tom Fairless of The WSJ. Excerpts:

"nearly half of primary healthcare clinics are privately owned"

"One in three public high schools is privately run"

"The capitalist makeover has allowed Sweden to . . . shrink the size of the state. That has enabled the government to sharply lower taxes and . . . sparked a surge in entrepreneurship and economic growth."

"Its total public social spending bill . . . has fallen to 24% of gross domestic product, similar to the U.S. and well below the over 30% for nations like France and Italy."

"Sweden’s economy is expected to grow by around 2% a year through 2030, roughly the same pace as the U.S. and double the growth rates of France and Germany"

"Sweden didn’t always have a big public sector. The country climbed from being one of the poorest to the third-richest country in Europe over 100 years through 1970 without high levels of taxation. 

But starting in the 1960s, the center-left Social Democratic Party—which dominated the country’s postwar politics—sharply raised taxes and spending, ultimately taking government spending as high as 70% of GDP by the 1990s. 

The changes triggered a long period of weak growth, stagnant after-tax incomes and ballooning budget deficits and debt that culminated in a banking crisis in the early ’90s."

"the government instituted sweeping economic reforms over the next two decades. They included cuts to unemployment benefits and housing subsidies and the privatization of public services, as well as tax cuts and a reform of the pension system to make it more affordable. Strict limits were imposed on government debt. (Sweden’s debt to GDP is a meager 36%, compared with 129% for the U.S.) In the mid-2000s, the government eliminated wealth and inheritance taxes."

"Wealthy entrepreneurs who had fled Sweden’s high taxes have been returning"

"The country saw more than 500 initial public offerings over the 10 years through 2024, more than Germany, France, the Netherlands and Spain combined"

"It has now moved ahead of the U.S. in the number of billionaires per capita"

"healthcare spending per capita in Sweden grew around 1% a year on average between 2014 and 2024 after adjusting for inflation—roughly half the pace in the U.K. and a third of the pace in the U.S."

"Stefan Fölster, an economist and former Finance Ministry official, argues that the vast majority of Swedes have benefited from the reforms. Households’ inflation-adjusted incomes have doubled on average since the 1990s, after stagnating during the 1970s and ’80s under high taxation, Fölster noted."

"Sweden has recently fallen down international education rankings, a shift that proponents of free schools attribute to high levels of immigration." 

More capitalist countries have lower income inequality

Tweet from Vlad Tarko. 

"More capitalist countries have lower income inequality, not higher. High income inequality is caused by cronyism which goes hand in hand with highly regulated markets. Welfare states also lower inequality, but you need free markets wealth to have generous welfare states."

 

"You can't derive causality from raw data. Those scatter plots are just a description of reality. If your causal picture of the world makes you expect the opposite patterns, you should re-evaluate. The cronyism comment is an alternate causal theory that fits the pattern.

In any case, if you think I'm deriving my whole world view from a few scatter plots, that's a very uncharitable interpretation. No, that's not what I'm doing. While, yes, empirical evidence is very important. Too many people have theories that are intuitive but flat out wrong.

The correlations on the upper-left and lower-right are actually quite strong. The other two less so, which further enhances the point! 1 Size of govt weakly correlated with equality, unless in rich country. 2 Even in rich countries, capitalism doesn't increase inequality."   

Capitalism does a far better job than socialism of feeding people.

A tweet from Chris Freiman. 

 

The Warmth of Cooperation

By Chris Freiman.

"New York City Mayor Zohran Mamdani recently caused something of an uproar when he contrasted the “the frigidity of rugged individualism” with the “warmth of collectivism.” This framing echoes the familiar criticism that capitalism forces people to go it alone as “atomistic individuals.” The thought goes like this: markets do real damage to the social fabric and our relationships because they organize our economic lives around competition and self-interest. Organizing our lives around competition encourages people to see each other as rivals rather than partners. In brief, capitalism pits us against each other, while socialism brings us together. Setting aside the fact that collectivist regimes haven’t exactly been warm to those living under them, this view gets capitalism backward.

Start with a simple observation about your own economic life under capitalism. Think about this week: how many cooperative interactions have you had, and how many competitive ones?

You probably didn’t compete with anyone when you bought coffee at Starbucks this morning. You didn’t enter a zero-sum struggle when you paid your phone bill, purchased groceries and gas, or caught a movie. Instead, you took part in a series of mutually beneficial, voluntary transactions. You gave someone money and they gave you something you wanted more than the money. Everyone walked away better off. In the words of Adam Smith, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”

Competition, by contrast, rarely pops up in your day-to-day economic life. A business competes with other businesses for customers and you’ve probably competed with others for a job at some point. But you cooperate far more often than you compete. And notice what market competitions really are—they’re competitions to see who’s best at serving others. You might say that they’re competitions to discover the best ways to cooperate and who the best cooperators are (more on this below).

Unsurprisingly, Smith understood the cooperative nature of markets well. He writes that a wool coat

is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country! How much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world!

Smith goes on, but I’ve got a word limit here—the point is that markets don’t atomize us. On the contrary, they lead strangers all over the world to cooperate.

Think back to the last time you bought a coffee. Starbucks has to coordinate with bean farmers, shipping companies, truck drivers, warehouse workers, roasters, equipment manufacturers, electricians, plumbers, accountants, and baristas. None of these people know you, and yet they manage, every day, to cooperate in ways that reliably get caffeine in your hand at 7:43 a.m. And this isn’t accidental—the prices provided by markets give people the information they need to figure out what others want, and they provide the incentive to give it to them.

There’s no denying that markets involve competition. You can go to the business section of a bookstore and find titles like Business Warfare and The Warfare of Business. But businesses are competing with each other to see who can best serve consumers. Netflix beat Blockbuster by figuring out a better way to give viewers what they wanted: convenience, selection, no late fees, and eventually streaming. In brief, Netflix won because consumers preferred cooperating with Netflix over Blockbuster.

A similar point applies to competition in the job market. Maybe you don’t merely want to buy coffee from Starbucks, you want to work there, too. But this means you’ll have to compete with other applicants who also want the job. Here again, let’s look at what it takes for an applicant to win this competition. They need to demonstrate that they’ll do the best job of making customers better off—say, by being more punctual, more efficient at making mochas, or more likely to serve drinks with a smile. Market competition is competition to see who can cooperate most effectively with others.

In any case, democratic socialists can’t be opposed to all competition. After all, democracy requires competition, and democratic socialists want democracy in the workplace as well as in politics. If competing for dollars is frigid, it’s hard to see why competing for votes would be any warmer. Market competition enables millions of people with different values, plans, and priorities to work together without agreeing on much of anything by helping them to coordinate many different choices. You and your barista don’t need to agree on the principles of justice to cooperate and make each other better off. Far from being atomizing or frigid, the free market is a system of interdependence that brings strangers together to cooperate for their mutual benefit."

Recent papers make airtight case against socialist growth

By Justin Callais. He the Chief Economist with the Archbridge Institute. Excerpts:

"Recent work by JP Bastos, Jamie Bologna Pavlik, and Vincent Geloso shows that Cuba severely underperforms “synthetic Cuba,” or what Cuba’s growth trajectory would have been if not for the socialist policies post-Revolution. Notably, they conduct their analysis based on reported GDP per capita numbers, adjusted (to account for fabricated data) GDP per capita, and adjusted for aid from the Soviet Union."

"Using the corrected data, Cuban GDP per capita was 48.3% below the synthetic counterfactual by 1972, and 44.3% below by 1989. When Soviet subsidies are stripped out, the picture is even grimmer: by 1972, Cuba’s GDP per capita fell 55.5% below the counterfactual, with that gap persisting through 1989.

Is this really just the US’s fault because of embargos? The authors account for this with specifications that are generous to inflate the embargo’s damage. Even so, the verdict is clear: the embargo can account for at most 8% to 10% of the difference between Cuba’s actual GDP and the counterfactual, a trivial share of the Revolution’s total effect."

"Before the Revolution, Cuba (much like Venezuela, which is covered in another great paper by Kevin Grier and Norman Maynard) was one of the wealthiest countries in Latin America. In just four years after the Revolution, Cuba returned to roughly the same living standards it had in 1937, effectively erasing more than two decades of economic growth."

"Louis Rouanet studies the impact of François Mitterrand’s 1981 election, who ran on a platform of “rupture with capitalism.” The findings are drastic: by 1996, France’s GDP per capita was roughly 26% lower than that of the synthetic counterfactual, a gap of about $7,300 in constant 2017 dollars. Investment collapsed relative to the counterfactual, and the employment rate underperformed by more than two percentage points."

"Even though Mitterrand somewhat reversed course after 1983, Rouanet argues that the policies persisted. The policies that expanded welfare spending, created hundreds of thousands of public sector jobs, and restructured the labor market were not reversed, and they locked in institutional arrangements that outlasted the President himself. France’s centralized, bureaucracy-dominated politics made bad policies stickier than they would have been elsewhere.

It is important to note that this wasn’t the type of social democracy (large welfare state complemented with a market economy) that exists in Scandinavia. The French Socialist Party in 1981 openly declared its goal to be the “socialization of the means of investment, production, and exchange.”"

"The broadest of the three, this paper by Andreas Bergh, Christian Bjørnskov, and Luděk Kouba, asks the question most directly: what does socialism do to economic growth, across countries and time? The authors draw on a dataset covering 192 sovereign countries from 1950 to 2020 and focus on the 22 countries that made a decisive transition to socialist planned economies after independence, countries like Tanzania, Zambia, Vietnam, Sudan, and Venezuela.

They use neighbor comparisons (China vs. Taiwan, Czechoslovakia vs. Austria, Yugoslavia vs. Greece) as a first cut, then apply more formal panel methods. The neighbor comparisons are striking:

Taiwan’s annual growth rate between 1950 and 1990 was on average 2.7 percentage points higher than China’s, Austria’s was 1.6 percentage points higher than Czechoslovakia’s, and Greece’s was .7 percentage points higher than Yugoslavia’s despite Greek instability, coups and a period of military dictatorship.

The results are consistent across every specification: adopting socialism is associated with a decline in annual growth rates of approximately two percentage points during the first decade after implementation. That sounds modest, but compound it over decades and it’s the difference between prosperity and stagnation. Let’s make a simple comparison. Assume two countries both have GDP per capita of $10,000. One goes socialist and grows at 2 percentage points less than the non-socialist country (assume 1% versus 3%). After 10 years, the socialist country has a GDP per capita of $11,046; the non-socialist one has GDP per capita of $13,439. After 20 years? Just $12,202 versus $18,061, a nearly $6,000 per capita difference!" 

Cuban infant mortality and longevity: health care or repression?

Gilbert Berdine, Vincent Geloso & Benjamin Powell. Excerpts:

"Centralized planning has disadvantages. Physicians are given health outcome targets to meet or face penalties. This provides incentives to manipulate data. Take Cuba’s much praised infant mortality rate for example. In most countries, the ratio of the numbers of neonatal deaths and late fetal deaths stay within a certain range of each other as they have many common causes and determinants. One study found that that while the ratio of late fetal deaths to early neonatal deaths in countries with available data stood between 1.04 and 3.03 (Gonzalez, 2015)—a ratio which is representative of Latin American countries as well (Gonzalez and Gilleskie, 2017).² Cuba, with a ratio of 6, was a clear outlier. This skewed ratio is evidence that physicians likely reclassified early neonatal deaths as late fetal deaths, thus deflating the infant mortality statistics and propping up life expectancy.³ Cuban doctors were re-categorizing neonatal deaths as late fetal deaths in order for doctors to meet government targets for infant mortality."

"physicians who worried that a mother’s behavior might lead to missing the centrally established targets will prescribe the forceful internment in a state clinic (casa de maternidad) so that they may regulate her behavior.⁴ Physicians often perform abortions without clear consent of the mother, raising serious issues of medical ethics, when ultrasound reveals fetal abnormalities because ‘otherwise it might raise the infant mortality rate’"

"Coercing or pressuring patients into having abortions artificially improve infant mortality by preventing marginally riskier births from occurring help doctors meet their centrally fixed targets. At 72.8 abortions per 100 births, Cuba has one of the highest abortion rates in the world.⁶ If only 5% of the abortions are actually pressured abortions meant to keep health statistics up, life expectancy at birth must be lowered by a sizeable amount. If we combine the misreporting of late fetal deaths and pressured abortions, life expectancy would drop by between 1.46 and 1.79 years for men."

"car ownership is heavily restricted in Cuba and as a result the country’s car ownership rate is far below the Latin American average (55.8 per 1000 persons as opposed to 267 per 1000) (Road Safety, 2016). A low rate of automobile ownership results in little traffic congestion and few auto fatalities." 

"The maternal mortality ratio of Cuba in 2015 was higher than in Latin American countries like Barbados, Belize, Chile, Costa Rica, Mexico and Uruguay (Trends in Maternal Mortality 1990 to 2015, 2015). In terms of healthy life expectancy, Cuba ranked behind Costa Rica, Chile, Peru and Bermuda and marginally surpassed Uruguay, Puerto Rica, Panama, Nicaragua and Colombia"