AEC, KI a INESS v spolupráci s ďalšími partnermi organizovali medzinárodnú konferenciu v rámci Free Market Road Show 2013 na tému Šetriť alebo nešetriť: Zachránia Európu len úsporné opatrenia?, ktorá sa konala dňa 7. júna 2013 v Bratislave. Ďalšie súvisiace informácie nájdete na www.konzervativizmus.sk AEC, in cooperation with the Conservative Institute and INESS, and in association with international partners organized the Free Market Road Show 2013 in Bratislava on June 7, 2013. More information at www.institute.sk.

1. Deregulation vs. Regulation:
What brings an economy back on track?
May 15, 2013

2. What Is Economic Growth?
More labor
More capital
Better efficiency of labor
Better allocation of capital
Labor and capital are the ingredients
The chef mixes the ingredients

3. Which Chefs Do You Prefer?

4. Years Needed to Double Economic Output
1 percent growth
2 percent growth
3 percent growth
4 percent growth
5 percent growth
6 percent growth
7 percent growth
0 10 20 30 40 50 60 70 80
1

5. The Libertarian Vision: Capitalism
What is capitalism?
A system of voluntary exchange
A system where the price system, reflecting
how consumers value good and services,
allocates resources
A system based on limited government
A system of competition

6. The Socialist Model
Technically, government ownership of the
means of production
Government has the power to direct the
allocation of resources.
Closely linked to redistributionism as
government seeks coercive equality of
results.
Presumably means very large government
and high tax rates.

7. What Battle Are We Fighting?
The battle in today’s world is not really a fight
between capitalism and pure socialism.
With some important exceptions, politicians
generally do not want to control the
“commanding heights” of the economy.
Politicians want a redistributive state and/or
private ownership with government control,
which means our real fight is against…

8. Corporatism or Statism
If the “means of production” are in private hands,
but politicians have power over all major
decisions, that is said to be corporatism.
This does not necessarily mean pro-corporation,
though cartels are a common feature.
This was the fascist economic model.
Mussolini had many admirers in FDR’s brain
trust.

9. The Economic Case for Freedom
Many factors determine economic
performance.
According to Economic Freedom of the
World, 20% each for fiscal policy, trade
policy, regulatory policy, monetary policy, and
rule of law/property rights.
Which implies that taxes and spending each
account for 10% of a nation’s score.

10. The Moral Case for Freedom
The outcome-based argument: When
markets allocate resources, nations tend to
be wealthier and/or grow faster.
The liberty/opportunity argument: Freedom is
a social good, even if it doesn’t lead to higher
living standards.
The Rawlsian argument: The less fortunate in
market-based nations are better off than the
middle class where government is pervasive.

11. What Is Good Regulatory
Policy?
The government has a role, maintaining a
level playing field, protecting property rights,
and upholding the rule of law.
But markets generally should determine the
allocation of resources – which businesses
succeed and fail, where capital gets invested,
and what consumers purchase.
This means more growth and less corruption.

12. A Case Study: The Financial Crisis
The defining issue in recent years is the
financial crisis.
The left blames the crisis – and the
accompanying recession – on deregulation
and capitalism.
Governments responded with bailouts and
Keynesian “stimulus”.
Those policies have failed, but who will win
the “narrative fight”?

13. Who Deserves the Blame?
In the U.S., the problem was largely created
by government policy mistakes.
Easy-money policy by Federal Reserve.
Corrupt system of subsidies from Fannie Mae
and Freddie Mac.
So-called affordable-lending rules that
extorted banks into making bad loans.
Preferences for debt in the tax code.
The result: A bubble that collapsed.

14. The Misguided Bailout
Governments should not bail out any private
companies.
Bailouts reward the people who make
mistakes.
Bailouts create moral hazard.
Bailouts hinder the necessary and desirable
reallocation of resources.
Bush supported bailouts, but no hope and
change with Obama

15. What Should Happen?
If financial institutions are insolvent, they
should be shut down.
Shareholders, bondholders, and senior
executives absorb the losses.
“Capitalism without bankruptcy is like religion
without sin”
Perhaps some taxpayer cost for insured
deposits.
No moral hazard in this system

16. Two Major Issues
What is the
appropriate role of
government?
The classical liberal
vision of small
government.
Or the welfare state
vision of large
government.
How should
government be
financed?
Broad-base and
low-rate system
designed to
minimize distortions.
Or a tax code as a
tool of social policy.

17. Big Government Inevitably…

18. …Erodes America’s Social Capital

19. Does Big Government Work?

20. What About Wealthy Welfare States?
Don’t Europe’s welfare states show that big
government is not an impediment to growth?
No. They became rich because they used to
have small public sectors and laissez-faire
policy.
Government expanded after they became
wealthy and could afford anti-growth policies.
A nation (or state) can tolerate one percent
growth once it is rich. But a poor nation (or
state) will never become rich with one percent
growth.

21. Burden of Government Used to be Small
0
5
10
15
20
25
30
35
40
45
50
1870 1913 1920 1937 1960
ExpendituresasapercentofGDP
Sweden
UK
US
Japan
Germany
France
Source: Tanzi and Schuknecht, "Reforming Government: An Overview of Recent Experience,"

23. What Are the Lessons?
The world is a laboratory showing the benefits
of small government and sound institutions.
Jurisdictions such as Estonia, Chile, and
Hong Kong are role models (at least
compared to the alternatives).
Poor people reap enormous benefits, though
rich people may become richer faster than
poor people become richer.
Long-run growth is the key variable.

24. Conclusion
For more info
www.cato.org
www.freedomandprosperity.org
www.danieljmitchell.wordpress.com
www.youtube.com/afq2007
@danieljmitchell