No matter how much smoke and mirrors they toss up there, there really is no free lunch. An explanation at Cafe Hayek.
Not only capital but also people move to where there is opportunity; and this is an essential part of creating new wealth and prosperity. This was dramatically illustrated for me in 1978, during a taxicab trip from the Wellington, New Zealand, airport to my hotel. The driver was friendly, and I asked, “Tell me about your country.” He replied, “It’s really wonderful. I don’t like paying half my small salary in taxes, but we receive so much that is free: health benefits, prescriptions, free education through college and advanced graduate study. I am just a cab driver, but my son is going to be a medical doctor. He has finished his medical degree and internship, and will begin practicing next year.” In recognition of his obvious pride, I said, “How wonderful. You have every right to be proud. Is he going to practice in Wellington?” He replied, “Oh no, he’s going to Australia. You can’t make any money here.” The New Zealand economic crisis hit about two years later. New Zealand could not compete in world markets – and could no longer afford socialism.
Large countries with a history of relying upon markets, such as the U.S., can endure the folly of heavy taxation and other burdens of state interventionism longer than can small countries such as New Zealand. But even behemoth economies like America’s are no more immune to economic laws and realities than are smaller economies. The ill-consequences of government folly are simply better able, in large countries like the U.S., to be hidden longer – and, when discovered, better able to be falsely blamed on innocent forces or pretend villains – than in small countries.