In the case of Europe, 69% of the billionaires on the top 50 list have inherited their fortunes, with a mere 31% being self-made. Only 4 Europeans on the top 50 can claim they are "self-made". This is a total of 13 Europeans total on the list. Despite the fact that the EU has roughly 63% greater population than the US, it only has half the number of billionaires in the top 50. If one were to adjust the European figures to reflect the population advantage, the EU would have 1.5 self-made billionaires and 3.3 who inherited their fortunes. This would put their total close to 5. I realize this is not the most traditional way to look at these statistics, but rationally, one would expect that if the other powerful Western democracy has 63% more people, in all likelihood they should have a 63% greater share of the Top 50.
There are two reasons that could cause this. First, Americans might be better educated. This is not the case. In fact, there are countless excellent business schools throughout Europe, many providing top notch educations. Education is highly subsidized in Europe and therefore many Europeans continue their education after high school. If education is not the cause another source of this disparity could be taxation and the overall European business environment. There are a few European nations listed in prominent slots on the Ease of Doing Business Index, (published by the World Bank) but there is not a singular set of policies applicable to all bloc nations. This means, in the EU, there are some countries where doing business is easy and others that are bureaucratic and expensive. Only Singapore and New Zealand place higher on this index than the US. With pending regulations and an overall more hostile business environment I would not be surprised to see the US begin to slide down the rankings by the next time this report is published.
There is a strong correlation between high GDP per capita and nations in the top slots of The Ease of Doing Business Index. For instance the average GDP per capita (adjusted for purchasing power) is 35% higher in the top ten countries on the index compared to the countries listed from 10 to 20. Providing a low tax, low corruption, anti-bureaucratic platform to run a business is the best way to pull a country out of poverty. Unfortunately the two powerful Western democracies seem to be reversing this trend. The EU is taking the lead with the US following in the name of emulating the "progressive European ideology". If a prominent spot on the Ease of Doing Business Index can attract businesses, jobs, and wealth to a particular country, slipping down this index can just as easily drive them out.
Taxation policies and overall business climate do not only influence the actions of businesses, but individuals as well. A good example is the European self-made billionaire, Ingvar Kamprad. He was born in Sweden and founded IKEA there. He has lived in Switzerland since the 1970's due to tax reasons. IKEA is now owned by a holding company in the Netherlands, reportedly also for tax reasons. This is a perfect example of how individuals and businesses will tend to migrate from hostile environments to more favorable ones. I believe Adrian Rogers said it best when he described the effects of high taxes and government bureaucracy on individuals:
"You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is the beginning of the end of any nation. You cannot multiply wealth by dividing it."
The point of this entry is not to be condescending toward Europe, or Europeans in general. Many people believe the European model is one the US should emulate. The above statistics should show that creating a welfare state robs people of their ability to become wealthy. Many will say that no person deserves the above level of affluence, and therefore restrictive legislation is a good thing. If a nation takes away the prospect of becoming successful many individuals will abandon risky plans that could be highly rewarding for themselves and society overall. Would one quit his job to start a business if he would only be marginally better off IF he succeeded? Also, please see my earlier post, A Look Into the Future, to see what astronomical funding hurdles these welfare states are facing in coming years. Statistics, above and otherwise, show that economies perform best with minimal government interference. If our current trajectory continues it is very possible for the US to become a quasi-welfare state within the next decade. This will rob Americans of their ability to become independently successful, it will snuff out entrepreneurial spirit, and most of all it will create a future budget crisis to the extent we have never seen. Many "grass-is-greener" Americans point to the benefits Europeans enjoy, but fail to grasp the financial implications of said benefits. Not one European nation has solved the problem of their ballooning public services costs because to suggest cutting benefits is career suicide for any European politician. Europe can expect massive social unrest when these benefit providers implode, I hope US politicians do not RSVP for the same party.
*For this entry consider "Europe" and "European" to refer to the European Union and its member states.
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