Saturday, December 17, 2011

Chart of the Day: Economic Freedom, Corruption and the European Debt Crisis

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From Gallup (including chart)

Residents in wealthier EU countries with the most unsustainable debt burdens -- including Greece, Italy, Spain, and Ireland -- are also among the most likely to say their government makes it hard to start and manage a business. The climate for entrepreneurs is most inhospitable in Greece, where more than 8 in 10 residents see their government as an obstacle…

The widespread perception in Greece, Italy, and other debt-laden countries that government makes starting and running businesses difficult may discourage entrepreneurial ambition in places that need it the most. Gallup's data correspond with other international measures of business regulation; for example, of the 25 EU countries ranked for the World Bank's 2012 Ease of Doing Business Index, Greece and Italy were furthest down on the list. Turning those perceptions around will require reforms in key areas to reduce administrative burdens and improve transparency in government procedures.

Cutting through the red tape will be no easy task, however. Administrative hurdles create opportunities for local officials to abuse their status as gatekeepers, often by awarding licenses or contracts to business owners who pay kickbacks. The issue is particularly severe in Greece, which maintains a huge, patronage-driven bureaucracy. But Gallup data reveal that among all EU member countries, the view that the government makes it easy to start and manage a business falls sharply as perceptions of widespread corruption rise.

Corruption are symptoms of arbitrary and repressive laws and the politicization of the distribution of resources. And political economic systems founded on the unnatural or artificially derived factors as the above will eventually meet their destiny as we are witnessing in Europe today.

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