Conservative Success in Two Charts

We conservatives often identify ourselves by a set of principles and values: we honor family, faith, country, and tradition. The emphasis varies, with nationalism being more important to some than to others; with the influence of faith varying depending on what denomination one adheres to. But fundamentally, conservatives share a deep appreciation of social, cultural, and economic institutions that protect, preserve, and invigorate a society where individuals can live freely in solid families and thriving communities.

In short, conservatives are good at explaining their principles and their vision of a strong, thriving society. The one part, though, where conservatives tend to fall short is in turning those principles into actual policy. That is not to say we don’t do it—but when we compare our ability to reason about conservative theory to our accomplishments on the ground, it is easy to see that we have a lot more work to do in the latter department.

On the positive side, we do have some compelling role models. Ronald Reagan is often referred to as a leading conservative; his success consisted more of standing up to the Soviet Union and reigniting the American economy than in enshrining conservative principles in legislation. Those were no small accomplishments—for which Ronaldus Magnus deserves praise—but from a broader viewpoint it would actually be easier to classify Donald Trump as a conservative president.

Conservatives can find an even more successful role model in Hungary. There are many ways to illustrate how Prime Minister Orbán has led his country from conservative theory to practice, but few pictures are more convincing than those that show in clear, concise contrasts how conservatism trumps socialism in practical application.

Any such ideological comparison is bound to be challenged based on the definition of each ideology. Socialists are often very sensitive to anyone trying to pin the atrocities of communism on them, though they rarely back away from tying the reputation of conservatives to fascist dung. Therefore, to avoid fruitless demagoguery I will apply a very simple distinction between socialism and conservatism. It is based on economic policy, which is one of the areas where these two ideologies tend to yield the sharpest contrasts:

• To the socialist, the economy is better when there is less economic inequality and lower poverty;
• To the conservative, the economy is better when there is more economic growth and more opportunities for people to work their way to a better life.

These two definitions are not over-simplifications. They actually simplify their respective ideologies as far as a simplification can be taken—but not farther than that. In fact, these definitions capture the essence of a century-old debate over economic policy. It was in the 1910s and 1920s that the contrast between socialist and conservative policies took a distinct form, not just in political theory and the academic literature, but also in practical policy. Britain was one of the earliest stages for this right-vs-left competition, although the conversation there was first and foremost concentrated around the level of activity that government should have during a recession.

Ideological battle lines were sharpened considerably during the Great Depression in the 1930s, when the fight between Right and Left gave birth to the modern, socialist welfare state. Its foremost purpose is to advance the cardinal premise of democratic socialism: elimination of economic differences.

This phenomenon, of course, is known as inequality among the Left. This term itself is loaded with value; who does not want equality? Normally, I would recommend the use of “economic differences” as opposed to inequality, but in order to keep the following succinct and focused, I use the term inequality throughout.

Much of the ideological debate between socialists and conservatives for the last 100 years has been preoccupied with economic inequality. The debate is often made inaccessible to most people by proponents from both sides, who often rely on sophisticated terminology and complex analyses to win the argument.

To some extent, this complexity is warranted; anyone wishing to sort out the arguments around economic policy, and the points about inequality vs. economic growth will have to invest some time and intellectual energy in it. Meanwhile, there is also a tendency among the experts on both sides of the debate—and certainly those of us with expertise in economics—to make the conversation unnecessarily complicated.

For this reason, the aforementioned simple, upfront definitions of socialism and conservatism can help focus the debate over which ideology is the most successful. They highlight easily identifiable economic metrics, demonstrating in essence that the debate over the economic success of respective ideology is no more intricate today than it was a century ago.

Our economies have evolved enormously, but the principles behind each side of the debate are just as applicable today as they were in the early years of the last century. Socialists still advocate for less economic inequality; conservatives remain focused on creating opportunities for people through economic growth.

As it happens, this debate is won solidly by conservatism.

To illustrate how, we are going to take a look at two charts. They report data on the economic variables mentioned in the two definitions above: inequality, poverty, and economic growth. The two former are compared, one at a time, to the latter.

The numbers reported in each chart are based on almost 400 pairs of observations from 33 countries: 29 in Europe, plus Japan, South Korea, Canada, and the United States. The raw data is from the Organization of Economic Cooperation and Development, OECD, and is unfortunately a bit spotty for the “socialist” variables: for some reason, the OECD does not report data on economic inequality and poverty on a regular basis. For example, there is annual data from 2004 for Lithuania and Slovenia, but only from 2013 for Sweden. There are only numbers for two years for the United Kingdom.

For this reason, in the comparisons between, on the one hand, inequality and poverty and, on the other hand, economic growth, I have paired up the observations of the two “socialist” variables with data for real growth in the gross domestic product, GDP, for that specific year. These observations are then organized in decile groups, as shown in the charts below.

The first chart measures GDP growth on its right vertical axis, and the so-called Gini coefficient on the left. The columns represent the Gini coefficient, which measures differences in household income: a high number indicates high economic inequality, and vice versa.

The line with the dots represents GDP growth. There is one dot for every column. For example, the average GDP growth rate for the observations in the first decile is 7.88% (the first dot), with the Gini coefficient at 0.470 (the first column). In the tenth decile, the corresponding numbers are -4.89% and 0.490.

Since a low Gini number illustrates economic equality, and a high number means high inequality, Chart 1 reports that inequality is smaller when GDP growth is high:

Chart 1: Gini Coefficient (left axis), GDP Growth (right)

The results from Chart 1 are compelling, yet expectable. An economy that is growing solidly creates lots of jobs in all income segments, but most of all for people who earn relatively little. There is high demand for low-skill workers, whose labor is in excess demand; employers have to raise wages and improve other benefits in order to attract workers.

By the same token, low-skill workers tend to be the first to feel the impact of a recession when the economy starts shrinking.

This means that anyone who wants smaller income differences between individual citizens should join the conservative camp and help advocate for policies that promote growth, economic freedom, and the free-market creation of opportunities for all.

This point is reinforced when we turn our attention to poverty (defined by a threshold of 50% of median income). Socialists have a standard solution for poverty: to dole out more government benefits to the poor. This, however, does not solve the problem with poverty—it merely disguises it behind tax-funded entitlements. There is a much better solution, as Chart 2 reports, where the poverty rate is reported by the columns and the numbers represent the percent of the population that lives under the official poverty line:

Chart 2: Poverty (left axis); GDP Growth (right)

Again, the result is clear: if you want less poverty, make sure that the economy consistently exceeds 2.5% real annual growth. 

These numbers are important, not just from the viewpoint of a winning conservative ideological argument. They are also easy to translate into real-life experience. To start with a country whose economy is stagnant, in 2013-2018 the German GDP grew by an average of 1.7% per year. Their poverty rate remained steady around 32% throughout 2018.

Compare this to Poland, whose economy averaged 3.7% growth in 2013-2018. Their poverty rate also held steady, but at a significantly lower level of 28-28.5%. 

Looking at income inequality, there is a similarly telling contrast between France and Hungary. In 2013, the French Gini coefficient was 0.5, increasing to 0.51 in 2014 and reaching 0.53 in 2018. (Again, a rising number means more economic inequality.) During the same period of time, French economic growth was 1.3% per year, on average.

The Hungarian economy, on the other hand, produced 3.6% real growth per year, while lowering its Gini coefficient (reducing inequality) from from 0.521 to 0.464. 

In other words, at the beginning of the period, inequality was higher in Hungary than in France, but thanks to economic policies that got their economy growing, the Hungarian government created an economically more cohesive country. Meanwhile, the French were limping along in the opposite direction. 

To further illustrate the points from Charts 1 and 2, the poverty rate in Hungary also stabilized. After having grown steadily since 2006, poverty in Hungary stabilized around 2012 when the economy began growing at EU-leading rates. The poverty then fell, from 34.5% in 2014 to less than 29% in 2019. 

By contrast, French poverty crept upward from 35.8% in 2014 to 37% in 2019.

But this is not all. There is more to the French-Hungarian comparison. The numbers used here for poverty and income inequality are “genuine” free-market based numbers. They are, in short, the poverty rates and rates of income inequality that the economy produces without any intervention by government. 

The OECD also publishes numbers for the same variables after the impact of taxes and government handouts. In other words, there is a Gini coefficient that shows how income is distributed by the economy itself, and another Gini coefficient that takes taxes and entitlement benefits into account. 

When we compare the two Gini measures, the latter, “welfare-state” Gini coefficient is of course always lower (since the goal with the welfare state is to reduce economic inequality). 

Now: the bigger the difference is between the genuine Gini coefficient and the welfare-state version, the more heavily government is engaged in income redistribution. In some countries, the welfare state is deeply involved in taking from “rich” and giving to “poor;” in Finland, e.g., government policies cut the Gini coefficient by half. 

Hungary used to have a government that was at least as deeply engaged in redistribution as in Finland. In 2007, the Hungarian welfare state reduced the country’s Gini coefficient by half, but once conservative policies began reshaping the Hungarian economy, the welfare state’s involvement in income redistribution has steadily declined. 

The reason for this is, again, that a strongly growing economy gives low-income workers plenty of opportunities to make more money. 

So there we have it: two charts that illustrate how conservatives, once they put their ideas to work, are better at reducing both poverty and income inequality, than socialists are. 

Not only does conservatism work, but it beats socialism at its own game.