Talk to any liberal about economics, and you’re likely to hear a string of praises for welfare, Medicare, and other government programs to “help people,” followed by insistence that lowering taxes will ultimately make most of us (especially the poor) much poorer. Never would it occur to them that there exists an iron-clad linkage between taxes, personal political freedom, economic freedom, and a society’s ability to improve the lives of all of its citizens, rich and poor.

Yet both history and modern economics abound with crystal-clear examples of this link. In many cases, the inverse connection is the most striking: when centralized government planning impinges on people’s freedom to engage in free market competition, the result is less efficiency, fewer choices for consumers, fewer jobs, and a lower standard of living for all.

The economy of Russia under the Soviet Union is a perfect example. Under socialist economic theory, the government would eliminate poverty and want by maintaining set prices for everything so that everyone could afford what they needed. Instead of giving rise to a utopian society of plenty, however, these policies caused the Russians to suffer greatly.

Distribution centers across the country would pile up with moleskin pelts, while people stood in other lines for hours to purchase basic goods like tomatoes or undershirts. Farmers living in the Plava River Valley, famous for its extremely fertile soil, remained poor with hungry millions living only 150 miles away in Moscow.

The Soviet economic planners who set the prices on certain goods were essentially throwing darts at a dartboard in the dark, leading to these astonishing surpluses and shortages.

The simple truth is that no limited number of people can keep track of all of the intricate demands of the market at one time. Consumer demands are constantly and quickly changing, for reasons that no one fully understands. Yet no one has to, if the government lets the market run freely. The most any one producer must do is to follow a few factors which lead to a change in demand for his product, and adjust his supply accordingly. This individual freedom to watch and adjust ultimately leads to less waste and more efficiency than if the government were trying to oversee all of these decisions from afar, resulting in prices and supplies which make everyone happier.

Western Europeans today are learning this lesson the hard way. Unemployment levels now approach 9%, a dramatic shift from 3% in 1965. GDP growth rates continue to move at a disappointing crawl, averaging 1% in Western Europe over the last ten years or so.

In Europe, if you are an individual doctor or lawyer or accountant, you are not personally free to move from Germany to Belgium, for example, to set up your practice in a town or city which might offer you more work.  Your freedom to live and work where and how you please is prohibited by the current rules of the EU.  The people in the Belgian town you wanted to move to must make do with less choice among service providers.  With competition restricted, their current providers can charge higher prices.  The local Belgian citizens are poorer because their government has effectively forced them to spend more of their limited incomes on medical, legal or accounting services than would be the case if free markets and free competition were allowed in those three industries.  These government rules protect the incomes of a very few people while hurting the well-being of millions.

In Europe, if you want to start your own business, you will not have the freedom to save your business in the future, if times turn rough, by letting some of your employees go in order to save both your business and the jobs of the employees you can afford to keep.  European governments make that nearly impossible under the law.  If your business runs into trouble, your hands will be largely tied while you watch it go bankrupt.  As a business owner, your economic freedom is severely limited.  Consequently, not many people start businesses in Europe (compared to the U.S.), and – as the last 30 years’ history shows abundantly – very few new jobs are created and the economies stagnate, decade after decade.

In Europe, if you are a farmer, you are not free to buy genetically modified seed – seed which is far more resistant to disease, or far more productive, or both.  The government tells you from whom you can buy seed, and from whom you cannot buy seed.  Local European seed producers benefit because they’ve been granted monopoly power.  Local farmers suffer, as do hundreds of millions of European consumers whose government prohibits the free market competition which would give them more choices and lower prices, hence more economic welfare.

Governments restrict personal freedom with laws, or with taxes, or both. Human beings are so fond of taking risks to work where and how they please that when even a dictatorship relaxes its laws a little bit, to allow more personal freedoms, there is usually an explosion of activity. People move, create new businesses, change jobs, and learn new skills by the thousands and millions. There is no other explanation for the growth of modern China – one of the most dramatic stories in recent world history. And yet, American liberals do not seem to understand.