On the Wealth of Nations - Sort Of
Becoming a Decent Economist
In July of last year, The Economist magazine published their list of the “richest” countries according to economic data that was finalized for the calendar year end of 2024. Of course, this can never be precise, and “countries” do not produce wealth – only individuals and their business enterprises do that, but this is an interesting and useful exercise that reinforces the existential need for economic freedom.
Not surprisingly, its study began with Gross Domestic Product (GDP) for each country’s economic vitality. That was adjusted for consumer price differentials among countries - and adjusted again for the rankings for hours worked to account for leisure time as an important measure of wealth.
For simplification, I will focus on the top eight countries listed in report, in alphabetical order: Belgium, Denmark, Netherlands, Norway, Qatar, United States, Singapore, Switzerland. But conspicuously absent from The Economist survey are Israel and Taiwan.
To that list, I will compare the Index of Economic Freedom rankings published by The Heritage Foundation last February. Lastly, I will evaluate the efficacy of GDP as a measuring tool with its superior alternative: Gross Output.
Cause and Effect
Readers and listeners of The Moneyball Method are now familiar with causality as the necessary factor for evaluating circumstances. And because consumer spending as a measure by GDP is an effect, I will begin with its primary cause – economic freedom. In this case, as measured by The Heritage Foundation.
Among the top eight countries in focus, Belgium was ranked last for economic freedom, but it ranks in the top quintile among the 184 countries in the survey:
Belgium’s economy has long benefited from open-market policies that support global trade and investment. Clear and transparent laws and regulations are well enforced. However, the tax system is relatively burdensome, and the extensive welfare state is costly. Labor market rigidities remain a major barrier to productivity and job growth.
In that brief commentary for Belgium, you can see the essentials: the free flow of capital and objective law must be maximized, taxation and redistribution must be minimized, and the unholy alliance between labor and government harms everyone.
Yet Heritage Foundation itself promotes centralized economic intervention for their own altruistic, utilitarian, and collectivist goals. In fact, in their introductory video they espouse:
Governments that encourage innovation and entrepreneurship . . . and surprisingly are better protectors of the environment . . . no single solution to the world’s major challenges . . . powerful effect on improving society . . . it’s about empowering people to choose their path in life . . . the creative solutions to pressing world problems.
All that sounds good, right? No. Good theory is good practice, facts are values, and 1) Government is force, 2) Free minds naturally create and innovate, 3) People with skin in the game will naturally protect their environment, 4) There is a single solution to the world’s major challenges, 5) Improving society is grounded in that solution. 6) It is not the role of government to empower anyone, and 7) What are the world’s pressing problems that were not caused by bureaucratic force or anarchy in the first place?
In this regard, there’s not a dime’s worth of difference between The Economist and The Heritage Foundation. Their collective goal is economic “freedom” dispensed and administered by the State. The success of the French Revolution comes to mind.
Good Economics
Regarding government intrusion, and according to International Monetary Fund data for 2024, the percent of GDP that represents government spending by our focus eight (no data for Singapore) countries range from a low of 26% in Qatar and a high of 54% for Belgium. The mid-range for government spending was 40% of GDP – and that is astronomical.
Bear in mind, business spending is about the creation of value and is measured by earned profit. About half of consumers are also wealth creators – with the top 20% of them creating about 80% of the wealth that benefits everyone (Pareto’s Principle). And legitimate government spending protects rights, adjudicates contractual disputes, and defends property rights. All spending by the State above this morally defensible threshold only destroys wealth.
Accordingly, now is the time to reintroduce my essential twenty-one-word lesson in economics:
Producers create wealth, supply precedes demand, prices are information, markets are efficient, profits are justice, capital finds talent, talent obeys reality.
In other words, free minds and the free flow of capital – both defended by objective law - is the single solution to “the world’s major challenges. So, where does the wealth of these eight countries originate for their government to destroy 40% of it while their residents enjoy relatively high-quality lives?
Sometimes the best answers come from astute observers who wish to free themselves from the poverty and restrictions caused by their own corrupt cultures and governments, like Substack’s The Cultural Romantic,
Norway and Qatar have some of the largest oil reserves on earth. Denmark now runs 3% of its economy on GLP. Belgium has 86% of world diamond trade. Netherlands has Europe’s largest port and biggest logistics. Switzerland and Singapore are mini fortresses for the super-rich to be extremely low tax while not being an offshore island. The US is the only market economy that operates at scale. It’s the only country on earth that doubled its household income from 1950 to now, only country with 31 million entrepreneurs, its economic excess literally powers the entire world. Who do you think is powering the Novo Nordisk GLP economy in Denmark?
That is a fascinating summary. Norway, Qatar, Belgium and Denmark are dependent on the wealth creators and investors from other parts of the world to develop and distribute their natural resources and refined products. Singapore and Switzerland are dependent on the wealth creators and investors from other parts of the world to defend and deploy their assets. And the United States and the Netherlands continue to be the producers and defenders of rights, liberty and justice - the virtues that benefit the entire world.
That is not a coincidence. It’s been that way since the Dutch settled New Netherland (Manhattan Island) in the 17th century:
Leiden became the premier academic center in the Netherlands - one that rivaled the major European centers for learning. And because the Dutch spirit of tolerance was well known throughout Europe, the country was also the publishing capital of the world. Naturally, the cost for printing books was lowest, the quality was highest, and the very existence of capitalism benefits everyone.
Gross Output
If producers create wealth and supply precedes demand - and they do, is there a better way to measure to measure the vitality of a national economy than GDP? Yes, and Gross Output (GO) was adopted by the US Bureau of Economic Analysis (BEA) in 2014 as a reliable alternative, but it uses net wholesale and net retail data - not gross, which limits the measurement of the supply side.
As The Moneyball Method Substack readers and listeners may recall, 3rd quarter GDP for the United States was announced recently at 4.4% - and this would have been higher if imports had not been subtracted. But for our purposes here, how does that compare to Gross Output that more accurately and completely reports business spending and investment?
When GO grows faster than GDP, it suggests economic expansion over the next few quarters, and vice versa. Currently, the BEA’s real GO growth rate of 3.2% is significantly lower than the annualized Real GDP growth of 4.4%. The static view might indicate that the economy is facing headwinds entering 2026.
My readers should also remember that Moneyball Method investors do not rely on financial market or economic predictions. At the same time, the lower GO data indicates that the force of government intervention is taking its toll on the formation of capital and its free flow to talent. Most notably, America's destructive and arbitrary tariff pronouncements.
The price of gold and real estate is further proof of the hurdles to capital formation. But other than current price levels that discount all known information, it is useless to rely on GO or GDP data to predict anything:
We will need to wait until the BEA releases Q4 and full-year 2025 data to get clearer insight into B2B spending trends for early 2026. Due to the federal shutdown in October and November, the BEA’s data release schedule has been delayed, and the specific release date for Q4 data release has not been announced.
However, this much I can guarantee - prices are information, markets are efficient, profits are justice, capital finds talent, talent obeys reality.
I like your seven pithy points.