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Andrew Henderson

Founder of Nomad Capitalist and the world’s most sought-after expert on global citizenship.

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Freedom

“American Exceptionalism” and other lies about economic freedom

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I talk a lot about how silly I find the concept of “American Exceptionalism”. The idea that one country is inherently superior to any other is an odd and disturbing concept to those who have seen the world. Or who just sit down and think about what’s being proposed by calling one’s country the most “exceptional”.

Government and the media do a lot to silently promote such a concept. Try telling your mother you’re going to holiday for a week in Iran and watch the reaction. Tell your friends you’re moving to Georgia (the one in eastern Europe) and they just might ask what you’ll do for electricity. Our culture “otherizes” foreign cultures by presuming they’re something that they’re not. The government keeps you believing it needs to start expensive wars by promoting the idea that most Muslims are evil.

And so on.

It’s not that I believe the United States – or as I call it ironically, The Land of the Free – is the worst place on earth. Yes, I’d rather live there than Afghanistan. But when you say that there are plenty of other countries that are equally good to live in, raise a family in, do business in, et cetera, some people get upset. It would be like telling your child he’s not vastly superior to his thirty fellow classmates and having him go nuclear on you.

I bring this up because I want to examine some stereotypes. I hear a lot of people talking about this-place or that-place using one-word descriptions. There are a lot of stereotypes used to list some countries as “good” and many others as “bad”, or at least “to be avoided”.

Let me explain. I’m often labeled as “conservative” because of my positions on economic freedom. While my positions on other issues vary, I focus on internationalization on this site as pro-business, pro-freedom, anti-tax diversification strategy.

However, I frequently see American conservatives using words like “socialist” to describe other countries. This one word is the nuclear bomb when dropped by a conservative who otherwise agrees with my economic positions.

But take a country like Denmark. Yes, Denmark has one of the highest progressive income tax rates in the world. Earn good money in a salaried position and you’re going to pay. There’s some social justice going on, and they are Michael Bloomberg‘s favorite country with a world’s first tax on fatty foods.

Yet Denmark is ranked above the United States in economic freedom. It’s been ranked the “world’s happiest country”. It has one of the most efficient regulatory structures in the world. Banking regulations there actually make sense. Starting a business there is easy with few of the job market nanny-state restrictions on hiring and firing that you’d find in places like France or even Japan. Foreign investment is welcomed, trade is relatively free, and the place is overall pretty transparent.

They’re even cutting back, even if it’s slightly, on their welfare system. Compare that to a growing welfare state in the Land of the Free. I’ve always said I believe you can judge a country based on momentum.

Finland is another place that gets dumped on. This despite holding the title for lowest corruption – anywhere. The country overwhelmingly doesn’t see – and doesn’t want – a closer European Union. Their politicians have been calling for the EU to let the stragglers in the union fail, even if it meant temporary pain for their own country. They’re tired of the EU’s nonsense. Finland often gets lumped in with its Nordic neighbors as being some out of control communist state, despite having a shrinking deficit. When you combine their lower federal taxes and higher regional taxes, the tax burden isn’t much worse than the United States.

Among Nordic countries, even Norway has a pretty robust banking system and a sense of fiscal management that Barack Obama and Ben Bernanke could learn from.

And while you might think of Bangladesh or Nigeria as not worth dealing with, plenty of multinational companies have. The lure of geoarbitrage is too great to pass up dealing with some entrenched bureaucracy. In today’s connected world, geoarbitrage isn’t just for mega-corporations; you can create your own advantages by taking the best from each place.

While there are some places I wouldn’t be touching with a ten-foot pole – among them Greece, Cyprus, Italy, and Spain – there are plenty of countries around the world which have a lot to offer you if you do the proper research and take steps to diversify.

I’m not saying to pack your bags and move to Denmark. What I’m saying is to embrace the best each country has to offer. Don’t write off countries because conventional wisdom says they should be written off. Follow the trends and find out which places are moving things in the right direction, and which are moving them in the wrong direction.

If you’re an investor in the Land of the Free, do you have confidence Barack Obama or one of the Democratic presidents to follow will not enforce the Buffett Rule and mandate you pay more in taxes? For as high as taxes in Belgium are, you can pay zero capital gains tax when your investments are structured properly. That’s part of the logic, aside from geography of course, for wealthy French to escape to Belgium in protest of Francoise Hollande’s tax plans. Russia, Gerald Depardieu’s new home, also has no capital gains tax on investments held longer than three years.

Heck, even Iran doesn’t see fit to tax capital gains. Although if you’ve been watching American media, you might think everyone there is a prison camp anyway.

If you run a business, you may find an LLC in your own country to be the best way to go. But if you’re planning on doing business internationally, an offshore corporation may be better. Plenty of places like Hong Kong allow for more lenient tax deductions from your business income, for example. Estonian corporations offer a moderate corporate tax rate, but only on profits you take out. Reinvest the money and it can be tax-free.

Of course, it goes without saying that there are a number of tax haven jurisdictions with no corporate tax that may or may not suit your situation. It goes to show, however, that plenty of countries you might not want to live in (until you visit, you never know) offer specific benefits to you as an entrepreneur or investor.

Having a bank account in one of the “socialist” countries like Norway might just be your saving grace one day. Challenging the conventional wisdom will open you up to new opportunities and new ways to diversify and expand your freedom. You can do that when you subject the world to stereotypes and wall yourself off to new and changing ideas. This is true in an age where personal and economic freedom is constantly under siege in much of the west and especially in the United States.

As Matthew said, “Why do you look at the speck of sawdust in your brother’s eye and pay no attention to the plank in your own eye?

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