New Hampshire is a small, remote, mountainous state with no major port or trade hub. Considering only natural economic resources, it has more liabilities than assets. Yet its economy is legendary. Its economic growth has been the envy of New England for decades.
How did this happen?
The simple answer is that New Hampshire unleashed the power of human ingenuity by systematically pursuing economic freedom for its people. The human mind being the greatest economic asset, New Hampshire leaders freed it from unnecessary constraints. Tremendous prosperity followed.
What we call “The New Hampshire Advantage” is not merely the absence of a broad-based sales or income tax. It is the result of a consistent, decades-long strategy of leaving individuals and businesses largely free to trade with each other as they see fit.
In short, the state’s economic strategy is to not have an economic strategy, other than to leave people and businesses free. It has worked beautifully.
Below are the inflation-adjusted real GDP growth rates of every New England state from 1977-2019, from worst to first, along with the rate for the U.S. as a whole. The data are from the U.S. Bureau of Economic Analysis and were compiled by the United States Regional Economic Analysis Project.
Rhode Island: 124%
New Hampshire: 335%
New Hampshire’s 335% growth is astounding. Such are the benefits of economic freedom.
The Fraser Institute, a Canadian free-market think tank, has for years ranked North American states on economic freedom. This week New Hampshire ranked No. 1 in North America — again.
For 24 straight years, New Hampshire has ranked as either the first or second most economically free U.S. state. Since Alberta, Canada, drifted away from free-market economics several years ago, New Hampshire has often ranked first in North America.
As the authors of the Fraser Institute’s report point out, “economic freedom is positively correlated with per-capita income, economic growth, greater life expectancy, lower child mortality, the development of democratic institutions, civil and political freedoms, and other desirable social and economic outcomes.”
Many people assume that New Hampshire’s low levels of taxation and government spending would lead to a high poverty rate. The opposite is true. We have the lowest poverty rate in New England.
The poverty rates for New England states are:
Rhode Island: 10.8%
New Hampshire: 7.3%
Freedom and prosperity tend to attract people who live in less desirable places. During the half century starting in 1960, New Hampshire experienced the highest population growth rate in New England. In the 1980s, our population growth rate was more than double that of Vermont and five times that of Massachusetts.
A 2008 report for the Council on the Future of Vermont noted the sharp difference between New Hampshire and Vermont in the 20th century.
“Had we kept pace with their growth rate for the past 106 years, our population would now stand at 1.1 million, about double our present population,” it concluded.
New Hampshire has gone from slightly more populous than Vermont in 1900 to more than twice as populous today.
Unlike Vermont, New Hampshire doesn’t have to pay people to move here. They come voluntarily.
In 2016, we surpassed Maine’s population for the first time in 215 years, though Maine is 3.78 times larger than New Hampshire.
Because humans are the world’s greatest economic resource, economic growth and population growth bring prosperity. Census figures show that New Hampshire’s median household income of $74,057 is about 25% higher than Vermont’s $60,076 and about 35% larger than Maine’s $55,425.
Despite having no Boston Harbor, Logan Airport, MIT, Harvard, BU, BC, or Yale, no Gold Coast along the Long Island Sound, and being relatively isolated in Northern New England, New Hampshire’s median household income is equal to 97% of Connecticut’s and 96% of Massachusetts’.
New Hampshire has a great state motto, which it should keep. But the state Department of Business and Economic Affairs could modify it into an accurate and catchy marketing slogan: “Live free and prosper.”
Since war and revolution gave way to trade and commerce, “Live free and prosper” has been the New Hampshire way. By cherishing economic freedom, we’ve created an island of liberty and prosperity in a region that has become distrustful of both. It works. Let’s stay with it.