Thursday, January 25, 2007

We're Number Four!

I grew up in a time and a place where we were proud to be living in the freest nation on the face of the earth. And the U.S.A. does enjoy a vast amount of freedom comparable to most other nations. Freedom can be measured in many ways, but Milton Friedman argued that economic freedom properly measured essentially embodies all forms of freedom.

Friedman and other like-minded economists concluded that the main points of economic freedom are:
  • Personal choice rather than collective choice.
  • Voluntary exchange coordinated by markets rather than allocation via the political process.
  • Freedom to enter and compete in markets.
  • Protection of persons and their property from aggression by others.
These economists developed the Index of Economic Freedom, which was first published in 1993. The index measures:

  • Size of Government: Expenditures, Taxes, and Enterprises

  • Legal Structure and Security of Property Rights

  • Access to Sound Money

  • Freedom to Trade Internationally

  • Regulation of Credit, Labor, and Business
The 2007 index is out. You can get a glimpse of it at the link, but to get all of the nitty-gritty details, you’ve got to fork over $24.95 for the book. Hey, these guys are promoting the free market. They’re trying to turn a buck, just like everyone else. Alternatively, you can download the book by giving up some personal information.

Mary Anastasia O’Grady, co-editor of the 2007 index, writes here:

Here's bad news for those who oppose global free trade: Not only did the world-wide trend toward greater economic liberty hold steady over the past year, but the incomes of poor individuals across the globe are rising as result. The world isn't only growing richer. The gap between the per-capita income of have-not populations and that of the developed world is narrowing.

O’Grady crows that despite all of the nasty stuff going on throughout the world and in our domestic politics, there has been a “global shift that reflects the basic human longing for individual liberty.” She adds, “While not all of mankind is participating in this advance, in those places where freedom has increased, people are becoming decidedly better off.” She notes that “economically free countries enjoy significantly greater prosperity than those burdened by heavy government intervention.”

All of this sounds very good. And then I checked out the nation rankings. We’re number 1, right? Wrong. Up there on top is Hong Kong, followed by Singapore, followed by Australia. The U.S. comes in at number 4, not even a bronze medal. What’s up with that? What are we doing wrong? Go back and check Friedman’s list and some problems should become readily apparent.

Of course, I think a lot of people would be quick to point out that the Chinese government in Hong Kong and the government in Singapore hardly come across as hotbeds of democracy. Both impose restrictions on political and individual freedoms that most Americans would think are quite oppressive. Australia offers a model with more cultural and political similarities to us, despite technically being a dominion ruled by a distant monarch.

I’m sure that some will say that these rankings only prove that the index fails to adequately measure freedom. And I believe there is some truth to that criticism. I noted here that economists have an unusual way of looking at things. Some will aptly argue that the restrictions that put us in fourth place produce other social positives that are either unmeasured or mismeasured by the index. There may be some truth to this as well, despite the fact that the index is broadly accepted and used as the basis for a great deal of research.

I guess we need to ask what we’re trying to achieve. Is the goal to improve the economic lot of individuals? If so, Johnny Munkhammer’s essay in the index on this topic offers a studied and interesting conclusion. He writes, “If the world wants to achieve both more jobs and better living standards, freedom is essential.”

I myself am no purist in this arena. I recently advocated heavier regulations on payday lenders. But I think the index is an important tool to use in shaping public policy. When it comes to economic freedom, the rule should be to tread lightly and cautiously, even erring on the side of freedom, lest we cause more ills than we cure with our well-intentioned actions. Of course, that may run counter to the economics of politics. Still, we ought to be #1, not #4, don’t you think?


Frank Staheli said...

It seems like we're so enamored with entertaining ourselves, including the arguing about stupid things in Washington D.C. and on talk radio that I'm not surprised we're falling.

Our Olympic basketball team is an apt metaphor. If they worked together as a team to solve their problems, they could be anyone, but they're way to self-absorbed to see how it's killing the team in general.

I'm particularly interested, in a time when the Democrat mantra is that the divide is getting greater between rich and poor in America, that difference in the world between haves and have nots is actually narrowing.

I think we need a nice serving of economic freedom topped with less government intervention.

Jeremy said...

You're absolutely right about the diminishing of property rights in America.

You should also mention the civil freedoms we've lost over the past decade or so. It has gotten so bad that we even have a sitting Attorney General of the United States who feels comfortable claiming that American's don't have basic human rights like habeas corpus because those rights haven't been specifically enumerated in the Constitution.

Our freedoms decrease as our ignorance increases.

That One Guy said...

It's been a prolific couple of weeks for you. Keep up the good work,and the good writing!!

The David Co. school stuff is absolutely apalling - and to add insult to injury, it seems the Ross's have now been indicted on 48 federal counts.

Stunning. Something is wrong in the state of Denmark!!


y-intercept said...

One trend is that a society really doesn't feel the benefits of freedom for several years. Some of the effects don't even show up until a generation or two down the line.

Conversely, government intervention in the economy has an almost immediate impact ... the ill effects not showing up for years.

The world had been gradually expanding freedom during the 1980s through 1990s (resulting in the current world wide economic boom). The effects of the current swing to the left will not show up for several years.