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.
- 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
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?