America's Dwindling Economic Freedom
online.wsj.com
online.wsj.com
The purported benefits: "Countries achieving higher levels of economic freedom consistently and measurably outperform others in economic growth, long-term prosperity..." really? From 2000-2008, Ireland held 3rd or 4th spot in the list[1], and is now 11th. Worked out great for them, what with the recession, the bailout, and the 2nd highest level of household debt in the world[2].
To those who would reply 'but that's outside forces, economics is complicated,', well, exactly. Reducing it to a list like this is wishful thinking.
[1] https://en.wikipedia.org/wiki/Index_of_Economic_Freedom [2] https://en.wikipedia.org/wiki/2008%E2%80%932013_Irish_financ...
If Ireland had followed more of the Iceland model post-crisis (dissolve the entities, prosecute the execs, reneg on debt) then I think the results for Ireland would probably be different.
http://www.leftbusinessobserver.com/Freedom1996.gif
It's comically bad. Random things like penis size correlate better with economic growth http://static1.businessinsider.com/image/5008876deab8ea62620...
(that's from a real paper from the Helsinki Center of Economic Research, btw, though it's obviously tongue in cheek)
Even its correlation with GDP is pretty shaky: http://www.heritage.org/index/book/images/in-2014-chapter-1-...
This is nothing but a list to write press releases around. There is no science to it, and we shouldn't take it any more seriously than articles about the mathematical formula for the perfect sandwich.
Taxation is 10% of the index, government spending another 10%.
TFA complains about "marginal income rates of %43" as though this were the general case. For what it's worth, %43 is the highest capital gains rate, the highest income rate is %39, which is for incomes of over 1.8MM: http://en.wikipedia.org/wiki/Income_tax_in_the_United_States
With that out of the way, the highest marginal tax rate was around %90 during the boom of the 50's and 60's, and is lower now than during Regan administration for example: http://www.ntu.org/tax-basics/history-of-federal-individual-...
If one is a member of the very highest tax bracket, then one might be tempted to measure freedom by the myopic comparison of income tax rates. It would be unsurprising if the Heritage Foundation were concerned about the very highest tax rate in great disproportion to it's nominal consequence.
There are other economic freedoms: freedom from excessive gov't granted monopolies (patent/copyright), freedom from protectionism, tariffs, limited work visas, etc. Even rich guys driven to distraction by high tax rates ought to be able to find something say about these sorts of things in an article about economic freedom, but no specific structural reforms are proposed. News flash: partisan think tank doesn't like taxes, president.
For the rest of rest of us, real freedom also means not being imprisoned for interacting with other consenting adults in ways that are illegal, and not being denied due process in various ways such as: torte reform, civil asset forfeiture, being spied on by agencies who are immune from judicial review, etc. Could we take a break from wringing our hands about the welfare of the ultra-rich, and work some of that stuff too?
You mean interactions like paying a consenting adult $7.24/hour to clean your bedroom? Selling a consenting knowledgeable adult a substance which has not passed FDA review? Paying a person without a medallion to drive you to a different location?
As far as I know, you don't escape from patent/copyright or work visa issues by travelling to other nations. Incidentally, those things are included in the Heritage rankings, and collectively get more weight than tax/govt spend.
When I said the article proposes no particular structural reforms, and ought to take on protectionism, &c. I meant that these are exactly the sort of issues I would like to have seen addressed.
It seems like we have in common more than you think :)
Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom).
At the least, these guys need better PR. That article seemed pretty out of touch with those of us in the rest of the tax brackets. Instead of complaining about top tax rates they should be convincing me that net prosperity will increase, even for middle class chumps like me, if we deregulate, lower _everyone's_ taxes, abolish the minimum wage, get rid of medicare/medicaid, get rid of public health insurance and unemployment insurance and welfare and food programs and social security, and &c.
That sounds like a hard sell, and I think these guys are afraid to address those issues head on in a public forum like WSJ, so they complain about other stuff that's less relevant.
I think making a link between economic freedom and economic growth is a tough enough sell without giving individual policy prescriptions. Ideally people should be informed enough to know what tradeoffs they are making when they vote for policy choices. It's OK to vote yourself a bit less economic growth for other things you want, but for many they aren't aware of those tradeoffs.
The reasons the author lists for why my freedom is suddenly so limited don't seem like they would really impact me all that much. So there's more health care regulation. And now I'm supposed to be panicking?
Perhaps not.
Precisely. I'm not sure topping the economic freedom charts is such a desirable goal for the average citizen.
Here in Hong Kong (#1 on the list) for example, I have the freedom to legally discriminate against employees based on age, appearance, religious beliefs and sexual orientation. I have the freedom to engage in anti-competitive mergers and monopolize the market. I have the freedom to pay peanuts, demand unpaid overtime, require a 6-day workweek, give one-week leave per year and not pay you for breaks. Freedom to run a toxic bus fleet and burn bunker fuel in my ship while anchored 24/7 1-mile from the center of town.
One can argue cause and effect, but I don't think it's coincidence that Hong Kong has the highest income inequality in the developed world[1] and one of the unhappiest populations[2].
[1] https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...
[2] http://unsdsn.org/files/2013/09/WorldHappinessReport2013_onl...
Freedom != opportunities
Maybe freedom leads to opportunities.
[1] http://www.tradingeconomics.com/hong-kong/unemployment-rate
By the way, "Hong Kong is one of the healthiest places in the world. Hongkongers enjoy a life expectancy of 85.9 for females and 80 for men, which is the third highest in the world, and an infant mortality rate of 3.8 deaths per 1000 births, the fourth lowest in the world." [1]
Depending on how you count it, measures of food insecurity in HK show about 1.5 million [1] (in a population of ~7 million). Oxfam in 2011 [2][3], for example, tracks 16% of poor households with children suffer from frequent starvation and 30% from simply not being able to afford enough food.
Homelessness is less severe...relatively. Surveys in the city find ~1000 people sleep in the streets -- and local weather makes this a less severe option than say...Toronto. You probably won't die on the streets in HK from exposure. But HK also offers a surprisingly unregulated housing market that allows for people to sublet incredibly small spaces and even stack rental units in a single dwelling like kennels. Estimates put 100,000 people living in these conditions [5] Significantly more live in apartments between 24-40 square feet. [6]
But this you could find out for yourself with a minute of googling, that you didn't shows you are simply trying to reinforce some preconceived notion.
1 - http://feedinghk.org/the-big-issues/hunger-101/
2 - http://www.oxfam.org.hk/en/news_1630.aspx
3 - http://www.oxfam.org.hk/filemgr/1630/FoodSurveyReportAug2011...
4 - http://www.cityu.edu.hk/youeprj/hope/homelessness.html
5 - http://www.dailymail.co.uk/news/article-2084971/Hong-Kongs-c...
6 - http://abcnews.go.com/blogs/headlines/2013/02/shocking-photo...
At the very early stage, the cost is high. I'm obligated to pay overinflated prices for insurance to support the life choices (pregnancy, drug addiction, fatness) of others. The cost is also highly unpredictable - it's based on my future income and the exchange website is designed to obfuscate it in order to avoid sticker shock. Good luck predicting future income if you don't work for the government/bigcorp.
And there are all sorts of edge cases where the regulations don't even make sense. For example, I live outside the US, but if I enter the US for 31 or 36 days (different websites give different numbers), I'm obligated to buy 365 days of obamacare or pay the obamacare tax. This drastically curtails my ability to make sales visits.
At the growing a business stage, it makes your 50'th employee very expensive.
I must be missing something because as someone who is growing a small business, the ACA (and its Massachusetts predecessor) has significantly simplified my life.
It isn't about what the quality of life will be like tomorrow or next year, it's the consequences a decade hence.
Those countries all have significantly better social security safety nets. The US does not because it is supposed to be economically successful for the majority, if that ceases to be the case things like a lack of public healthcare is going to become a significant problem.
http://sg.news.yahoo.com/singapore-falls-to-record-low-place...
And they have rather brutal corporal punishment for quite trivial things (swearing on an airline flight??):
http://www.news.com.au/national/beyond-excruciating-when-it-...
Economic freedom, that is the freedom of companies to do as they please, is often in conflict with individual freedom. For example, I find myself with much greater freedom as an employee or as a consumer in Germany than in the US, because the inherent imbalance in power between the two parties is leveled by regulations curtailing the corporations' freedom.
How free are you to start up a company in any given field? To earn income doing a task of your choosing? To spend your income on items of your own choosing?
That is the essence of economic freedom.
In the details it shows that the USA is still very high in certain areas - like personal freedom in labor mobility - but is getting marked down for continued and excessive debt.
I think the list is somewhat imperfect (Hong Kong is no longer a country, despite it's commendable history of low taxation and personal freedoms, now lost to being a chinese micro-state).
The discussions around healthcare seem to muddy the waters - although it is a hot topic I don't think it really counts for much as most of the countries above the USA have much more regulated or state owned health care.
Regulations prevent more powerful others from removing my own freedom as they want.
Microsoft or Apple can't prevent me from starting up a new company or buying some other product unless they get the government to regulate my other choices out of existence - which means they can only harm me by decreasing my economic freedom. The exact opposite to what people seem to be trying to say here.
On the right, we have the toddler. He is 2 years old. On the left, we have the heavy weights world champion.
Ladies and gentlemen, please make your bets. The fight is about to begin!
I'll restate again: Economic Freedom gives you, the individual, the freedom to pursue your own economic choices. That is the type of job you'd like to do, the type of business you'd like to start, how you'd like to spend your income.
It has zero to do with David vs Goliath, Corporation vs Individuals.
Case in point. Would you like to start a community bank, to better serve yourself and your local community? Have you got the freedom from regulations to do so?
Regulations, as we all know, are often written by lobbyists and passed by politicians. Frequently these regulations are designed to entrench power and escape from competition.
Let's look at a common discussion point on this site - Uber. High economic freedom means you're free to start your own Uber-like service. You're free to create a car service, and free as a consumer to purchase a ride from them. Low economic freedom means there are barriers from either starting the company or buying it's products. From such freedoms springs economic growth. Entrepreneurs require economic freedom so that they can find new paths, so that they can pivot around looking for the right business model.
That is why it has nothing to do with 'big vs small' or anything like that. Regulations do not make you free.
These seem orthogonal to me. You can have individual economic freedom.
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For example, for all the fear mongering about Microsoft's monopoly in the 90s, the reality ended up being that the free market is a fickle mistress and Microsoft's power dwindled pretty quickly when mobile and web came around and changed the game on them (see: innovator's dilemma). Another great example is AOL/Time Warner. All those lawsuits and extensive government intervention were complete wastes of money, and I wouldn't be surprised if 10 years from now all the current "dominant players" have been overrun as well.
Compare this to the monopolies granted and supported by the government in the form of patents and copyrights. Disney, while gaining its early success from taking from the public domain, enjoys Congress' approval to basically get indefinite copyright extensions and never have to relinquish any of their work. We the tax payer get to subsidize reducing Disney's competition. And hopefully here I don't have to go into the details of how detrimental technology patents have been to both consumers and new businesses (and arguably even the companies that hold the patents!).
In other words, I'm actually not that scared of "natural" monopolies: i.e. monopolies that get to where they are legitimately through actually convincing 100% of consumers to buy their product, vs. by filing paperwork to the US government and then sending cease and desist letters to competitors. I also believe it would be much harder to attain such a "natural" monopoly in a patentless world.
What scares me is the interaction between corporations and governments to establish monopolies that legally cannot be challenged, or alternatively, to augment their monopolies by influencing high ranking members of congress. I'd gladly trade the risk of doom-and-gloom potential monopolies for eliminating patents.
I also find it very odd that people develop a government-monopoly blindspot- Microsoft monopoly = bad and evil, Government monopoly =benign and good. Both are just groups of people, and subject to the same capture by good or bad intentions.
You will have most economic freedom where the existence of monopolies are the lowest.
Existence of monopolies is one of the strongest arguments for limiting the size of government, which limits the size of regulations.
Yes, it is starting to look like these 'crony-populist regimes' that threaten economic freedom actually make people a good deal freer in material terms.
There is of course some possible bias in this article that should be derivable from the domain name.
It's a pretty well made website. You can export filtered data in csv, there are profiles for each country, etc.
First, there's Hong Kong, Singapore, Switzerland, Mauritius -- Mauritius...?!?!? -- Ireland, Denmark, and Estonia.
Really? You're really going to compare those postage stam...sorry, countries, and their so-called economic freedom to the U.S.? Really?
Australia, Canada, Chile, and New Zealand...OK, I can perhaps buy that. Particularly Australia and Canada.
Now look at the countries below the U.S. Included are:
Taiwan, Germany, South Korea, Israel...all doing quite nicely on the capitalist front.
Not to mention Norway, Sweden, Finland, and several other countries with arguably higher standards of living and qualities of life than the U.S.
A silly list purporting to demonstrate an even sillier implication.
I don't get it.
Take regulation, one of the things that's considered a measurement. Yeah, the U.S. has lots of regulations about, say, oil and gas and coal extraction. Do either Hong Kong or Singapore even have to think about oil, gas, and coal extraction? The U.S. has farms and ranches that are bigger than a few of those countries. Do those countries need to think about food regulation the way the U.S. does? That sort of thing.
For the most part they're not even in the same universe economically.
And yes, it was a bit of deliberate hyperbole.