On the Other Hand...

Freedom and Prosperity

by Jim Davies

Regular readers of this column will find many reasons for getting government out of our lives; it's a parasitic institution, an idea whose time is long gone. But support for that unorthodox view came recently on the Editorial page of the "Wall Street Journal", no less; in an article by Richard K Messick, who works for a think tank called "Freedom House". His findings were so striking I thought you would want to hear about them.

I'm not familiar with "Freedom House" and would question one aspect of his work - we'll show that in a moment. But the bottom line is, I think, entirely valid and its importance hard to exaggerate.

Messick surveyed 82 countries, whose populations make up 90% of the world's, and graded them into four categories: Free, Partly Free, Mostly Not Free, and Not Free. His key measures had mainly to do with economic freedoms or their lack (like taxes and regulations on business) rather than personal ones (like censorship, civil rights and control of the judiciary) but he makes a good case that the former are prerequisite for the latter; that if a country is free economically, the other freedoms do follow, whereas the converse is not true.

The astonishing result shows that the 27 countries (33%) that he calls "free" produce over 80% of all that the surveyed countries produce!

That is, that those countries where the government lets its people go about their business with little interference (these 27 "free" ones) are nearly seven times more productive than all the other 55 combined!

More: if we take population into account, the 27 have only 19% of the people in the countries surveyed, which means that the people in those "free" countries are twenty nine times more productive than more restricted people!

These are astounding statistics, that ought to be shouted from the rooftops, which is why I reproduce them here. Spread them around! Tell your neighbors: FREEDOM WORKS!

Caution

There's one caveat: I cannot agree with Messick's description of America and Europe as "free" in the near-absolute sense he uses the word. America is certainly the freest country in the world, but that is a relative word, not an absolute one. However, far from detracting from his findings, this correction only adds to them an extra importance: we could be much richer yet!

There's another consideration to give us pause: as with all statistics, correlation (here, between freedom and prosperity) does not prove causation (that the one directly produces the other.) In other words, it could all be coincidence. On another planet, perhaps freedom would produce poverty.

These are omissions, however, not hard to make good; and we can largely fix the pair of them by exploring WHY freedom manifestly produces wealth for all. In my opinion it has to do with human nature, and the motivations we all have for working hard and smart.

Those motivations come while we work, and as a result of our work. In the workplace itself, we all get signals, every day, as responses to what we do. The boss gives an appreciative word - that's a positive signal. A customer is rude - there's a negative one. We generate an idea that's accepted - positive. It's stomped on, because work rules are rigid - negative. A "glass ceiling" - negative; opportunity for promotion on merit - positive.

Such negative signals generally come from a fixed environment, where government and/or unions have combined to prevent innovation and improvement, where initiative is not wanted because it challenges the status quo. They can also be found in large companies which lack the stimulus of marketplace competition; a situtation always short-lived, in a free society where established firms are not protected by laws designed to exclude it.

That incidentally is the tragedy of politicians like Buchanan, who appeal powerfully to that segment of the working population that has been hurt by foreign competition, but with a policy that will for certain make the work environment far more depressing and destructive for the next generation.

Invention

Suppose after gaining some expertese in our field we reckon we could do better on our own and try to found a new business, to implement some of our bright ideas and keep the profits for ourselves instead of working for someone else. That's never easy, but is it made artificially more difficult? - have the rules been rigged so as to exclude such upstart competition?

In our own (and again, this is why I have trouble with Messick's uncritical use of the word "free" to describe America and Europe) it certainly is; though not nearly as badly as in less successful countries like Russia. In most professions you actually have to get government permission even to start up! That process is called "licensure", and it applies to around 150 different professions, and its only true purpose is to protect its existing members from newly entrant competitors. So does each trade or profession tend to stagnate, to be denied the new blood they all urgently need for progress.

It's a wonder of technology that so far, bright people can invent new ideas (and, so, professions) faster than the politicians can write laws to license and restrict them. But for that, we'd be living in a far, far poorer world.

Finally comes, of course, the whole matter of reward: having worked hard and smart, do we get to keep what we have earned? - or is it stolen as taxes and poured down some government sewer? Here's the most powerful motivator of all. That's the biggest single factor, that either produces wealth or chokes it off.

© Copyright Jim Davies 1999

Jim Davies lives in New Hampshire,
and enjoys contemplating which way is up.

The above is Edition # 158

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