IN THESE trying times of market turmoil, high unemployment and great inequality, economic freedom is touted as the panacea for all the world’s wrongs by outfits such as South Africa’s Free Market Foundation (FMF) and the US’s Heritage Foundation.
They argue — and I largely agree — that if you leave people to their own devices and allow them to make the most of their talents and abilities and free them, as far as possible, from the encumbrances of red tape, they will do well individually. Society will then, as a whole, be better off economically.
But is this hypothesis borne out by the data?
The Washington-based Heritage Foundation has a clear ideological founding principle, encapsulated in the opening statement on its website which states that "when institutions protect the liberty of individuals, greater prosperity results for all".
The FMF has a far less impressive website, but its tag line of "progress through freedom" says pretty much the same thing.
To test the hypothesis, I use per capita income as a rough proxy for individual wealth and because I have only 750 words to make my argument, I ignore for the time being inequality and some of the "happiness" indices that get touted from time to time. The 10 wealthiest countries by per capita income according to the International Monetary Fund are: Qatar ($102,211), Luxembourg ($79,785), Singapore ($60,410), Norway ($55,009), Brunei ($54,389), the US ($49,922), the United Arab Emirates (UAE) ($49,012), Switzerland ($45,418), Canada ($42,734) and Australia ($42,640).
This is a fairly eclectic mix of liberal democracies, state-dominated autocracies and monarchies. But how do they fare when it comes to granting their citizens’ their economic freedom?
According to Heritage’s 2013 index, compiled in partnership with The Wall Street Journal, five of these wealthiest countries are in the top 10 economically free countries: Singapore (2), Australia (3), Switzerland (5), Canada (6) and the US (10). This implies a link between economic freedom and wealth, but no absolute correlation. But does economic freedom have other benefits too? Are people in wealthy countries, for example, more tolerant than their counterparts in less well-off parts of the world?
From my secular and liberal perspective, I hope so. It would be awful if people took the freedoms they enjoyed and then failed to share these with others who were different from them. Certainly in countries like the US this is the case. Even in the parts of the so-called Land of the Free where the religious right rules, the state doesn’t sanction the abuse of the rights and freedoms of dissidents, at least within its own borders.
With some relatively rare exceptions, apart from some strident rhetoric and book burning, the haters tend to not act on their dislike of other faiths or lifestyles.
People in the US are generally free to practise whatever religion works for them and have sex with whomsoever they choose, even when this is frowned upon by the majority of their fellow citizens.
The US is not alone in this. Looking again at the top 10 income per capita countries, it is clear there is a link between economic and other kinds of freedom.
Of the five wealthiest which also appear in the top 10 of the Heritage index, namely Singapore, Australia, Switzerland, Canada and US, homosexuality is legal except in Singapore, which has not enforced the law banning male homosexuality since 1999. In Singapore, women are allowed to get it on with whomever they choose.
But in the five wealthiest nations by per capita income that fall outside Heritage’s top 10, namely Qatar (27), Luxembourg (15), Norway (31), the UAE (28) and Brunei (not rated), there is a range of legislative responses to things like homosexuality, apostasy and atheism, depending largely on geography, religion and political history.
Norway and Luxembourg are cool about individual activities, but apostasy and atheism are illegal in Qatar and the UAE, and homosexuality is illegal in Brunei, Qatar, and the UAE. Putting this all together, it is clear that if you don’t have oil and you want your people to be rich, set them free economically.
There is a virtuous cycle of freedom and economic growth, but there are no guarantees that one will lead to the other.
For interest’s sake, South Africa, with its incredibly liberal constitution that allows for a great deal of personal choice, is ranked 81st on the per capita gross domestic product list at $11,375, and 74th on the economic freedom list, with our scores having fallen in the corruption, government spending, fiscal freedom, business freedom and labour freedom sub-indices.
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