IN THESE trying times of market turmoil, high unemployment and great inequality, economic freedom is touted as the panacea for all the worlds wrongs by outfits such as South Africas Free Market Foundation (FMF) and the USs 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 Heritages 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 doesnt 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.
IN THE MARKETS: Wealth and freedom go together, for the most part