The Case for Freedom I: The Economy
What is Freedom?
Freedom. The United States was founded on this simple principle, its tenets enshrined in the Bill of Rights and lauded by most Americans as something we all agree on. I suppose very few reading this article would proclaim themselves to proudly stand against freedom, and yet many do.
Merriam-Webster’s top definition for freedom is “the absence of necessity, coercion, or constraint in choice or action”. Put simply, freedom is the ability to determine how you live your own life, to the maximum extent possible, whilst also respecting the freedom of others to do the same.
In this first article in what I hope to be a multi-part essay, I will show that freedom in the economy creates prosperity & opportunity, and that paradoxically, programmes aimed at improving income inequality often cause the opposite.
It’s about rights, right?
It’s important to note that rights do not come from government, but that they are implemented inherently as restrictions on government. A right does not grow government’s power, but rather limits it.
Sometimes, politicians try to create ‘rights’ which empower government and compel it to provide something for another person, like a “right to healthcare” or a “right to college”. These are not actually rights, but fall under the definition of entitlements, and have the effect of growing government.
To summarize the difference; a right to own a gun would mean that the government cannot prevent a citizen from purchasing a gun. An entitlement to own a gun would compel government to provide a gun to every citizen.
The obligations created by entitlements inherently reduce individual freedom, because they compel other Americans to provide a good or service against their will.
If there is a “right to healthcare”, then this creates an obligation on a nurse to work, and an obligation on the American taxpayer to pay that nurse for her services. This means that the government holds ownership over a) your property & b) your labor.
Freedom & prosperity are married
I’m sure nobody would argue that anyone would rather do what the government wants them to do than be free to follow their own dreams and desires. Given that we have but one life on Earth, most of us would rather work in the field that interests us and spend our leisure time doing the things we personally prioritize.
In the world’s most restricted economies, rated as “repressed” and “mostly unfree” by the Index editors, average income hovers around $4,000 a year. But in a “moderately free” economy, it’s three times as much: $12,830. If you’re in a “mostly free” one, you can double even that amount: $26,630 annually. And in a “free” economy? $33,579 — more than eight times the money you’d earn in an unfree economy.
— The Heritage Foundation
Opponents of economic freedom often like to focus on equality, arguing that it’s unfair that some people make huge amounts of money whilst others barely make enough to live, but this supposes two things:
- That high economic freedom causes severe income inequality; and
- That their alternatives (primarily socialism) produce better outcomes.
Freedom & income inequality
Let’s look at point one: a lot of research has been done into the correlation between government intervention and income inequality. Aspergis, et al concluded that in the United States, reducing economic freedom actually increases economic inequality. Perez-Moreno drew a very similar conclusion in a similar study in the European Union.
It’s not particularly difficult to see why — whilst large corporations can hire armies of accountants & lawyers to find loopholes & efficiencies in a complex tax or regulatory system, and can afford more research into automating their processes, small businesses have a much higher barrier to entry.
This ‘protectionism’ means that there are less corporations in any given industry, which means less competition to reduce prices, increase quality of goods & services and provide well-paid jobs.
This explains why large entities like WalMart continuously lobby for a higher minimum wage, and why the largest pharmaceutical and insurance providers lobby for Obamacare. It’s simply easier for these large entities to absorb increased costs of business than for their competitors to keep up.
Anti-Freedom: the legacy of socialism
So, how about point two: does socialism actually improve the situation for the poorest? If it does, it’s hard to see any evidence for this. The legacy of socialism in Russia, China, Venezuela and North Korea is littered with mass starvation, government brutality and extreme restrictions on free expression and the political process.
Take the example of Chile’s “Miracle”, where new finance minister Hernán Büchi responded to the economic crisis by throwing out the old socialist system and replaced it with radical freedom — a flat tariff similar to Singapore, lower taxes, lower regulations and mass privatization.
This had the effect of allowing people to save and invest more of their money, which created jobs at an unprecedented rate & drove up wages for Chileans. Today, Chile is the wealthiest and the most economically free nation in a continent riddled with restrictive policy prescriptions.
What about the ‘happy medium’ of Scandinavia?
Much of the left-wing dialogue in the United States has moved away from socialism and towards a defense of the Scandinavian nations. Whilst these nations are relatively wealthy with high tax rates, much of this success was obtained prior to the move towards larger government:
As late as 1950, Swedish tax revenues were only around 21 per cent of GDP. The shift towards a big state occurred during the following years, as taxes increased by almost one per cent of GDP annually. Then, from 1975 to 1995, economic development was stagnant.
- Nima Sanandaji, author of The Surprising Ingredients of Swedish Success
Additionally, Sweden has actually seen more income inequality since the introduction of greater welfare benefits:
…the decrease in income inequality in Sweden occurred before the expansion of the welfare state…
- Andreas Burgh, Swedish economist
There are also pressing social issues in Scandinavian nations due to their willingness to accept a mass influx of refugees and generous welfare system, which have been covered at length by segments of the media, but include higher incidences of rape, high unemployment among migrant populations and growing social unrest.
Sweden: the left-wing paradise that had lower income inequality under capitalism, stagnated under authoritarian economic policy and lost its legendary social cohesion under leftist social policy.
So, we should do nothing for the poor?
To paraphrase Ronald Reagan, the best social welfare programme is a job. By creating the economic conditions for higher job creation, and controlling the border to prevent an oversupply of cheap labor, we can restore balance to an economy which works only in the interest of large corporations.
First of all, we should focus on small businesses. Simplifying the tax system, reducing the burden of regulation and making it easier to become self-employed will all contribute to more competition in the economy.
More competition in the economy means more jobs, which means companies will have to pay higher wages as they compete for workers. This can already be seen in retail under the Trump jobs boom, with Target yesterday pledging a $15/hr base wage by 2020 — more than double the federal minimum.
Second, we should allow workers to keep more of the money they earn. Ted Cruz & Paul Ryan have both proposed simple tax returns which fit on a postcard, which would be much simpler for Americans and allow US citizens to spend our money on our own priorities.
More jobs also means lower unemployment, which means trading welfare spending for tax receipts, so that we can better focus our entitlement spending on those who truly need it. Helping people out of poverty instead of making them more comfortable in it is the way to prosperity.
Conclusion
As the United States and the west falls further from liberty with Obamacare, an ever-growing tax code, burgeoning bureaucracy and a push towards political correctness, it’s time for us to ask ourselves which direction of travel we want to take.
Do we want higher incomes, higher social cohesion, more jobs, more growth and more choice for consumers, or do we want a planned economy which has been shown by historical and contemporary research to create the opposite?
Do we want to run our own lives, set our own goals, follow our own dreams and make our own minds up, or do we want the government and large corporations to make these decisions for us?
For me, the answer is simple. Let me know what you think in the comments.
