Shoppers walk through Hong Kong's Mong Kok district. Photo: Mike Clarke / AFP / Getty Images
History demonstrates that in terms of
ensuring opportunity and prosperity, the forces of individual freedom,
limited government, and free enterprise will always trump statist
policies that perpetuate favouritism in economics and politics.
Since 1995, the Heritage Foundation’s
Index of Economic Freedom has documented these principles in operation
around the globe and highlights why economic freedom matters.
The Index, a data-driven benchmark study
of economic policies in countries on every continent, is about more than
just country rankings. It is an exploration into the sources of
enduring economic dynamism and how they relate to each other, ensuring
opportunities for the greatest number of people.
The 2017 Index,
our 23rd edition, has just been published – and once again provides
ample evidence of the benefits of economic freedom, both to individuals
and to societies. People in economically free societies have better jobs
and are less likely to live in poverty. Per capita incomes are much
higher in countries that are more economically free.
Economies rated “free” or “mostly free” in
the 2017 Index generate incomes that are more than double the average
levels in other countries, and more than five times higher than the
incomes of people living in countries with “repressed” economies.
Not only are higher levels of economic
freedom associated with higher per capita incomes, but greater economic
freedom is also strongly correlated to overall wellbeing, taking into
account factors including health, education, environment, innovation,
societal progress, and democratic governance.
People in economically free societies live
longer and have healthier lives. They enjoy greater political freedom
and can better defend their human rights.
Indeed, economic freedom is a critical
element of life that transcends market, opening the gates of greater
wellbeing to ever more people around the world. Nations with higher
degrees of economic freedom prosper because they capitalise on the
ability of the free-market system not only to generate dynamic growth,
but also to reinforce it through efficient resource allocation, value
creation, and innovation.
Policies that promote freedom, such as
improvements in the rule of law, the promotion of competition and
openness, or suitable restraints on the size and economic reach of
government, offer practical solutions to a wide range of economic and
social challenges that face the world’s societies.
It is gratifying to see overall global
progress in advancing economic freedom reflected in rising scores in
dozens of countries. Hundreds of millions of people are emerging from
poverty into the promise of a brighter future.
Despite varying levels of economic freedom
across the regions, the fundamental relationship between economic
freedom and prosperity holds true worldwide. No matter the region, per
capita income levels are consistently higher in countries that are
economically freer.
To give just a few examples from the 2017
Index, there is the United Arab Emirates (8th), where broad-based and
dynamic growth has been underpinned by continuous efforts to strengthen
the business climate, boost investment, and foster the emergence of a
more vibrant and diverse private sector. The generally liberal trade
regime has helped to sustain the momentum for growth. The same is true
of Hong Kong, which tops the Index.
In the aftermath of the Brexit vote, the
United Kingdom (12th) demonstrated good economic resilience with
effective rule of law, an open trading environment, and a well-developed
financial sector. Fiscal consolidation has progressed through spending
cuts that have reduced the fiscal deficit to a more manageable though
still high level.
Conversely, the United States (17th)
continued its string of discouraging results, registering its lowest
economic freedom score ever. The substantial expansion of the U.S.
government’s size and scope, and increased regulatory and tax burdens in
many sectors, have severely undermined America’s global
competitiveness.
Some countries perform far below their
potential, South Africa (81st) has seen its economy stifled by political
instability and a weakening rule of law. Private-sector growth remains
constrained by structural and institutional impediments caused by
growing government encroachment into the marketplace.
By contrast, Vietnam (147th) has
capitalised on its gradual integration into the global trade and
investment system, transforming itself into a more market-oriented
economy. Reforms have included partial privatisation of state-owned
enterprises, liberalisation of the trade regime, and increasing
recognition of private property rights.
It is regrettable that in China (111th)
and India (143rd), advancement toward greater economic freedom has been
both limited and uneven.
Overall, it is all too common these days
for those who feel exploited by the market system to lash out at
capitalism as the root cause of their economic woes. Yet when their
complaints are examined, what stands out is not anger directed at an
actual free-market capitalist system, but rather frustration with
economic systems of government-supported privilege based on favouritism
or various forms of cronyism.
This is why the imperative to advance
economic freedom for a greater number of people is stronger than ever.
Free-market capitalism built on the principles of economic freedom does
not just conserve – in many cases it overturns and transforms. It pushes
out the old to make way for the new so that real and true progress can
take place. It leads to innovation in all realms: better jobs, better
goods and services, and better societies.
As Friedrich A. Hayek once observed, “If
old truths are to retain their hold on men’s minds, they must be
restated in the language and concepts of successive generations.” The
Index of Economic Freedom provides the basis for such a dialogue and a
foundation for economic revival in the years ahead.
No comments:
Post a Comment