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Yet economic freedom is different from political freedom

Summary:
The Guardian hosts something of a moan about the two reports which attempt to measure economic freedom around the world.Two of the “freest economies” in the world are on fire. According to indexes of “economic freedom” published annually separately by two conservative thinktanks – the Heritage Foundation and the Fraser Institute – Hong Kong has been number one in the rankings for more than 20 years. Chile is ranked first in Latin America by both indexes, which also place it above Germany and Sweden in the global league table.....The rage may be better explained by other rankings: Chile places in the top 25 for economic freedom – and also for income inequality. If Hong Kong were a country, it would be in the world’s top 10 most unequal. Observers often use the word neoliberalism to describe

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The Guardian hosts something of a moan about the two reports which attempt to measure economic freedom around the world.

Two of the “freest economies” in the world are on fire. According to indexes of “economic freedom” published annually separately by two conservative thinktanks – the Heritage Foundation and the Fraser Institute – Hong Kong has been number one in the rankings for more than 20 years. Chile is ranked first in Latin America by both indexes, which also place it above Germany and Sweden in the global league table.

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The rage may be better explained by other rankings: Chile places in the top 25 for economic freedom – and also for income inequality. If Hong Kong were a country, it would be in the world’s top 10 most unequal. Observers often use the word neoliberalism to describe the policies behind this inequality. The term can seem vague, but the ideas behind the economic freedom index help to bring it into focus.

All rankings hold visions of utopia within them. The ideal world described by these indexes is one where property rights and security of contract are the highest values, inflation is the chief enemy of liberty, capital flight is a human right and democratic elections may work actively against the maintenance of economic freedom.

Well, yes, in a manner. Economic freedom and political such don’t map over each other exactly. They are measurements of different things - height and width are not always correlated either.

The underlying complaint is really that such indices argue against voting to take everything off one group and give it to the other - you know, that democratic control of the economy.

Except that’s not what they do argue in the slightest. Looking at the Fraser and Heritage indices gives us a quite different conclusion. It’s true that Chile and Hong Kong are up there in the top 20. But then so are Sweden, Norway, Denmark, Iceland and Finland. The Scandinavian social democracies are up there that is.

It is possible to have that greater equality if that’s what you want. But it matters how you do it. None of the countries that attempt to have detailed government management of the economy make it into the upper reaches of that listing. Places which run with that free market capitalism do. The equality bit then being achieved by taxing that system.

We aren’t that worried by equality or inequality. We also argue that whatever inequality exists today is simply not of any comparable form to that of yesteryear. But if you are worried about it the lesson to draw here is that achieving the equality is a bolt on extra to an efficient and free economy. It’s not something to be achieved by trying to limit or direct that initial creation of human wealth.

In fact, when one burrows down into those numbers the finding is that the Scandis are rather more free market and capitalist than we are - they tax more too.

The whine here is the complaint that the indices show that the directed economy doesn’t work. Which is actually a useful thing to point out as it doesn’t.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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