Economic Freedom — Hot or Not: A League Table

2


(bluebay2014/Getty Images)

On Thursday, the Global Index of Economic Mentality (GIEM) will be launched at the Atlas Network’s 2020 Liberty Forum. It is the work of Brad Lips (Atlas Network, Washington, D.C.), Pal Czegledi (University of Debrecen, Hungary), and Carlos Newland (ESEADE University and Torcuato Di Tella University, Buenos Aires, Argentina).

GIEM scores measure the public’s embrace of the idea of economic freedom. A high GIEM score indicates that citizens in a particular country support the idea that their government should not play a major role in directing or regulating economic activity or in redistributing income. Citizens of high-scoring countries typically back an institutional framework that prioritizes private initiative, free competition, and personal responsibility — in short, a system of free enterprise.

Out of the 74 countries covered, New Zealand comes out on top with the highest score on the inaugural Global Index of Economic Mentality, followed by the Czech Republic, Sweden, the United States, and Denmark. This year’s lowest scorer is Bosnia, preceded by Bangladesh, Myanmar, Montenegro, and Azerbaijan. See the full Global Index of Economic Mentality rankings below.

The GIEM study found that countries that embrace a free-market mentality have more efficient economic institutions and higher per capita GDP than those who support socialist, interventionist mentalities. The Global Index of Economic Mentality study also contains additional findings of note.

Rather surprisingly, Chile is the lowest GIEM scorer in Latin America, even a notch below Argentina, and 64th overall. These data suggest that while the Chicago Boys, many of whom are my friends, accomplished innumerable free-market reforms — reforms that have led to a great improvement in prosperity and the second-highest GDP per capita of any country in South America — they have failed to convince the Chilean public of the benefits of the free-market system that has lifted them out of poverty.

We now move from a country with a surprisingly low score to the somewhat surprising (given its current prime minister) chart-topper: New Zealand. Its high GIEM ranking can be explained by the embrace of ideas propagated by a good friend of mine, Sir Roger Douglas, New Zealand’s former minister of finance (1984–1988) in the Labour Government during former prime minster David Lange’s tenure. With the introduction of “Rogernomics,” New Zealand’s economy was liberalized and opened up to free trade. Indeed, Sir Roger took New Zealand from far-reaching state interventionism under an ostensibly conservative government (not a success) to one of the most free-market economies in the world. Some of the many successful reforms and deregulations of Rogernomics included the removal of foreign-exchange controls, removal or significant reduction in subsidies to many industries, including agriculture, and a massive reduction in the marginal tax rate. As a result of Sir Roger’s reforms, the government even now keeps a detailed balance sheet and audits its financial statements.

The Czech Republic, which ranks second in its embrace of free-market ideas, is another country that stands out. Much of its high GIEM score can be put down to the tireless work of another good friend of mine, Václav Klaus, former minister of finance (1989–1992) of Czechoslovakia, and former prime minister (1992–1998) and president (2003–2013) of the Czech Republic. Klaus led the Czech Republic’s radical transition from communism to a free-market economy. Indeed, the Czech Republic was one of the most radical early reformers in the former communist bloc. With Klaus’s books, journal articles, lectures, and speeches, he educated the Czech public about free markets and liberty. Unlike the case of the Chicago Boys in Chile, Klaus’s ideas and influence have stuck.

If we look at country-by-country demographics, there is not much difference between the economic mentality of those over 40 years old and under 40 years old for most countries. But there are notable exceptions. The countries with the most significant difference in economic mentality between the two age groups are the United States, New Zealand, and Australia. In these countries, the younger generations possess a significantly weaker attachment to free-market ideas than do older generations, with the U.S. as the most extreme case. It makes one wonder what brand of economics is being peddled in high schools and universities in the United States, New Zealand, and Australia.

Steve H. Hanke is a professor of Applied Economics at the Johns Hopkins University in Baltimore. He is a senior fellow and director of the Troubled Currencies Project at the Cato Institute in Washington, D.C.





View original Post

LEAVE A REPLY

Please enter your comment!
Please enter your name here