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Economic Freedom

May 29, 2010 • Developing Economies, Regulation, Thinking Economically • 198 Views    No Comments

Composed of 179 countries, the Index of Economic Freedom ranks France 64 and the United States 8. At the top of the list, with the more free economies and the lowest numbers, are Hong Kong, Singapore, and Australia while North Korea, Zimbabwe, and Cuba are listed at the other end. On the United States pages, the authors indicate that the index number is destined to increase because of the response to the financial crisis. Citing massive government spending, they say that economic freedom has diminished.

A Washington Post column by Michael Gerson actually started me thinking about government economic intervention. He pointed out that support for health care reform has recently diminished to 14% of the U.S. population expressing ‘”very favorable” views’. Taking us to an historical perspective, he says that the social safety net initially targeted the elderly through Social Security and Medicare, and the poor and disabled with Medicaid and Aid to Families With Dependent Children. Looking at waning enthusiasm for health care reform, he suggests that the U.S. population prefers a safety net reserved for those who need it rather than everyone. He is also saying that U.S. public opinion prefers a lower Index of Economic Freedom number.

The Economic Lesson

To determine the extent of government economic intervention, researchers look at such variables as the ease of starting a business, the degree to which trade is free, and the level of government spending and taxation. The list also includes the amount of corruption that permeates the business world, such labor regulations as how easy it is to dismiss an employee, and the dependability of property rights.

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