Regulation

How America Can Regain Its Economic Freedom

Limit barriers to international trade, reduce regulation, and increase protection for private property.

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If you've been wondering why the nation's so-called economic recovery seems so weak, here's one partial explanation: The United States has been moving in the wrong direction on measures of economic freedom.

The Cato Institute, a Washington think tank, produces an annual report examining economic liberty around the globe. Over the past three decades, average economic liberty has increased, at least slightly. But America — which used to rank second in the world — no longer even makes the top 10.

The annual report examines a host of factors — such as tax rates and regulation, the freedom to trade internationally and the ease with which aspiring companies can enter the marketplace. Although the Cato Institute is libertarian in its political philosophy, it does not advocate unregulated anarchy. Genuine economic freedom requires strong governmental guarantees for property rights, for instance.

As the late great Milton Friedman once put it, "The organization of economic activity through voluntary exchange presumes that we have provided, through government, for the maintenance of law and order to prevent coercion of one individual by another." It also requires government to provide for a monetary framework, and so forth.

Why care about economic liberty at all? There are two good reasons. The first is an ethical argument based on personal autonomy: If two people freely and voluntarily agree to engage in some form of trade, then a third party — someone who is not involved in the transaction — has no right to stop them unless his or her own rights are somehow violated.

People will argue about whose rights are violated by which transactions. For instance, does an American have a "right" to a job that otherwise might be taken by an immigrant? Or does the job really belong to the employer — who has the right to choose who will fill it? Still, the general principle of noninterference is based on both moral considerations and simple common sense: If Smith doesn't have the right to dispose of his own property as he wishes, then how on Earth does someone else acquire a right to dispose of it for him?

Not everybody buys the moral argument for free markets: Collectivists, communitarians and religious fundamentalists often reject the idea of individual autonomy outright. But there is also a strong practical argument for economic freedom: It makes people better off.

On the micro level, as (again) Friedman once put it: "The most important single central fact about a free market is that no exchange takes place unless both parties benefit." Even if, for example, you grudgingly pay a taxi driver what seems like an exorbitant sum to drive you across town, you don't do so unless you think you're better off taking the taxi than not taking it. The taxi driver can't force you to get in the cab, any more than Apple can force you buy an iPhone. You only do those things if you think you'll be better off.

On the macro level, abundant experience has shown that economic liberty tends to provide for the general welfare far better than any economic system imposed from on high. Even passionate redistributionists must concede you can't redistribute wealth until the wealth has first been created. And as Cato notes, "nations in the top quartile of economic freedom had an average per-capita GDP of $39,899 in 2012" — the latest year for which data are available — "compared to $6,253 for bottom-quartile nations."

The poor in economically free countries also are better off: "In the top quartile (of nations), the average income of the poorest 10 percent was $11,610, compared with $1,358 in the bottom quartile."

In fact, Cato notes, the average income of the poorest 10 percent of residents in the most-free economies is almost twice the average income for all residents of the least-free economies. You're better off being poor in a free country than middle-class in a country where the economy is unfree.

Environmentalists might object that this pragmatic argument ignores the effects of economic activity on the environment — and there's something to that. But the simple fact is that environmentalism is a luxury of the (relatively) rich. Nobody cares about protecting the planet when they spend all their time fending off starvation and disease. (For that matter, capitalist democracies tend to take better care of the ecosystem than command-and-control states.)

All of this helps explain why we should be worried when the U.S. moves backward in economic liberty — as it has been doing for more than a decade now.

From around 1980 through roughly 2000, Cato points out, "the United States ranked as the world's third-freest economy, behind Hong Kong and Singapore." By 2011, it had sunk to 16th (and has rebounded slightly since then). The reason for the decline is principally threefold: less freedom to trade internationally, more regulation and substantially less protection for private property.

The fault for these trends is bipartisan. The Obama administration ushered in a substantially tighter regulatory regime, but (political attacks notwithstanding) the Bush administration was no slouch in that regard either. Republicans have blocked the free movement of labor by perpetuating rigid limits on immigration and, occasionally, by signing off on occupational-licensing restrictions that create market-entry barriers.

"Non-tariff trade barriers and restrictions on foreign investment," Cato notes, also have "grown substantially" in the past decade. And it blames other factors such as eminent domain and "the violation of the property rights of bondholders in the auto-bailout case" for eroding economic liberty in other ways.

This doesn't mean the U.S. should scrap all regulations and close down the federal government. The right to earn a living does not confer a right to poison your neighbor's pond with toxic runoff. But there comes a point when government rules and regulations do far more harm than good. Judging by Cato's last report, the U.S. passed that point a decade ago. The sooner it starts to reverse the slide, the better off we'll be.

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  1. A. Barton Hinkle on America’s Economic Liberty Deficit

    Make that “Every Kind of Liberty Deficit” and you’re on to something.

  2. “…it does not advocate unregulated anarchy.”

    What they mean is “unregulated Free Market”, which translates to “a marketplace unregulated by government”, because there’s no such thing, of course, as “an unregulated Free Market”. Markets are regulated by the players and prices that compose them. The “government regulation” is actually a method of circumventing the internal regulations of the market, for the purpose of making sure that those too lazy to compete can use violence to eliminate market rivals.

    1. I think he was arguing that the government’s place in the market is to ensure the players follow the NAP. Pretty much exactly what yous said.

      Basically, without a means to ensure that, it becomes an issue of who is the strongest. Shoot your competition, for example, until you are the only one providing the needed resource. You see it happen in the drug world fairly often, where the lack of enforcement of NAP in the market creates this situation.

      Of course, I know the anarchists disagree that Government is needed in this regard, but most libertarians at least come to the conclusion that it is by far the easiest way.

      1. I don’t know. I do not believe that without government, the market would dissolve into zero sum violence. The potential costs of using violence to take from others should they successfully defend themselves makes it much better to trade, which is why the majority of people would be moral even if they weren’t threatened by the government. The government, by it’s nature, is a violation of the NAP. So you are replacing potential violations of the NAP with assured violations of the NAP by an institution which you have no hope to defend yourself against. I’d just point out that the drug world is so bad because it illegal, a black market. You don’t see pot shops in Colorado hiring gang bangers to burn down competing pot shops. Removing the heavy hand of govt has simply allowed moral people into the marijuana market.

        1. “The potential costs of using violence to take from others should they successfully defend themselves makes it much better to trade,”

          Shouldn’t this be true of any market though? Wouldn’t cocaine cartels be better off peacefully coexisting with one another instead of using violence. I realize that violent people may be drawn to the black market, but if the natural economic incentive is to cooperate with each other, wouldn’t they?

          1. Shouldn’t this be true of any market though? Wouldn’t cocaine cartels be better off peacefully coexisting with one another instead of using violence

            Yes they would. But states have arbitrarily raised the cost of peaceful co-existence by shutting the drug firms out of the protection of law, a service that states everywhere have monopolized.

            I realize that violent people may be drawn to the black market, but if the natural economic incentive is to cooperate with each other, wouldn’t they?

            If all else were equal, they would. But that’s not the case as I mentioned above.

      2. I think he was arguing that the government’s place in the market is to ensure the players follow the NAP.

        Who watches the Watchmen?

        Why is it believed that we are able, as a society, to control a leviathanic goverment (whose officials we can legally change out only every two, four, or six years), but are helpless when it comes to dealing with the local grocery store?

        1. Because statism is “easier” as mentioned in this thread. Yes it takes less time to think through the ideas of statism since they’re simplistic and self-contradicting lies. Immoral and logically inconsistent ideas are easy to have, especially when it’s all you know. But the statist system itself is infinitely harder in practice. Exhibit A: two world wars, exhibit B: every election you run the chance of socialist governments entrusted to protect your property…

      3. I think he was arguing that the government’s place in the market is to ensure the players follow the NAP.

        So the best way to ensure the maximum adherence to NAP, is to grant one institution a sole monopoly right to violate the NAP with impunity. That’ll do the trick…

  3. Ridiculous regulation, litigation, and spendapaloozatation are our major impediments to economic success anywhere near our potential. Want to make poor people less poor? Want to buy a giant army? Be fucking rich.

    Really, it’s in everyone’s interest to free the economy. Even totalitarian states see that at times.

    1. Its not in everyone’s interest or we wouldn’t have lobbyists or crony capitalism.

      1. Yes. Everyone accept the thieves.

        1. Except, but, really everyone does seem to accept the thieves, too.

          1. Nice malapropism!

        2. Everyone accept the thieves All your base are belong to us

          1. should read “…thieves .gt. All…”

  4. It also requires government to provide for a monetary framework, and so forth.

    Stories of Nazi Prison Camp prisoners using cigarettes as money fail to mention that the prison guards oversaw this ad hoc monetary system, occasionally printing up “cigarette promissary notes” to make sure that the prison camp didn’t suffer from a “money shortage”. This is why Nazi Prison Camps never suffered a deep depression. Economically speaking, of course.

    1. Threadwinner!

    2. Yeah, I saw that and was kind of confused that the statement came from a libertarian (as I assume the author is).

      The only purpose behind having a monopoly on money is for ease of taxation.

      1. I should say, for theft, of course.

      2. The only purpose behind having a monopoly on money is for ease of taxation.

        Well now hold on a minute

        I should say, for theft, of course.

        Oh okay then.

        We could write a library of books on all the evil and murderous schemes of the government that would be entirely impossible without a banking cartel.

  5. For instance, does an American have a “right” to a job that otherwise might be taken by an immigrant? Or does the job really belong to the employer ? who has the right to choose who will fill it?

    Grrrrr…

    A “job” is a contract for labor. One does not have the right to compel someone else to pay a premium for his labor.

    Suppose Al starts Moronville’s first pizza parlor. It’s not good pizza by any stretch of the imagination, and it’s on the expensive side, but it’s all the Morons have. That is, until Ben starts a second pizza parlor that offers better pizza at a better price. Al goes out of business. Did Ben “violate Al’s right” to his job as a pizza parlor owner?

    1. Did Ben “violate Al’s right” to his job as a pizza parlor owner?

      Why do you hate small bookstores (children, and America), cavalier973?

  6. Such rankings don’t take into account issues of social justice, which are far more important and easy to define.

    1. They sure are easy to define; They are all total hogwash; excuses for a small self-nominated elite to push the rest of society around.

      1. afterthought;

        make that “a small self-selected elite of no noticeable merit”

    2. Yeah? Easier to define? By all means Len, please define it for me then… as I’ve been waiting a really, really long time for someone to put a percentage on “fair share.”

      1. I thought that was quite clearly sarcasm.

        1. Len gets testy when the blow dries up.

      2. EBOLA

      3. When it comes to the rich and paying taxes, fair share is defined as “more than whatever they are currently paying.”

        We will revisit this definition when they rate the 100% tax rate. Perhaps some sort of forced labor will be involved.

        1. *reach, not rate

  7. That answers “how” on a trivial level. Now how about some real “how”? How do you get people to do these things?

  8. I love how they talk about Cato as if it’s something different than Koch Controlled……that’s a sure winner!

    Spend hundreds of millions setting up institutions and then echo them in your other publications – the perfect definition for “echo chamber”.

    Let me translate:

    Limit barriers to international trade = Kochs should be able to not only extract all of our resources, but export our oil and gas with no thought as to domestic consumption, etc.

    reduce regulation= allow Koch’s to pollute more and not have to deal with those messy ideas of clean air, water and land.

    Increase protection for private property – if we want to DUMP OUR DUSTY TAILINGS AND COKE on some property that we own, fuck the millions who have to breathe it. If our private property is a watershed, fuck the idea that we need to keep downstream clean. fuck it all.

    Does that sound right?

    1. Show us in the doll where the Kochs touched you.

      1. The KKKoch brothers ass-fucked him in his brain, and I can show you exactly where…

        1. The KKKoch Bros fucked him in his Medusa Muddy-Usa Oblongato, part of his brain, is what I read when I snuck into his shrink’s office late one night, Watergate-style…

      2. EBOLA…..and Obama caused it!

      3. Show us where Cato and all these other echo chambers have nothing to do with the same KOCHS?

        Oh, you cannot. That’s because you are all fascists and the Koch’s are your Adolf. Your “news” is whatever Koch purchased pub repeats the same BS…

        The strangest part of it is that some of you believe you think for yourself. That’s fantastic.

        1. Oh my God! I know who you are now!

          You were that guy trying to sell coupons on the bus and calling anyone who didn’t buy them “Adolf Hitler”!

          Hey, did you ever make it to Safeway?

    2. Craig, for some reason I have this image of you on your hands and knees, with a Koch at one end, and Soros at the other, pounding away at you, and you’re yelling YES NO YES NO YES NO YES! It’s disturbing, but apt.

      1. Not while I have EBOLA…..we’ll talk about FREEDOM after we shut down all airports and international trade and all go nuts..

        until then….remember

        EBOLA is all that matters.

        1. Your savior’ open borders will give us “Los Epidemia”.

          1. Please let me know when the Obamalola crisis is over so I can leave my momma’s basement and start spouting libertarians slogans again!

            1. Again, I know you! I was wearing my band’s t-shirt that day! Obamalola Crisis!

              Dude, thanks for the name drop. Drink on the house at our next show.

              Actually, I’ll thank you again as “Start Spouting Libertarians” is a great song/album name.

    3. Shit birds headinass.
      Flocks of dirty little shit birds.
      Flying up from your shit state.
      Shitting on people.
      Gathering up all the shit twigs, to make their little shit nest’s.

  9. Genuine economic freedom requires strong governmental guarantees for property rights, for instance.

    Yes in order to have secure property rights, we must have those rights guaranteed by a monopoly guarantor with a monopoly right to expropriate property.

    It also requires government to provide for a monetary framework, and so forth.

    I assure you that a centrally planned, manipulated or monopolized monetary system does not enable economic liberty to flourish.

    The first is an ethical argument based on personal autonomy: If two people freely and voluntarily agree to engage in some form of trade, then a third party ? someone who is not involved in the transaction ? has no right to stop them unless his or her own rights are somehow violated.

    The ethical argument precludes your support for a tax funded state.

    This doesn’t mean the U.S. should scrap all regulations and close down the federal government. The right to earn a living does not confer a right to poison your neighbor’s pond with toxic runoff.

    You seem to imply that that the federal regulations is not only an indispensable safeguard against pollution but also the best institution to deal with it. Or at least better than property rights, common law and local jurisdiction.

    You’ve made numerous pro-liberty arguments only to invalidate the very premise a sentence or two later. It reads like a Steve Chapman article.

    1. ^This. The government’s monopoly over the money supply and its property regime contribute to most of the problems we have today.

  10. Ha! As if in today’s America we act upon common sense. All of those people are quietly working their way to the exits before they lock us all in.

  11. “Not everybody buys the moral argument for free markets: Collectivists, communitarians and religious fundamentalists often reject the idea of individual autonomy outright.”

    Such “religious fundamentalists” would presumably not include Christians, as Christ himself taught extensively about His Father’s extension of grace to all who would have it in exactly the same sense that a property owner may dispense of his property as he wishes and no one who does not own that property may object.

    1. Unless they are parasitical and hypocritical socialists, in which case, they are entitled to “object” (read, whine and cry-baby all day long), because EVERYTHING belongs to the COLLECTIVE HIVE, and those who can summon enough violence to “speak” for that Hive! All obey the Hive, now… Sieg Heil Socialism!

    2. Except that your run-of-the-mill property owner would likely go to prison for what the Christian deity intends to do to all those who refuse or (heaven forbid) never hear of his offer of “property.”

      Theistic religious belief is inherently totalitarian. Sure, some sects may allow a relatively high degree of autonomy in human affairs However, and to paraphrase the late Christopher Hitchens, at the end of the day there is still an unaccountable dictator seated on the throne. This supreme authority submits us to round-the-clock surveillance, can convict us of thoughtcrime while we sleep, and promises to torture us even after we have passed from this life.

  12. My roomate’s aunt makes $71 /hour on the laptop . She has been out of a job for six months but last month her income was $12021 just working on the laptop for a few hours.
    You can try this out. ????? http://www.jobsfish.com

  13. Honestly, until there is serious discussion of abolishing government money, voiding all government land holdings, and a host of other interventions we tend to take for granted, talk of “economic liberty” will be meaningless. Friedman had a lot of valuable insights in a lot of areas, but allowing the government a monopoly on the money supply and, therefore, credit supply has been disastrous.

    1. Friedman was a consequentialist. That failure to recognize the morality of liberty allowed him to accept all sorts of utilitarian sounding premises at face value. It’s amazing that anyone even considers the Chicago school to be a free market school of thought.

  14. Nevermind that this is a “libertarian lite” piece, and that the title implies otherwise. “How America Can Regain Its Economic Freedom” –there was not one single tidbit of information involving “How” that is in the domain of reality.

    Sociopaths control the existing corrupted unconstitutional offices, and their licensing and union power centers tend to control elections. They are perversely-incentivized by an ongoing stream of cash to maintain this power. Moreover, they are incentivized by both a carrot and stick from those above them in the power hierarchy to infiltrate and marginalize the Libertarian Party, and any other group that dares to oppose them. Depending on how serious the opposition is, they have varying degrees of seriousness in their response.

  15. The people who “go to the barricades” for the Libertarian Party all get fucked over, because the Libertarian Party is externally-controlled by someone who doesn’t want them to succeed. Typically, in the country’s history, such people have been FBI guys, like Brandon Darby, or Douglas Durham, or even lower-level sociopaths like the ones in “Green is the New Red.” Jesse Ventura mentions that he was questioned extensively about his victory, the first time he won the governor’s race in MN, by the CIA (and he only asked them “How are you operational inside the borders of the USA? Your charter says you’re only to operate outside the borders of the USA.”). In any event, the enemies of liberty are controlling the stated allies of liberty, or such allies are not serious about liberty. Either way, there is no “How” in the libertarian zeitgeist.

  16. There was no mention in this article as to how Libertarians might win either elections (or liberty itself), when they have previously been politically nonviable. Moreover, the existing police state absolutely will not surrender power and money willingly. So, suggesting that they do smart things is like politely suggesting that a rapist stop raping a woman, halfway through. When the rapist is balls-deep in your ass, quietly saying “I’d really prefer you didn’t” is just more typical libertarian dip-shittery. It’s literally pontificating about fanciful daydreams, and indicating to absolutely every common man who is paying attention that if he gets involved with “libertarians” he is asking to get squished like a bug.

    So, nevermind elections, there’s not even any advice about how one might roll back a single piece of regulation, or a single restriction on individual freedom. If there was, then *that* would constitute a “How.”

  17. I’d probably like Hinkle if I met him, because I generally like libertarians —as people.

    But Libertarians have a special onus that is placed upon them: they purport to have SOLUTIONS to REAL-WORLD problems like the problem of omnipresent tyranny. Naming the problem isn’t enough. HOW, HOW, HOW do you intend to solve it?

    At this point, I’m not sure that there is a single libertarian in the country who has the intellectual machinery to even comprehend what I’m saying.

    …And that’s why we lack liberty of every kind, not just “economic liberty” …as if that could be separated from the liberty to drive on a highway without being pulled over for having “out of state” plates, and “the liberty” to avoid having your car ransacked for drugs.

    I have the answers, and the solutions. Enough to fill both an article, and a book. I guess you’ll have to wait for it, because I was just here to point out that Mr. Hinkle needs a “How.”

  18. When is Reason.com going to allow us to uprank and downrank comments? That’s just taking advantage of the fact that this is the internet, not a piece of paper. They should allow site members to uprank, and they should allow non-members to uprank and downrank on a separate listing. They should also sign up for disqus, and allow anyone to sign in with a reciprocal account.

    Why stand in the way of human psychology promoting an anonymously commented-upon comment thread?

    For the basics of emergent organization: http://www.kk.org

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