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Expect Declining Living Standards From Decaying Economic Freedom, Warn Researchers

The poor may be hit hardest, and it doesn't look good for civil liberties either

Americans need to brace themselves for a declining standard of living—or, at best, very slow improvements funded by drawing off wealth accumulated in the past. That's the warning from two economic researchers who point to the country's slump in measures of economic freedom. Since the ability to buy, sell, use property, and gain wealth without government interference is inextricably linked to economic growth, those sliding rankings—especially when compared to improvements in much of the rest of the world—suggest a long period of economic doldrums in the years to come, so long as the U.S. continues to piss away its legacy of economic freedom.

The warning appears at Investors Business Daily, courtesy of W. Michael Cox and Richard Alm, director and writer-in-residence, respectively, at the William J. O'Neil Center for Global Markets and Freedom at the Southern Methodist University Cox School of Business. Drawing from annual Economic Freedom of the World reports compiled by international researchers and published by Canada's Fraser Institute, Cox and Alm point out that much of the planet is less hobbled each year than the one before by bureaucrats and red tape, but that the U.S. peaked in the late 1990s, slid for over a decade, and has been stuck for several years.

That's bad news for Americans' living standards. It's also, as we'll see below, a lousy omen for those with the fewest means and for liberty in other areas of life.

"High and rising economic freedom spurs the creation of capital in all its forms, planting the seeds for rising living standards," they write. "Where economic freedom falters, capital will be scarce, misused and poorly maintained. Over time, people will become poorer."

Cox and Alm even calculate how much consumption you should expect in the future for several countries, assuming they maintain their current economic freedom rankings. Residents of China are consuming 56.3 percent less than you'd expect given the level of economic freedom. Indians consume 29.3 percent less. People in those countries can probably expect life to get cushier.

But the data predicts a level of consumption 22.2 percent below the current figure for the U.S. Americans can expect a more constrained future. Not so cushy. And the authors say they already see that happening.

Signs are already pointing to an ebbing U.S. capacity to consume. Both mean and median per capita incomes, which grew rapidly in the 1980s and 1990s, have fallen in the past decade. Unless the United States reverses its decline in economic freedom, the best Americans can hope for is middling growth in living standards, and they may not even get that.

If it helps, decades of very high economic freedom give us a capital stock to draw from to cushion the predicted decline.

Not included in the article (which is presented in expanded form in the Center for Global Markets' 2013 annual report) are the wider and equally disturbing ramifications of declining economic freedom. Last year's Economic Freedom of the World report graphically demonstrated just how much better off the poor are in economically free countries than in those with greater government control. Annual per capita income is $11,610 in "most free" countries, abruptly falling off to $3,929 in the second quartile, and declining from there.

Economic freedom is also closely connected with civil liberties. Relatively free countries tend to respect people's autonomy across the board. Authoritarian governments don't confine their predations to any one area of human life. Freedom is a package deal.

So, if the United States is in for economic stagnation because of decayed economic freedom, we should expect that the poor will be hit hardest. We can also assume that other liberties will also suffer at the hands of intrusive officialdom and proliferating rules.

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  • Idle Hands||

    But will this translate into less income inequality?

  • Free ¡Woodchippers! Society||

    "Hey dude, you should like totally check out Capital in the Twenty-First Century by Thomas Picketty. It's this great book that I claimed to have read cover to cover in just a couple of days after it was released." /Progconomist

  • D. M. Michell||

    Like they really care.

  • sarcasmic||

    I don't know. People keep saying this, but living standards continue to increase as the cost of goods goes down. Especially with regards to appliances and electronics. The number of hours the average person has to work in order to buy these things keeps going down, leaving money left over to buy other stuff.

    http://cafehayek.com/2013/01/c.....-2013.html

  • Mr. Flanders||

    I have to agree with sarc here. Although economic freedom is certainly a big factor when it comes to economic growth, I think that it is only one of many. Even people working hourly jobs in retail have the latest iPhones and iPads (which also may explain why they are not doing well financially). I'd argue that the price vs. the functionality or efficiency of products continues to improve year over year.

  • sharmota4zeb||

    Yes, and no. Digital cameras are getting better for a given price, but computers are getting worse. Who wants to type with his thumbs on a small screen?

  • Free ¡Woodchippers! Society||

    The cost of goods goes down despite the massive extortion and distortion by the state, not because of it. That point needs to be stressed as a testament to the capacity of economic freedom to produce wealth even in such a poor environment.

    Our economic growth of a few percent per year is akin to the life forms living around hydrothermal vents deep under the ocean. Living under incredible pressure and impossible conditions, it's still able to sustain and grow it's population because it's innovative enough to use what few resources are made available to it. But as such, the life in that environment holds on to it's livelihood by a mere thread, which can be extinguished at any time when the circumstances change.

    That sort of fragility is an unnecessary limiting factor for human civilization because there's no need to carve out our existence in such an inhospitable environment. Humanity is capable of better social institutions than states.

  • sarcasmic||

    The cost of goods goes down despite the massive extortion and distortion by the state, not because of it.

    Um, OK. I have no idea why you would think I believe otherwise.

    Humanity is capable of better social institutions than states.

    Sure, humanity is most definitely capable of better social institutions than the state. Thing is, the state employs organized violence, and makes sure it has the last word in that violence. Because of this, the state will always exist. Not because the state is better, but because it has the capability to destroy. Individuals are no match for organized violence, and any group of men employing organized violence to defeat the state will only end up replacing it. That's what's happening in the Middle East at this very moment. I wish there was a cure for the parasite called government, but I don't know what it is.

  • Free ¡Woodchippers! Society||

    I followed that first sentence with this second one;

    That point needs to be stressed as a testament to the capacity of economic freedom to produce wealth even in such a poor environment.

    I was saying we ought to take that tact in using this information in arguments with lefties and those who would say "see the government doesn't stifle wealth creation".

    Because of this, the state will always exist.

    The Eternal State argument is handily refuted by the fact that it isn't eternal. The state as we know it isn't even like ancient states were. Our modern states are more all-encompassing than ever, ancient ones didn't necessarily monopolize criminal justice, had lower taxes and had extremely limited statutory powers if any at all, and many societies had generations of people living and dying without ever living under a state.

    I wish there was a cure for the parasite called government, but I don't know what it is.

    Anyone who defines the state as broadly as "organized violence" will be hard pressed to find a cure. Similar to the way a doctor would be unable to treat your cancer if he defined tumors as any clump of cells.

  • BeBraveUSA||

    Well said Chipper. I whole heartedly agree. Americans tend to succeed in spite of government interference. I like to imagine the double digit GDP if government would simply release American capitalism from it's shackles. Nothing makes me cringe more than hearing a politician speak of "creating jobs". It is the antithesis of what they do.

  • D. M. Michell||

    Oh right. When I was a kid a Snickers bar was a foot long and only cost a nickle. (Oops. Sorry. I guess sarcasm is your department.)

  • Restor-woodchipper-as||

    It's just bad luck.

  • The Late P Brooks||

    the U.S. peaked in the late 1990s, slid for over a decade, and has been stuck for several years.

    I blame BOOOOOOSH.
    Seriously, fuck that guy.
    With a red hot poker.

  • DesigNate||

    There does seem to be a strong correlation to his time in office and our decline on the chart.

  • DenverChipper||

    Unpossible. I have been repeatedly assured that Team Red is the party of free markets and smaller government.

  • Free ¡Woodchippers! Society||

    Pretty soon people are going to start putting the term "red hot poker" into their handles out of solidarity for the late The Late P Brooks, killed in process of being served a warrant that happened to be taped to a flashbang.

  • BeBraveUSA||

    More likely the continued voluntary surrender of America to our betters in every form of government. From the school board to the White House Americans seem to fear making their own decisions and think government can protect them just like "Julia" from cradle to grave. As for me give me liberty or give me death...Not literally, just saying.

  • gaoxiaen||

    When your main export is expended ordnance it's hard to get the recipients to pay for it.

  • D. M. Michell||

    Bush couldn't have done it alone, not that I like him any more than what's-his-name, the present anti-rightist-in-chief.

  • The Late P Brooks||

    living standards continue to increase as the cost of goods goes down.

    And our Top Men are desperately trying to bring that to a screeching halt.

  • sarcasmic||

    Yep. Better to use tariffs to force millions of Americans to pay higher prices for imported goods than to allow some factory to close. A couple hundred workers are seen, while everyone paying artificially inflated prices is unseen.

  • NSmallz13||

    SAVE THE ANERICAN JOOOOBES. Merica. Who cares that we get way lower prices on a lot of goods from outsourcing that also helps the people in the country. Someone was exploited! I just know it!

  • sarcasmic||

    Lower prices mean lower quality!

  • NSmallz13||

    It just makes sense. How can something so good cost so little? We must protect the consumer! GARBLE GARBLE GARBLE

  • sarcasmic||

    Walmart is forcing cheap Chinese trinkets on the American people! They must be stopped!

  • Palin's Buttplug||

    Fuck the House Democrats for (perhaps) killing Obama's trade initiative. Paul Ryan and Boehner were the good guys for once.

  • sarcasmic||

    Just because they say the bill was to promote freer trade doesn't mean it was actually so. Since the passage of the Affordable Care Act I have only seen health care become less affordable (the price of my insurance has roughly doubled while the coverage has roughly halved). So if this bill was anything like Obama's signature act, it would have had the opposite of its stated effect.

  • Sevo||

    sarcasmic|6.15.15 @ 11:12AM|#
    "Just because they say the bill was to promote freer trade doesn't mean it was actually so."

    You're dealing with turd here. If Obo says there's a mattress at the bottom of that cliff, we can be sure turd'll take the plunge.

  • sarcasmic||

    When I reply to turd, it's not for turd's benefit.

  • Free ¡Woodchippers! Society||

    You're dealing with turd here. If Obo says there's a mattress at the bottom of that cliff, we can be sure turd'll take the plunge.

    No. He'll be calling everyone else stupid for not taking the plunge. He himself would only jump if he could take the rest of us with him for the ride.

  • AlmightyJB||

    Student privacy. Get them used to it early.

    http://mobile.nytimes.com/2015.....?referrer=

  • Palin's Buttplug||

    Yet personal net wealth is up 35% since 2008.

    The nation's wealth rose 2.6% from July through September to $77.3 trillion, the Federal Reserve said Monday. Household wealth has been rising gradually since bottoming at $57.2 trillion in 2008. Early this year, America finally regained all the wealth it had lost to the Great Recession.

    http://www.usatoday.com/story/.....r/3932563/

    It is like the housing price bubble never happened.

  • Butler||

    Woooooooow. Pick the recent low point in personal wealth (due to collapse in home and stock prices), then proclaim that all growth since then indicates a long-term trend of wealth accumulation in the face of declining economic freedom.

    Just . . . wow.

  • Jordan||

    We are also in the midst of another Fed-sponsored bubbles. Of course, central bank clowns have never been able to spot a bubble.

  • Sevo||

    Palin's Buttplug|6.15.15 @ 11:06AM|#
    "Yet personal net wealth is up 35% since 2008."

    Careful. The messicans are gonna steal your cherry-picking job!

  • sharmota4zeb||

    Actually, immigration from Mexico has steadily declined ever since Obama took office. Numerous Mexicans are looking at what life is under his rule and deciding, "Fuck that. I'll stay in Mexico."

  • livelikearefugee||

    How can we have recovered since housing starts are stuck at 1.1 million and a normal market would be 1.6-1.7 million? Ask anyone in the housing industry if we've recovered.

    Go here: http://woodproducts.sbio.vt.edu/housing-report/ to see how bad things really suck.

    The economy doesn't recover until housing recovers and vice/versa.

    And, why hasn't housing recovered? Because people can't qualify for mortgages. They can't qualify for mortgages because they either don't have jobs or have low paying jobs.

    The only part of the industry with a bright outlook is remodeling parents'
    basements so their unemployed liberal arts majors with horrendous student loans have a place to live.

  • The Late P Brooks||

    Any bill should be presumed to have the exact opposite effect of its title.

  • sarcasmic||

    I put this in the lynx, just for you.

  • sarcasmic||

    True.

  • NSmallz13||

    Doesn't matter how many billions have been raised out of poverty, some people are just getting way too much monies $$ compared to their hard working employeeZ. It's just not right

  • The Late P Brooks||

    You should really change your handle from "Palin's Buttplug" to "Obama's Buttlicker", Shreeek.

  • The Late P Brooks||

    proclaim that all growth since then indicates a long-term trend of wealth accumulation in the face of declining economic freedom.

    Where would we be without the Federal Reserve Bank?
    We'd be living in caves and eating grubs, that's where! There should be a giant statue of Ben Bernanke in every town square.

  • Jayburd||

    Thanks to the Fed I can afford a $5 bag of potato chips.

  • gaoxiaen||

    I'm living it up! I can afford a pack of cigarettes a day!

  • NSmallz13||

    Is it just me or is economic freedom and its benefits extremely easy to understand? Sometimes I wish an economic literacy test was required to be able to vote. Even though that goes against all that I stand for.

  • Free ¡Woodchippers! Society||

    so long as the U.S. continues to piss away its legacy of economic freedom.

    I just realized this was a Tucille article. Best damn prose at Reason. It contains just the right amount of piss and vinegar in every article. Now with 25% more piss for FREE!

  • NotAnotherSkippy||

    Managed decline for the win.

  • terriannecuneo||

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  • terriannecuneo||

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    http://www.worktoday7.com

  • JShigg||

    The airport has become the DMV...enough said.

  • tz||

    The foundational error was redefining quality of life as cash. Big families are less "wealthy" but happier.

    The culture of death leaves little to value.

  • sharmota4zeb||

    Government agencies make that mistake, because they tax wealth, not children. If they were guaranteed free labor from every child born, they would make a habit of raping women to increase the supply of forced labor.

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  • CBear||

    I see

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