The Heritage Foundation has released its annual “Index of Economic Freedom.” As America enters an election season increasingly influenced by anger at an economy rigged in favor of the wealthy, maybe it’s time to ask: What is “economic freedom,” and who is it for?
What does economic freedom mean to you, personally? Given that we only recently recovered from a serious national bout of “Powerball Fever,” it’s a safe bet that for most people it means not having to worry about having enough money. It means earning a livable wage; enough to meet basic needs, like food, shelter, transportation, and medical care. It means earning enough to support your family, and having leisure time to enjoy your family. It means being able to educate your children — or yourself — without putting your in hock with debt. It means having a fair shot at reaching the next rung on the economic ladder, and securing a better future for your children. It means being able to retire with a decent standard of living.
For the Heritage Foundation, “economic freedom” is, “the fundamental right of every human to control his or her own labor and property.” Who’d disagree with that? However, the Heritage definition quickly moves from a focus on the individual to a society in which, “governments allow labor, capital, and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.”
It sounds good, until you realize we’re not talking about the rights or freedoms of persons like you and me, but wealthy people and “corporate persons.” Heritage breaks “economic freedom” down into four pillars: Rule of Law, concerning property rights and “freedom from corruption”; Limited Government, concerning “fiscal freedom” and government spending; Regulatory Efficiency, concerning “business freedom”, “labor freedom”, and “monetary freedom”; and Open Markets, concerning “trade freedom”, “investment freedom,” and “financial freedom.” They repeat the word “freedom” as often as possible, but what do all of those things mean in reality?
If you’re an average worker, it means little to no “regulations concerning minimum wages.” So employers can pay you as little as they like. If you can’t live on what they pay, you’re free to try to earn more elsewhere. Good luck with that, because who gets rich paying higher wages than their competitors? Several of the countries in the Heritage’s “economic freedom” top ten, had the lowest hourly minimum wages, including Chile ($2.20), Estonia, ($2.70). Others have no minimum wage.
There are some developed countries with no minimum wage on Heritage’s index, like Switzerland (number 4) and Denmark (number 12, just behind the US), but they tend to rely on strong trade unions to negotiate fair wages for workers.
If you’re an American worker, it means driving down wages with trade agreements like the Trans Pacific Partnership (TPP), that institute what Heritage calls “trade freedom,” defined as “ the absence of tariff and non-tariff barriers” on imports and exports of goods and services. The top ten on Heritages index is almost a membership list of TPP countries, including: Singapore, New Zealand, Chile, Australia, and Canada.
It means there are few, if any, labor laws prescribing maximum working hours. There’s no limit on how many hours your employer can require you to work. It means you don’t even have a right to a two-day weekend.
It means there are few, if any, “laws inhibiting layoffs,” “severance requirements,” or “measurable regulatory restraints on hiring and hours worked.” In other words, forget about “right to work” states. It’s a “right to work” world, in which you have the right to work harder and longer for less.
It means no Social Security, as we know it. In fact, it means no government programs, as Heritage’s index uses zero government spending as a benchmark. (So underdeveloped countries with little governmental capacity may receive “artificially high scores” for government spending). The government won’t have anything to spend anyway, because “fiscal freedom” means a low top marginal income tax rate, and a low top marginal corporate tax rate. The lower the rates, the higher the “fiscal freedom” score. Serving as a tax haven for corporations and wealthy individuals seeking to avoid taxes back home, under the banner of “investment freedom,” can earn countries like Ireland (number eight on Heritage’s index) high “economic freedom” scores.
How does all this “economic freedom,” mostly for the wealthy and “corporate persons,” work out for the rest of society? According to Heritage, more “economic freedom” is supposed to mean less inequality. Yet, some of the highest ranking countries on Heritage’s index have the highest rates of inequality.
- Despite being number one on Heritage’s index, Hong Kong’s yawning gap between rich and poor has fueled protests, despite increasing minimum wages.
- Number 2 on Heritage’s index, Singapore has one of the highest rates of inequality, leading to calls for the government to take action.
- The “miracle of Chile” (number seven on Heritage’s index), so christened by conservative economist Milton Friedman, has lost its shine as Chile’s plantation economy has made it one of the countries with the most serious inequality problems.
Every year Heritage comes out with a new “economic freedom” index, and every year the questions behind the numbers is the same: What is economic freedom, and who is it for? The answer remains the same, too. Heritage’s “economic freedom” is freedom for the wealthy and giant corporations for further consolidate their wealth and power, and not much else.