Yonai: Economic freedom is key to worldwide prosperity
The White House recently released the 2016 Economic Report of the President, and from reviewing the content within the document’s 435 pages it appears as though the word “freedom” is not a word that Barack Obama regularly extracts from his vocabulary box.
Referenced only in relation to Vietnam and Malaysia — not the United States — the word is mentioned once, while “inequality” is mentioned between 235 and 241 times, depending on how you count it.
Sadly, President Obama is not the only prominent world leader to downplay the important role that economic freedom plays in maintaining stable, flourishing and authentic societies.
During a meeting last week at the Vatican, Pope Francis told a group of Italian business leaders to not let the “mantra of economic freedom and thirst for profits prevail over human rights and freedoms.” Most of us can agree with the pope that individual human rights and freedoms are certainly important; however, his perspective on the true nature and purpose of economic freedom is flawed.
In fact, numerous studies have discovered that economic freedom alone has largely allowed societies to turn inequality and poverty into comparative advantage. This freedom has enabled countries and communities worldwide to collaborate with others who have contrasting skills to create opportunities and contributions inconceivable to mankind.
Data compiled by economists at the O’Neil Center at Southern Methodist University and published by the Fraser Institute show that nations with more economic freedom have lower levels of poverty. In fact, the poorest 10 percent in the most economically free nations earned about nine times more than those in the least economically free. Average income for the poorest 10 percent in the most economically free nations was $9,881 whereas the average income for the same people in the least economically free nations was $1,629.
The results were similar within the 50 states and in U.S. metropolitan areas; places with more economic freedom have higher incomes. The states with the least amount of economic freedom had about 8 percent lower per person income than the national average while the freest states earned about 7 percent more per person than the national average. Even at the metropolitan level, people in the freest metro areas earned about 7 percent more than those in the least free. We must be concerned about freedom, not inequality, if we want to increase income, reduce poverty and improve lives.
At the global level people often ignore the role economic freedom plays in reducing worldwide poverty. Between 1990 and 2010 about 1 billion people were pulled out of extreme poverty worldwide because of freedom. This isn’t to say that these billion people are living in the lap of luxury, but it is an indication that we’re moving in the right direction with increased freedom. By freeing their talents, people are able to earn a living and live with more dignity.
In India, often thought of as one of the poorer places on earth, economists call for more economic freedom to reduce the plight of the impoverished. A recent study echoes the notion that economic freedom reduces poverty in India. It found that economic freedom within the various Indian states coincides with increased economic growth. The study calls for more policy changes to bring India more economic freedom in its fight against poverty.
The White House and many people fail to recognize that poverty, not inequality, haunt people. In India we see people asking for more freedom to fight poverty, they aren’t railing against inequality. They understood what America used to understand; free people have the power to create value to improve their lives and the lives of their neighbors.
We need to fight for policies that increase the freedom for all and not provide regulatory protections for certain businesses over others. We need to fight back against the backroom dealings unethical business people make with government. Being pro-business doesn’t mean you support freedom.
The elimination of poverty and the increase of human flourishing should be our goal as human beings who care about others. Given what we know, it means we must take a stand for freedom. A billion people out of extreme poverty isn’t a bad start. Let’s keep working for a freer, more prosperous world for all.
Derek K. Yonai is the director of the Center for Free Enterprise and associate professor of economics in the Barney Barnett School of Business and Free Enterprise at Florida Southern College in Lakeland, Florida. He wrote this for InsideSources.com.