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Bi-Weekly "Metapolitics" Discussion in Fishtown

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Brian B.
Bi-Weekly "Metapolitics" Discussion in Fishtown

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This discussion will cover one of the most commonly used tools for comparing economic policies in various countries, the Heritage Foundation's "Index of Economic Freedom". The Heritage Foundation is a conservative think tank based in Washington, DC, and they formed the intellectual backbone of the GOP since the "Reagan Revolution" of the 1980s. The Heritage Foundation promotes a brand of fiscal conservatism that could perhaps best be described domestically as "neoliberalism", which is similar but somewhat to the right of the economic policies pursued by Bill Clinton's "New Democrats" in the 1990s and the "Third Way" of the UK's New Labour party under Tony Blair. Internationally, in terms of development economics & trade policy, the Heritage Foundation can be thought of as the center-right arm of the economic ideology known as the "Washington Consensus."

https://en.wikipedia.org/wiki/The_Heritage_Foundation

https://en.wikipedia.org/wiki/Neoliberalism

https://en.wikipedia.org/wiki/Washington_Consensus

The Heritage Foundation's members are conservative intellectuals & policy wonks and although they may seem "far right" to some pundits on the political left, its members are hardly akin to the fire-breathing "culture warriors" of Fox News & right-wing talk radio or to the radical "anarcho-capitalist" libertarians who think taxation is theft and want to abolish all government. Bill Clinton's welfare reform and the "individual mandate" for health insurance eventually employed by both Romneycare & Obamacare both started as ideas hatched at the Heritage Foundation.

The "Index of Economic Freedom" is popular with both establishment conservative pundits at National Review and Beltway libertarians at Reason Magazine, and you can predictably find op-eds at both publications whenever the US slips in the Index's ranking (we're currently #11, just below the UK and just above Denmark).

In addition to looking at the Index and learning how it defines & measures "economic freedom," we'll look at critiques of the Index by 5 people: Stefan Karlson of the Ludwig von Mises Institute (a paleo-libertarian), Kevin Carson of the Center for a Stateless Society (a radical, left-market anarchist), Will Wilkinson of the Niskanen Center (a pro-market, left-libertarian), Michael Lind of New America (a center-left, pro-business liberal), and John Miller of Wheaton College (a progressive who's highly critical of income inequality & globalization).

OVERVIEW OF HERITAGE'S DEFINITION OF "ECONOMIC FREEDOM" & THE INDEX RANKINGS:

For a basic description of the Index of Economic Freedom, go here: http://www.heritage.org/index/about

The Heritage Foundation measure economic freedom based on 10 quantitative and qualitative factors, grouped into four broad categories, or pillars, of economic freedom:

Rule of Law (http://www.heritage.org/index/rule-of-law) (property rights, freedom from corruption); Limited Government (http://www.heritage.org/index/limited-government) (fiscal freedom, government spending); Regulatory Efficiency (http://www.heritage.org/index/regulatory-efficiency) (business freedom, labor freedom, monetary freedom); and Open Markets (http://www.heritage.org/index/open-markets) (trade freedom, investment freedom, financial freedom). Each of the ten economic freedoms within these categories is graded on a scale of 0 to 100. A country’s overall score is derived by averaging these ten economic freedoms, with equal weight being given to each.

Check out the current country rankings: http://www.heritage.org/index/ranking

Then check out which countries score highest on each of the various 10 factors: http://www.heritage.org/index/explore

HOW CAN SOCIAL DEMOCRACIES RANK AHEAD OF THE U.S. IN "ECONOMIC FREEDOM"?

Both liberals & conservatives (and libertarians) are often shocked to see Western social democracies ranked ahead of the US on a right-wing think tank's "Index of Economic Freedom". After all, isn't the US the most "capitalist" society on Earth? The short answer is no, that's an oversimplification due to a nebulous definition of "capitalism". Capitalism technically just means "private ownership of the means of production" but it gets conflated with laissez-faire policies like the free market, free enterprise & free trade, or with fiscal austerity & privatization of social services, or with various negative phenomena like kleptocracy, cronyism, high income inequality, and high market concentration (i.e. oligopolies). These are all different things and not always positively correlated - some are even negatively correlated (like laissez faire policies that promote competition & oligopolies).

The seemingly paradoxical result of social democracies that are more "capitalist" or more "free market" than the US is due to the fact that people overlook that the Index has 10 factors, and so countries that rank low in "fiscal freedom" due to high taxes and "government spending" due to high spending on social programs can still make up for it with high levels of freedom in the other categories. And many people don't realize that the US doesn't do very well on these other 8 factors.

Many of the social democracies with generous welfare states went through a period of neoliberal reforms in the late 1980s & early 1990s because of a period of prolonged economic stagnation in the 1970s & '80s. While they still have high taxes & high government spending on social programs and in many cases have more regulation on their labor market than the US, the Anglo & Nordic social democracies beat the US in the other 7 factors measured by the Index and thus end up ahead or not too far behind.

If you want more info on how these neoliberal reforms played out in various social democracies, here's some articles that describe what went on in New Zealand, Sweden, Canada and Australia. The first 2 articles are from libertarian sites that regard these neoliberal reforms as very good, whereas the latter 2 articles are from left-wing sites that consider neoliberalism to be very bad:

https://mises.org/library/reform-not-impossible

http://reason.com/archives/2016/04/18/bernies-rightamerica-should-be

https://canadiandimension.com/articles/view/canadas

https://libcom.org/news/australia-globalisation-neoliberal-permanent-revolution-04042016

  • NOTE: I don't want to get caught up in discussing the 4 articles above, but I wanted you to have a basic idea of why social democracies can rank about even or ahead of the US in Heritage's definition of overall "economic freedom".

CRITIQUES OF HERITAGE'S DEFINITION OF "ECONOMIC FREEDOM" AND THEIR INDEX:

NOTE: I realize the articles below comprise a lot of reading, so for those who don't have the time or energy to plow through them, I've summarized them in our discussion section: https://www.meetup.com/Philadelphia-Political-Agnostics/messages/boards/thread/50456708

  1. Stefan Karlson, "The Failings of the Economic Freedom Index" and "Economic Freedom Indexes: Fraser vs. Heritage"

https://mises.org/library/failings-economic-freedom-index

https://mises.org/blog/economic-freedom-indexes-fraser-vs-heritage

  1. Kevin Carson, "The 'Economic Freedom Index' Isn't" and "What Economic Freedom Indexes Leave Out"

https://c4ss.org/content/4399

https://c4ss.org/content/22251

  1. Will Wilkinson, "The freedom lover's case for the welfare state"

http://www.vox.com/2016/9/1/12732168/economic-freedom-score-america-welfare-state

Will Wilkinson & Dave Armstrong, "Fixing the Heritage Foundation’s Economic Freedom Index"

http://themonkeycage.org/2010/04/fixin_the_heritage_foundations/

  1. Michael Lind, "The question libertarians just can't answer"

http://www.salon.com/2013/06/04/the_question_libertarians_just_cant_answer/

  1. John Miller, "Free, Free at Last" and "(Economic) Freedom’s Just Another Word for...Crisis-Prone"

http://www.dollarsandsense.org/archives/2005/0305miller.html

http://www.dollarsandsense.org/archives/2009/0909miller.html

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