2020 has been an extraordinary year for the global economy, with slowing growth and economic turmoil caused and exacerbated by the COVID-19 pandemic, which has engulfed the entire world.
Amid the health crisis, perhaps not so unexpectedly, our free trade system has once again been called into question by some as the root cause of systemic economic problems that supposedly need to be corrected or readjusted by a mandate from the big government.
Indeed, 2020 has been a stark reminder of the continuing struggle between the state and the free market.
Populist attacks on the free market – fueled by election year politics in the United States, as well as real setbacks in the economy – have gained momentum.
Some of the political actions taken or planned by the governments of the United States and other countries in response to the ongoing global pandemic unfortunately threaten economic freedom as well as long-term economic growth and prosperity.
The Heritage Foundation has just published its Index of economic freedom 2021, our 27th edition, which offers a good starting point to take a step back and reflect on the fundamental principles that are behind the progress we have made.
The 2021 index, which examines the policies and economic conditions in 184 sovereign countries, reveals a global economy that, as a whole, continues to be “moderately free.”
Perhaps reflecting the difficult political environment complicated by the early stages of the ongoing pandemic, average global economic freedom has not improved over the past year.
As the Index cataloged, nations with higher degrees of economic freedom thrive. Indeed, they capitalize more on the capacity of the free market system not only to generate but also to reinforce dynamic growth through efficient allocation of resources, value creation and innovation.
Here are three charts that illustrate the critical importance of preserving and advancing economic freedom.
1. Economic freedom ensures prosperity. Countries classified as âfreeâ or âmainly freeâ in the 2021 index generate incomes more than double the average levels of other countries and more than six times higher than the incomes of people living in countries with ârepressedâ economies.
2. Economic freedom is strongly correlated with general well-being, including factors such as health, education and the environment. Economically resilient countries are not necessarily geographically large or rich in natural resources.
Many countries have succeeded in expanding opportunities for their citizens by strengthening their economic dynamism and their integration into global markets.
In general, the overarching goal of economic policies should be to create an environment that offers the best chance of translating opportunities into general well-being.
3. Economic freedom promotes upward mobility and significant social progress. Any discussion of inequality is more about the values ââof a society than about its economic system. At the heart of upward economic mobility is the task of advancing economic freedom so that dynamic and inclusive growth can occur in meaningful ways for ordinary people.
Advancing economic freedom is really about putting in place pro-market, growth-inducing policies that benefit as many people as possible, rather than the privileged few.
The President of the Heritage Foundation, Kay C. James, offered a reminder on why economic freedom is more important than ever:
The debate in the United States about whether to move away from free markets and towards socialism can change dramaticallyâ¦. This is because in the fight against the global pandemic, we will likely see the emergence of one of the most compelling arguments in our lives for free market systems – and lives will be saved in the process.
Indeed, the way through which we can emerge from this pandemic stronger than we were before is through a re-engagement with the proven policies of free market capitalism.
In particular, as we continue to fight the current pandemic, our confidence in economic freedom is undoubtedly being tested. But now is not the time to waver.
Let us not forget that a good economic policy is a good public health policy, they go together.
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