Democracy Doesn’t Matter to Defenders of “Economic Freedom” | Quinn Slobodian


TTwo of the world’s “freest economies” are on fire. According to the “economic freedom” indices released each year separately by two conservative think tanks – the Heritage Foundation and the Fraser Institute – Hong Kong has been number one in the rankings for more than 20 years. Chile is ranked first in Latin America by both indices, which also places it above Germany and Sweden in the world rankings.

The violent protest in Hong Kong has entered its eighth month. The target is Beijing, but the lack of universal suffrage that catalyzes popular anger has long been part of Hong Kong’s economic model. In Chile, where student-led protests against rising metro fares have turned into a nationwide anti-government movement, the death toll is at least 18.

The rage is perhaps best explained by other rankings: Chile ranks in the top 25 for economic freedom – and also for income inequality. If Hong Kong was a country, it would be in the world top 10 most unequal. Observers often use the word neoliberalism to describe the policies behind this inequality. The term may sound vague, but the ideas behind the Economic Freedom Index help make it stand out.

All rankings contain visions of utopia. The ideal world described by these indices is a world where property rights and the security of contracts are the highest values, inflation is the main enemy of freedom, capital flight is a human right and democratic elections. may actively oppose the maintenance of economic freedom.

These rankings are not just academic. Heritage rankings are used to allocate United States foreign aid through the Millennium Challenge Corporation. They set objectives for decision-makers: in 2011, the Institute of Economic Affairs deplored that an increase in social spending led to a fall in the British ranking. Conservative MP Iain Duncan Smith even cited the heritage index in favor of a hard Brexit. Launch of the 2018 index at the Heritage Foundation, Trump’s secretary of commerce, Wilbur Ross, expressed hope that environmental deregulation and corporate tax cuts would reverse America’s decline in rankings. Where does this way of framing the world come from?

The idea for the Index of Economic Freedom originated in 1984, after a discussion of Orwell’s 1984 at a meeting of the Mont Pelerin Society – an exclusive debate club of academics, policymakers, thinktankers and business leaders trained by Friedrich Hayek in 1947 to oppose the rise of communism in the east and social democracy in the west. Historian Paul Johnson argued that Orwell’s predictions did not come true; Michael Walker of the Fraser Institute in Vancouver countered that maybe it was. High taxes, mandatory Social Security numbers, and public transparency on political contributions suggest we may be closer to Orwellian dystopia than we thought.

Walker saw this debate as the unfinished business of Milton Friedman’s 1962 book Capitalism and Freedom, which suggested that political freedom rested on market freedom but had not scientifically proven it. Friedman was present at the meeting and, along with his wife and co-author, Rose, agreed to help organize a series of workshops on the challenge of measuring economic freedom.

The Friedmans assembled a host of luminaries, including Nobel Prize winner Douglass North and The Bell Curve co-author Charles Murray, to determine if something as nebulous as freedom could be quantified and classified. They ended up with a series of indicators, measuring the stability of the currency; the right of citizens to have bank accounts in foreign countries and in foreign currencies; the level of public expenditure and public enterprises; and, above all, the personal and corporate tax rate.

When the Walker’s Fraser Institute published its first index in 1996 with a preface by Friedman, there were some surprises. According to his historical overview, the second freest economy in the world in 1975 was Honduras, a military dictatorship. The following year another dictatorship, Guatemala, was among the top five. They were not anomalies. They expressed a fundamental truth about the clues. The definition of freedom they used meant that democracy was a moot point, monetary stability was paramount, and any expansion of social services would cause the rankings to drop. Taxation was theft, outright, and austerity was the only way to the top.

“The ‘right’ to food, clothing, medical services, housing or a minimum level of income,” the authors wrote, was nothing less than “the demands of” forced labor. ” [imposed] on others. The index director translated the vision into policy advice a few years later, writing in a public note to the Canadian Prime Minister that poverty could be eradicated with a simple solution: “End welfare. Restore hospices and homes for single mothers.

Not content with economics, the Fraser Institute partnered with the Cato Institute in 2015 to publish the world’s first index of “human freedom.” They included all previous economic indicators and supplemented them with measures of civil liberty, rights of association and freedom of expression, alongside dozens of others – but left out multiparty elections and the Universal suffrage. The authors specifically noted that they excluded political freedom and democracy from the index – and Hong Kong was at the top of the list again.

What was happening? One answer is that the project to measure economic freedom had caused some of its authors to question their previous assumptions about the natural relationship between capitalism and democracy. In the 1990s, Friedman, who previously viewed the two as mutually reinforcing, sang a different tune. As he said in an interview in 1988: “I believe that a relatively free economy is a necessary condition for freedom. But there is evidence that a democratic society, once established, destroys a free economy. An emancipated people tended to use their votes to pressure politicians to spend more on social spending, clogging the arteries of free trade.

In the workshops devoted to the creation of indexes, Friedman cited the example of Hong Kong as proof of the veracity of this proposition, saying: “There is almost no doubt that if you had political freedom in Hong Kong, you. would have much less freedom than you do under an authoritarian government.

Former Hong Kong Managing Director CY Leung agreed. During the 2014 “Umbrella Revolution” protests, he was asked why the suffrage could not be extended. His pragmatic response was that it would increase the power of the poor and lead to “the kind of policy” that promotes the expansion of the welfare state instead of pro-business policies. For him, the compromise between economic freedom and political freedom was not buried in a clue. It was clear as day.

Rankings of economic freedom also exist within nations. Stephen Moore and Arthur Laffer, two of Trump’s economic advisers, created comparable rankings for U.S. states – which have turned out to be drastically useless in predicting economic success. The system was deployed by the Cato Institute in India too, encouraging a race to the bottom of deregulation within and outside national borders. One of the report’s authors, Bibek Debroy, now chairs Indian Prime Minister Narendra Modi’s Economic Advisory Board.

Pinochet, Thatcher, and Reagan may be dead. But indices of economic freedom carry the neoliberal banner by deeming the goals of social justice to be forever illegitimate and by pushing states to see themselves only as the guardians of economic power. Stephen Moore, who was a favorite earlier this year for Trump’s Federal Reserve appointment, keep it simple. “Capitalism is much more important than democracy,” he said in an interview. “I’m not even a big supporter of democracy. Hong Kong’s financial secretary made much the same point two weeks ago in London, when he cited the city’s top ranking for economic freedom and reassured his audience that “alongside the demonstrations, business continues unabated”.

By color coding nations, celebrating the winners on glossy paper, and giving high-ranking countries a reason to celebrate at banquets and balls, the indexes help perpetuate the idea that the economy should be protected from excesses. politics – so much so that an authoritarian regime a government that protects free markets is preferable to a democratic government that redefines them. At a time when the vote can lead to changes that threaten the freedom that capital has long enjoyed, the availability of democracy in the index vision is what haunts us, from Santiago to the South China Sea in passing through Washington DC.

Quinn Slobodian is historian and author of Globalists: The End of Empire and the Birth of Neoliberalism


Leave A Reply