How economic freedom forms the basis of telework


Social distancing and shutdown policies linked to the coronavirus pandemic are having significant effects in slowing the spread of the virus. By ensuring that our health system maintains sufficient capacity to respond effectively, these policies could reduce the overall health and economic toll unless an effective vaccine or treatments are subsequently developed.

However, these policies also impose substantial costs on the economic livelihoods of countless people and businesses around the world.

The magnitude of these costs in terms of lost production and jobs has been quite significant. Naturally, as the restrictions imposed by governments become broader and longer lasting, the social and economic costs increase. Chronic health problems, addiction and crime are more common as economies falter.

Finding the right balance between the benefits and costs of closure policies is the primary consideration facing governments around the world.

In this regard, an important new special report from The Heritage Foundation, “A Comparative Analysis of Policy Approaches to COVID-19 Around the World, with Recommendations for US Lawmakers,” has good news to offer: depends on how the closure of a country is draconian.

The study took an in-depth look at responses from 11 countries around the world, all of which have been affected by the virus to some extent. All countries encouraged social distancing and restricted inbound travel, but they varied widely in the extent to which they imposed lockdowns on economic activity at the national level.

The study found no clear relationship between case rates or death rates and the severity of the lockdown. Widespread lockdown orders have not yielded better results than more targeted measures, such as isolating the sick, mass testing and contact tracing.

While not systematically included in comparisons, it may well be that external factors such as age and population density influenced the results as much as government policies.

Now comes a new study from the International Monetary Fund presenting a new index of the feasibility of working from home in 35 advanced and emerging markets.

For countries which impose more severe restrictions, working from home is becoming an important alternative means of maintaining a certain level of economic activity.

The study finds a notable positive association between a country’s level of economic development, measured by gross domestic product per capita, and the ability to work remotely, which reflects varying degrees of development of the digital economy.

More specifically, the research of the International Monetary Fund Noted:

This crisis has made it clear that the ability to connect is a critical factor in people’s ability to continue to engage in the workplace. Investing in digital infrastructure and bridging the digital divide will enable disadvantaged groups to participate meaningfully in the future economy.

And that’s not all. We compared data determining the Telework Capacity Index (provided by authors Mariya Brussevich, Era Dabla-Norris and Salma Khalid of the International Monetary Fund) to the scores of the Heritage Foundation’s 2020 Economic Freedom Index and found a significant correlation between the levels of economic freedom and the ease of teleworking, as shown in the attached graph.

What ultimately happens to our economy and our society in the COVID-19 age is largely a function of the political choices that will be made in the months and years to come.

Points to keep in mind are: 1) a country’s success in stopping COVID-19 is not based on how many livelihoods you can destroy; 2) to prevent the economy from collapsing, policies should make it easier to work from home; and 3) countries with more economic freedom, in addition to the many other advantages they have, are more likely to allow people to keep their jobs if homework becomes necessary.

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