To prosper, Alabama needs more economic freedom

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The Fraser Institute published the 2021 North American Economic Freedom Rank this week, and there’s good news and bad news for Alabama.

The good news is that our state has improved in the rankings since last year, from a score of 5.79 to 6.39 out of 10. The bad news is that we are 29th out of 50 states.

You might ask, “What is economic freedom anyway?” According to the report’s authors – Dean Stansel, José Torra and Fred McMahon – economic freedom involves “minimal government interference, relying on personal choices and markets to answer fundamental economic questions such as what should be product, how it is to be produced, how much is produced and to whom the production is intended.

The figure of 6.39 is the result of a complex calculation weighing various factors, including public expenditure (general government consumption expenditure as a percentage of income, transfers and subsidies as a percentage of income, and insurance and pension benefits as a percentage of income). percentage of income), taxes (income and salary income as a percentage of income, top marginal tax rate and income threshold to which it applies, property and other taxes as a percentage of income and sales taxes as a percentage labor market regulation (full-time minimum wage income as a percentage of per capita income, government employment as a percentage of total government employment and union density).

A score of 7.83 distinguishes New Hampshire as the freest state, followed by Tennessee, Florida, Texas, Virginia, Georgia, South Dakota, Idaho, North Dakota. North and North Carolina. New York ranked lower with a score of 4.33. That, and government blockades, could explain why so many people are fleeing the Big Apple.

These figures are based on pre-pandemic data. It is unclear how future iterations of this report will account for emergency responses and lockdowns related to the pandemic.

Alabama’s political leaders pretend to defend free markets and economic prosperity. Why did their words not translate into concrete and measurable results that would improve our ranking in the ranking? Part of the reason is that Alabama has a large public sector and a small private sector. The government does not add or create value; it simply moves money from one place to another, taxing and spending but never creating. Entrepreneurs, meanwhile, create value and opportunity, take risks government can’t, and innovate in ways bureaucracies can’t.

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Another reason is a fundamental misunderstanding about the relationship between government and business. Saying that you are “pro-business” does not prove your attachment to economic freedom. Many companies do not like economic freedom, which requires unhindered competition. Companies often pursue anti-competitive policies and practices, pressuring the government for formal privileges and benefits in order to stay ahead of the competition. Consumers, of course, are the victims of this cronyism, which drives up prices.

Crony capitalism gives “capitalism” a bad name. Unfortunately, we have too many of them in Alabama.

The Manuel H. Johnson Center for Political Economy at the University of Troy is a member of the EFNA network and remains dedicated to promoting economic freedom in our state and region. By various measures, Alabama continues to register as one of the poorest states in the country. Johnson Center researchers believe that we Alabamians can do better, that our state can become an engine of economic progress and prosperity, a shining example for our neighbors and a testament to the reality that low taxes, deregulation and competition produce widespread fulfillment and joy.

As the population shifts from the Midwest and Northeast to the south – to warmer climates, friendlier cultures, and lower taxes found, for example, in Texas or Florida – Alabama must embrace economic freedom both to follow and to stand out. We have a bright future, and I predict that by the time my children grow up, we will be ahead rather than behind in the economic freedom indices.

But only if we decide to be free.


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