Rankings of “economic freedom” tell us nothing about capitalism

Last month, the Frasier Institute published its annual report Economic freedom of the world report. As usual, he showed that “economic freedom” is positively correlated with many good things and negatively correlated with many bad things.

Defenders of capitalism love the Frasier Institute. Libertarian philosopher Jason Brennan, for example, made extensive use of rankings in the context of criticizing the arguments of Marxist philosopher GA Cohen. Brennan argues that given all the positive things that come with greater economic freedom, the debate over the superiority of capitalism over socialism has a clear winner: the pro-capitalist side. The only question that remains is whether socialism would be better in a hypothetical world where humans are less selfish and lazy.

Economist Peter Leeson has used the reports from the Frasier Institute to mount an even more vehement defense of capitalism. be bad. Leeson says it’s wrong because Frasier Institute figures show capitalism deserves Three Cheers.

Although many relationships in the social sciences are unclear, the relationship of capitalism to development is not one of them. Unless we are ashamed of unprecedented increases in incomes, longer life expectancies, greater education and greater political freedom, there is no reason to be a milquetoast defender of capitalism.

These are bold statements. And if you just look at the many Frasier Institute charts and assume that the x-axis is really about something called “economic freedom” (or, in Leeson’s parlance, countries becoming “more capitalist” and “less socialist” ), The data does seem to prove that people live longer and are more prosperous, more educated and more politically free in more capitalist countries. How, then, could one be a socialist? How could anyone even be a social democrat, aspiring to curb “excessive” or “runaway” capitalism through expansive social programs and a regulatory state? The more capitalist a society, the better the results.

There is only one problem with all of this. The premise is absurd. Even a quick glance at the Frasier Institute report reveals that the numbers that emerge from their methodology bear no relation to anything that is argued between social democrats, socialists, and supporters of laissez-faire capitalism. to do.

First of all, however, it’s worth stopping to talk about definitions. Many socialists believe that a fully socialist society is one in which the workers control the means of production. Since there has never been a society where even a large part of the economy has been placed under the control of the workers, the degree to which a society is socialist in this sense is difficult to measure. Other socialists, however, thought that state ownership over most of the economy would be sufficient. This can Be measured. There have been societies like the USSR where almost all of the economy was state-owned, countries like the United States with little state ownership, and countries like Norway (where nearly d (a third of the workforce works in the public sector, and the state owns shares in many companies) which fall somewhere in between.

Likewise, we can make a distinction between “socialism after capitalism” (i.e. socialism in the strict sense) and “socialism in capitalism” (i.e. policies for which socialists all over the world have fought to improve the lives of working class people (within fundamentally capitalist structures). This too can be measured. We can compare companies based on state intervention to facilitate union organizing by workers, or on the difference between health care systems like that of the United States (where only a minority of the population is eligible for public health insurance), Canada (where there is universal public health insurance but the hospitals themselves are mostly private) and countries like Great Britain, Sweden, Norway and Denmark (where most or all of the hospitals are government owned and the doctors and nurses are public employees).

Rankings comparing companies by degree of state ownership would be relevant to arguments about whether societies are better off with capitalism or with at least some forms of socialism. Likewise, classifying companies according to their health care system or degree of union friendliness would be relevant to the arguments about the reforms that socialists support within capitalism.

But all you have to do to confirm that the Frasier Institute does nothing like this is take a look at the handy interactive map on their website. Play with the map for about five seconds and you will find that Norway and Sweden are both much more “economically free” than Haiti.

You read correctly. Norway and Sweden are tied for 37th place. Haiti is in 118th place. This means that Haiti, according to the Frasier Institute, is less capitalist than Sweden or Norway.

Pop quiz: Does Haiti have a larger welfare state than Sweden or Norway? Is there a more favorable environment for unions? Does it have a larger public sector?

These are not serious questions.

So what is going on here? The five categories that the Frasier Institute uses to judge different countries are “size of government”, “legal system and property rights”, “solid money”, “freedom of international trade” and “regulation”.

Four of these categories at least seem to have something to do with contested issues between social democrats, socialists, and advocates of “runaway” capitalism, although “property rights” are more obviously relevant than the oddly mixed category. “Legal system and property rights.” Hold that thought.

In the meantime, what is “healthy money”? Here’s how the summary describes the category: “Inflation is eroding the value of legitimately earned wages and savings. Sound currency is therefore essential to defend property rights.

This “therefore” is a bit strange, as the idea behind it seems to be that less than low inflation is essential to “defend” property rights than it is essential for homeowners to get the benefits they want. would otherwise receive these property rights. More importantly, however, the order of explanation here is the opposite of what we usually get in right-wing (misleading) arguments that Venezuela’s economic woes, for example, show that socialism produces bad. results. Usually libertarians and conservatives say socialist policies are bad because they lead to inflation. They do not define inflation itself as inherently non-capitalist.

What about the “legal system and property rights”? The description in the summary is too vague to make it clear what is being measured, but the full report usefully divides this into subcategories:

A. Judicial independence
B. Impartial courts
C. Protection of property rights
D. Military interference with the rule of law and politics
E. Integrity of the legal system
F. Legal execution of contracts
G. Regulatory costs of selling real estate
H. Police reliability

Of these eight categories, C is the only one that seems somewhat relevant to the capitalism versus socialism debate. And even there, it is only relevant if the property is protected against nationalization (or expropriation by the workers themselves, as in the movement of reclaimed factories in Argentina in the early 2000s). On the one hand, G could also be salient, although the “regulatory costs” that the Socialists want to impose on businesses (such as better workplace safety laws, a higher minimum wage, measures to make it harder to remove unions) rarely have much to do with the to sell enterprises.

The other six are simply irrelevant. What socialist complaint about the police is that they are too reliable (H)? What socialist does not want workers to be able to sue their bosses for violating union contracts (F)? Have you met a socialist whose main complaint against the American courts is that they are too impartial (B) and independent of government (A) or that the justice system has too much integrity (E)? (For a clue to the real complaints, google “Steven Donziger.”) The climax of the absurdity, however, comes to D. Do Socialists want the military to interfere more with legal and political systems? Ask Salvador Allende about this.

It could be argued that while none of this has to do with whether societies are “more capitalist” or “less capitalist,” it at least has to do with whether these societies live up to the ideals. many defenders of capitalism. Fair enough.

But that’s like saying that the Soviet Union performed badly on many standards dear to the hearts of many socialists. There is a long tradition of socialists defending free speech, for example. We would look pretty dumb if we ranked countries according to their degree of socialism using the degree of protection of free speech as one of the measures, thus giving the Soviet Union a score of “socialism.” Lower than that of the United States. . . and thus triumphantly concluding that the degree of socialism was positively correlated with the protections of free speech.

This is exactly what the Frasier Institute and the libertarians who tout its findings do when they regard societies as more “economically free” (or, in the hands of Brennan and Leeson, “more capitalist”) in part because ‘they are less corrupt and unstable – and then use that to argue that “economic freedom” or “capitalism” itself leads to more democracy and better political outcomes. Are there worse outcomes in societies characterized by high inflation, high judicial corruption, and frequent military coups? No kidding. It’s supposed to have what exactly to do with longstanding debates on capitalism and socialism?

Does the history of the twentieth century contain much fodder for intellectually honest critiques of at least some forms of socialism? Sure. But the Frasier Institute only prepares the books.

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About Norma Wade

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