The free enterprise system has been the greatest force the world has ever known to reduce poverty and increase prosperity. The bad news is that many here in the United States are forgetting this important lesson. The good news is that in other parts of the world, economic freedom is beginning to take hold and is doing more to raise the standard of living than any government program.
For years, the conservative Heritage Foundation and the Wall Street Journal have painstakingly catalogued several economic indicators to determine why there are some countries with higher rates of life expectancy rates and literacy, education and an overall higher quality of life, while others struggle to provide their citizens with the most basic services.
Their newest findings in the Index of Economic Freedom reveal that there is, in fact, a secret sauce for economic prosperity. Much to the disappointment of liberal economists, it has nothing to do with higher levels of government spending on anti-poverty programs. In fact it is quite the opposite. By unleashing the power of the free enterprise system, economic growth follows.
To measure economic freedom, researchers look at a number of factors, including levels of corruption, government spending, taxes, regulations and the ease of opening a business.
Disappointing is the precipitous decline of the U.S. score on the index in recent years. As a result of increased government spending, including the failed economic stimulus bill and the passage of Obamacare, the United States now ranks 11th out of 178 rated economies, behind Chile (7) and Canada (6). Once upon a time, the United States was at a respectable sixth place in the rankings, but since President Barack Obama was sworn into office the U.S. has fallen out of the top 10.
By unleashing the power of the free enterprise system, economic growth follows
The effects are all around us. Wages are stagnant while most of the wealth being generated is being concentrated among those closest to the political class. No surprise, then, why there is broad discontent among the electorate that feels it is being squeezed.
Of course, what’s needed is not populism grounded in tried and failed big government policies, but rather economic policies that make it easier for people to save, invest and create commerce.
But while we turn our back on what has made our country prosperous, in countries such as India, which has some of the highest levels of poverty on earth, economic freedom is beginning to flourish. Under the reform-minded Narendra Modi government, India has been better managing its public finances and making investment easier, according to the Index’s authors. Work remains, to be sure. But if India continues on along its current path, the future looks bright for the world’s largest democracy.
What this means is that more and more Indians will have the ability to control their destinies and enjoy a higher quality of life. It may mean owning a cell phone and accessing the Internet or not worrying about where they’ll get their next meal. That’s the power of the free enterprise system, made possible through greater economic freedom.
Famed economist Milton Friedman and his wife Rose captured the moral argument for capitalism this way: “So long as freedom is maintained, it prevents positions of privilege from becoming institutionalized. Freedom means diversity, but also mobility. It preserves the opportunity for today’s disadvantaged to become tomorrow’s privileged and, in the process enables almost everyone, from top to bottom, to enjoy a fuller and richer life.”
Israel Ortega is a Senior Writer for Opportunity Lives. You can follow him on Twitter @IzzyOrtega.