The “Economic Freedom Index” Isn’t

In a recent article for Reason magazine (“Freer is Better,” October 14th),  John Stossel discusses the downgrading of the United States on the Economic Freedom Index from sixth to eighth place — “behind Canada!”  The index is based on several matrices, including freedom of movement of capital, the amount of business regulation, and levels of taxes and spending.  Apparently increased government spending coupled with the bailouts and/or purchases of the banking and auto industries were the primary cause of the change.

The United States, for the first time in sixteen years, was reclassified from “totally free” to “mostly free.”

That last bit of information suggests that the Index is based on, to say the least, a very skewed view of what “economic freedom” entails. Its standards are so warped by neoliberal ideology as to be almost entirely suspect (that the Index is compiled by the Heritage Foundation’s Center for Data Analysis, in collaboration with the Wall Street Journal, should tell you something.)

The United States was “totally free” economically until this year? That’s enough to suggest, right there, that the Index focuses on a narrow range of “economic freedom” criteria that are most amenable to corporate power, without looking critically at the forms of state intervention most centrally important for strengthening corporate power.

For example, by any valid measure of economic freedom, the passage of the Digital Millennium Copyright Act would have been considered an upward surge in statism and protectionism unequaled since (at least) the Smoot-Hawley Tariff. But Heritage, a co-creator of the Index, is one of the most strident advocates, inside the pseudo-libertarian beltway establishment, of global “intellectual property” enforcement expansion.

The Economic Freedom Index fails to distinguish between the primary, structural forms of state intervention that prop up corporate power, and the secondary, ameliorative forms of intervention that attempt to moderate its side effects. The state enforces a whole host of artificial property rights and artificial scarcities which serve as sources of economic rent to privileged firms, and maintains all sorts of regulatory cartels. The cumulative effect of these privileges, artificial scarcities, and cartels is to place the entire planet under virtual corporate lockdown (although we’re still not down to the twelve corporations in “Rollerball” quite yet).

None of these forms of intervention shows up on the “Economic Freedom Index.” What does show up is the fiscal and welfare state interventions undertaken to restrict corporate exercise of state-granted privileges and make corporate power humanly endurable for those of us who work in the world instead of owning it.

When the mainstream press and mainstream politics identify this kind of analysis with “economic freedom,” it’s no wonder that the general population thinks it’s against “free markets.”  If I didn’t know better, if I didn’t know that real free markets were the enemies of corporate power, I’d hate them myself.

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