Economic Freedom and Development

The future of every country depends on how well her citizens can use available resources, in the shortest possible time, to create wealth and employment in the country. However, this is hardly achievable where human initiative and innovation are suppressed, thus hindering economic freedom and development. Although, it is rather an argumentative discourse if economically free nations are better off than their counterparts in all indicators of wellbeing. As would be expected in this kind of discourse, we are readily faced with two problems. First, what are the criteria of economic freedom? Second, what indicators can readily be relied upon to judge a nation’s wellbeing? Knowledge of what indicators to use, and what constitutes economic freedom would be the starting point in comparing nations of the world.

The definition of ‘economic freedom’ is complicated. Its complication arises from the fact that it has no internationally acclaimed definition. Different people define it according to their economic orientation. For instance, the definitions of economic freedom by communist, socialist and Marxist, on the one hand, and that of a capitalist or a neutral player could hardly be the same. However, the concept has been defined by Niclas Berggren, an economist in the Ratio Institute, Stockholm, Sweden, as “the degree to which market economy is in place, where the central components are voluntary exchange, free competition, and protection of persons and property”. Similarly, it has been defined by the online encyclopaedia, Wikipedia, “as the freedom to produce, trade and consume any goods and services acquired without the use of force, fraud or theft. This is embodied in the rule of law, property rights and freedom of contract and characterised by external and internal openness of the market, the protection of property rights and freedom of economic initiative.” According to the Fraser Institute in its annual publication, Economic Freedom of the world, 2012 Annual Report, five major areas for determination of economic freedom were canvassed. They include, Size of Government( government participation), legal system and property rights, sound money, freedom to trade internationally and regulation. In its Economic Freedom Ratings 2010, the top 20 nations included, Hong Kong, Singapore, New Zealand, Switzerland, Australia, Canada, Bahrain, Mauritius, Finland, Chile, United Arab Emirates, Ireland, United Kingdom, Estonia, Taiwan, Denmark, Qatar, United States, Kuwait, and Cyprus, Japan and Oman tying the 20th position. In the bottom 20 were, Lesotho, Ecuador, Argentina, Niger, Cote d’Ivoire, Central African Republic, Ethiopia, Mauritania, Togo, Burundi, Mozambique, Chad, Algeria, Guinea-Bissau, Democratic Republic of Congo, Angola, Republic of Congo, Zimbabwe, Myanmar and Venezuela taking the last position. These economic freedom rating will be used throughout this essay to compare countries. Now we can proceed to compare these nations and establish a relationship between economic freedom and wellbeing.
Indeed with regards to economic freedom in different nations, a broad comparison will depend on a number of comparable frontiers. This is simply to say that in determining if economically free nations outperform their opposites in all indications of wellbeing, necessary indicators must first be identified. This obviously brings us to the second problem, already raised, namely, what are the indicators of a nation’s wellbeing. For the purpose of this essay, I shall rely on five different indicators namely, level of poverty, level of unemployment, standard of living, life expectancy and Gross National Product, Gross National Income, or Gross Domestic Product.
To begin with, nations that are economically free provide better opportunities for citizens to invest in new businesses and also protect the citizens’ proprietary interest through effective law. The impact this will have on the economy is better and improved employment opportunities which will cut down the level of poverty in a country. The harsh effects of poverty on the lives of citizens need no elaboration. Its impact is the beginning journey into hunger, lack of health care and early death. Again, where poverty dominates in a country, families have to resort to every workable option for survival, this is the genesis of child labour. A case study of most industrialised nations with economic freedom will show a low level of poverty when compared with nations that suffer from economic bondage. For example, Zimbabwe had 68% poverty level in 2004 and Nigeria( ranked 120 in the economic freedom index) had a 70% poverty rate as at 2007. In contrast, Mauritius had 8% poverty rate in 2006, while Taiwan had an incredible 1.16% in 2010.
Again, unemployment is an indicator of wellbeing. It is often, though not exclusively, tied to illiteracy level. The level of illiteracy in a country has an adverse effect on employment. This is simply because majority of the population lacks specialized skills and technical knowledge which incapacitates their innovative and inventive abilities. This will ultimately lead to fewer jobs being created for the ever growing population. The correlation between illiteracy and unemployment cannot be overemphasized. Unemployment is a strong indicator of wellbeing because it determines the quality of life the people can live. It can be safely concluded that countries that score high on illiteracy level also score high on unemployment ratings. If a people lack the intellectual and economic freedom to create new businesses, wealth and employment, then the obvious result is a high level of unemployment. Zimbabwe had an unemployment rate of 70% in 2011, and is the third worst non-economically free nation in the world. In contrast, Switzerland has 3.1% unemployment rate as at 2012.
Furthermore, the standard of living of economically free nations outweighs their opposites. The standard of living is closely linked to poverty and unemployment; where these two determinants are high, the standard of living will be poor. It is therefore not surprising that a country like Zimbabwe, with unemployment rate of 70% and poverty level of 68%, has an abysmal standard of living which is among the worst in the world. The most significant thing about Zimbabwe is that it is ranked as one of the worst non-economically free nations. Obviously, I do not entertain any doubt that the standard of living is a good indicator of the wellbeing of any nation. Interestingly, Hong Kong, which is ranked as the most economically free nation has a standard of living which is among the highest in the world.
In the same way, a glance through the ratings of countries based on Gross National Product(GNP), Gross National Income(GNI) or Gross Domestic Product(GDP) will show that the top 10 nations are also among the top 20 economically free nations. While the bottom 20 are among the least free nations in the world. The top 10 countries by GDP, as of 2012 IMF rating, are Luxembourg, Qatar, Norway, Switzerland, Australia, United Arab Emirates, Denmark, Sweden, Canada and Singapore, and they are among the top 20 economically free nations as reproduced above in paragraph 2. The ratings for the bottom 10, 2012 IMF rating, include Sierra Leone, Eritrea, Madagascar, Niger, Malawi, Ethiopia, Liberia, Burundi, Democratic Republic of Congo, and Somalia. Interestingly, these countries are among the worst in the rankings of economically free nations reproduced in paragraph 2.
An overall indicator of wellbeing is life expectancy. It is a direct result of all the other indicators. Poverty, unemployment, illiteracy have a bearing on life expectancy because they determine access to health care and quality of life. The life expectancy rate of most African countries is among the worst in the world. The economic freedom of these African countries is also the lowest in the world. Examples abound, the life expectancy of Chad, Angola, Mali, Guinea-Bissau, Swaziland, Somalia, Lesotho, Democratic Republic of Congo, Central African Republic and Sierra Leone ranges from 51 to 47 years, and constitute the 10 lowest in the world.
In conclusion, the level of economic advancement, legal framework and system of economy practised affect individual input, in terms of innovation and invention. Most African countries practise mixed economic system with a rough balance between state and private ownership, but one common feature among them is that there is always a sphere reserved for the exclusive exploitation of the state. Thus, state monopoly in African countries is not strange. The performance of economically free nations and the advancement of open markets has led renowned socialist, Robert Heilbroner, to admit that the capitalist and economic freedom has won the debate as the statistical evidence becomes overwhelming. It is advocated that countries, based on statistical evidence, should pursue policies that promote economic freedom in order to speed up their economic advancement and the wellbeing of citizens. Therefore, it is most apt from the foregoing, to submit that economically free nations outperform non-economically free nations in all indications of wellbeing.

Emeka E. C. Sylvester

© 2017.