Dollars & Sense: (Economic) Freedom’s Just Another Word for...Crisis-Prone

[marmar]

(Economic) Freedom’s Just
Another Word for...Crisis-Prone

By John Miller

In a period of slowing economic growth in many parts of the world, popular pressure for governments to act to fix the situation can be enormous. In responding to such pressure, it is vital that leaders understand the real causes of negative economic developments and undertake actions that will fix them rather than exacerbate them. If intrusive government regulation has contributed to an economic problem, it is unlikely that still more government regulation will cure it. If excessive taxes have stifled investment and entrepreneurship, increasing tax rates is unlikely to spur economic growth. If the monetary supply has been too loose or credit too easily available, lowering interest rates is unlikely to be the magic fix the public demands.

—Executive Summary, Index of Economic Freedom 2009

In “Capitalism in Crisis,” his May op-ed in the Wall Street Journal, U.S. Court of Appeals judge and archconservative legal scholar Richard Posner argued that “a capitalist economy, while immensely dynamic and productive, is not inherently stable.” Posner, the long-time cheerleader for deregulation, added, quite sensibly, “we may need more regulation of banking to reduce its inherent riskiness.”

That may seem like a no-brainer to you and me, right there in the middle of the road with yellow lines and dead armadillos, as Jim Hightower is fond of saying. But Journal readers were having none of it. They wrote in to set Judge Posner straight. “It is not free markets that fail, but government-controlled ones,” protested one reader.

And why wouldn’t they protest? The Journal has repeatedly told readers that “economic freedom” is “the real key to development.” And each January the Journal tries to elevate that claim to a scientific truth by publishing a summary of the “Index of Economic Freedom,” an annual report put out by the Heritage Foundation, Washington’s foremost right-wing think tank. But Heritage’s index turns out to be a barometer of corporate and entrepreneurial freedom from accountability rather than a guide to which countries are giving people more control over their economic lives and over the institutions that govern them.

This January was no different. “The 2009 Index provides strong evidence that the countries that maintain the freest economies do the best job promoting prosperity for all citizens,” proclaimed this year’s editorial, “Freedom is Still the Winning Formula.” But with economies across the globe in recession, the virtues of free markets are a harder sell this year. That is not lost on Journal editor Paul Gigot, who wrote the foreword to this year’s report. Gigot allows that “ostensibly free-market policymakers in the U.S. lost their monetary policy discipline, and we are now paying a terrible price.” Still, Gigot maintains that “the Index of Economic Freedom exists to chronicle how steep that price will be and to point the way back to policy wisdom.”

What the Heritage report fails to mention is this: while the global economy is in recession, many of the star performers in the Economic Freedom Index are tanking. Fully one-half of the ten hardest-hit economies in the world are among the 30 “free” and “mostly free” economies at the top of the Index’s ranking of 179 countries. .......(more)

The complete piece is at: http://www.dollarsandsense.org/archives/2009/0909miller.html

[izquierdista]

1. “It is not free markets that fail, but government-controlled ones”

Said like a true believer in the religion of the free market. What started out as a construct to explain some social phenomenon, i.e. economic exchanges of goods and services, has turned into a religion with believers who follow the unerring words of the priests of the cult.