It’s Economic Liberty, Stupid!

Posted on Feb 2 2011 - 1:00am by Harrison

At the end of the day, the toppling of a government happens for one basic reason: a lack of economic liberty.  The more repressive a regime, the less economic freedom and the lower the standard of living is with fewer opportunities to advance in life.  Despots don’t do free market economies – they can’t – because a free market economy requires every member of the population to be able to make changes in their lives as they see fit and for every other member to either accommodate these changes or not.  With over 360 million people in the United States, billions of decisions per day are made by Americans such as: should I get a new job, should I save money or buy an LCD television, how much can I sell my weekend home for, which stock is best for me to buy, should I patent my idea?

Peoples living in planned or restricted economies can’t make most of these decisions because they aren’t free.  They aren’t free because their economies aren’t free.  Their economies aren’t free because they are ruled by despots who can only maintain their power by taking control of every aspect of life.

If you were in China right now and searched for “Egypt” you would get no results because the government has controlled access to that information.

The riots in Tunisia were started by a university graduate who, frustrated at not being able to advance economically in his life, started selling food from a cart.  The police didn’t like this because he didn’t have a permit (which he would not be granted) so they confiscated his cart and food.  In response, the man set himself on fire.

He didn’t see a future for himself.  If enough people agree, they will revolt.

Business Insider had a series of revealing graphs showing the lack of economic liberty in Egypt:

Fewer economic opportunities mean pessimism about the future.

A free market economy would look very differently.

Countries such as Egypt and Tunisia have very inefficient economies with little mobility and a vast underclass.  Other countries in the Middle East also have inefficient economies but they have vast amounts of oil which produces income that the State can distribute to essentially keep the populace’s silence via welfare payments.

When you have vast amounts of the population sitting around with the feeling that their skills are not needed and they have little chance of using their talents to improve their lives, you will have revolution.  The problems in Egypt have not appeared overnight but the Internet has allowed someone living in Cairo to compare their life with that of someone living in other parts of the world to see how they are doing relative to others and this has provided the impetus to act.

In the United States, when someone who lives far away from the Big City watches television they can see how others live, just as those in Egypt do.  They might be watching the show Burn Notice on cable and notice the main character wearing a nice suit.  If they want, they could go online and find a similar suit and order one they can afford.  They can say to themselves:

I saw someone else wearing a suit I liked and now I have one, too.

Someone in Egypt has no hopes of this because they have little economic mobility and, as the chart above shows, their inefficient economy forces them to spend up to 40% of their income just to feed themselves.  There is no established banking system such as we have in the West so buying on credit is not an option and because everything is centrally planned, entrepreneurs who could offer affordable suits are few and far between and jobs are thus limited making it impossible to earn enough money to buy a suit.  The result is frustration and that nagging feeling you aren’t going anywhere in life.

Because our economy is so diverse there are not only thousands of different kinds of suits on the market but there are millions of different types of jobs one could get in order to buy such a suit.  In short, that person would feel they have the economic opportunity to better themselves, even if at the end of the day we are just talking about an article of clothing which they could wear to an interview to get a better job.

Americans also do not spend 40% of their income on food because we have a relatively efficient economy when compared to most countries.  And for most people, when you don’t have to worry about going hungry you can spend your time buying a suit you saw on some television show and go to bed content with yourself.  Even if you didn’t buy the suit you could tell yourself that, if you wanted to, you could buy it.  The could buy it part is what prevents revolutions from occurring because if most people feel like you do, that they could do something if they wanted to, why upset the apple cart and destroy the system?

Cynical Liberals would say this is how the Corporate Class keeps the Working Class down… by telling them that one day they will be able to buy that car or house or suit.  Liberals will say the Capitalist system is just deluding you with dreams that will never come true because it is rigged.  Unfortunately for Liberals, enough Americans actually do advance economically to disprove their theories.

Liberals like to put down Capitalism because it is “selfish” and “cold” but Capitalism works because it makes many of the worst elements of human nature work for us not against us.  In economic terms, ours is a self-correcting system unless, of course, the virtually unlimited dollars from the Federal government pollutes and distorts the system thus destroying the balance.  Fannie Mae and Freddie Mac are but one example of Federal money distorting the system making self-correction impossible.

The result is a “crash” when the system corrects itself in a violent, sudden way.

Planned economies run by despots like those in Egypt don’t reward greed (or the fancy word for it: entrepreneurship) because if you invent a better widget the president’s nephew might have you thrown in jail, steal your idea, and open a factory selling your it.  There is little incentive to make a better mousetrap because it is very difficult to profit from it and if you feel like you’re going nowhere in life because the system is out to get you and everyone else feels this way, too, then you have the inevitable result: revolution.

The problem with what could happen in Egypt is almost all of the people demonstrating have little idea what life in a free Capitalist society is like because those aspects of existence have not been allowed to grow due to an oppressive government.  The youth who want freedom may end up with something very different: an Islamic state.  The Muslim Brotherhood will promise “social justice” and enough food for everybody and adequate housing but, in the end, cannot deliver on this because they are anti-free market.

If the demonstrators buy into the story spun by the Brotherhood and put them in power they will realize only too late that they have been sold a bill of goods with nothing to show for it in return.  This is the danger the world runs by the events unfolding in the Middle East.  We can only hope the darker forces do not prevail.

But at the bottom of it all is one fact: free economies equal stable societies.

Look at the chart below, courtesy of the Heritage Foundation… would you want to live in any of those countries which rank low in terms of economic freedom?  Don’t think so.

Egypt is #97, right next to Tunisia (#98) which just underwent a revolution.

See any relation between happiness and economic freedom?

8 Comments so far. Feel free to join this conversation.

  1. LD Jackson February 2, 2011 at 2:29 AM -

    Another excellent post, Harrison. You lay it out so simple, I wonder why our own government can’t see the simplicity of it all.
    LD Jackson recently posted..The Crisis Commission Report Can’t Be Taken Seriously

  2. Steve Dennis February 2, 2011 at 3:50 AM -

    Wow! Great post Harrison, I agree with Larry when he wrote that you make it seems so simple. It really is all about the economy because the economy is what lets people make something of themselves–at least in a free society.
    Steve Dennis recently posted..Arizona group begins the process to recall Sheriff Dupnik

    • Harrison February 2, 2011 at 11:40 AM -

      Thanks. I wonder what you call someone who ignores the facts?

      • Matt February 2, 2011 at 4:23 PM -

        You refer to people that ignore realities as “liberals.” 😀

  3. sharon smith February 3, 2011 at 10:55 AM -

    As I was reading your article, North Korea was running through my mind. Not surprising, they rank #179 on the economic index. North Koreans don’t have a access to media, which might be why they haven’t had a revolution. They have no way of knowing that they actually live in a very harsh society.
    About a year ago there were studies being done with children on the Korean peninsula. Somehow, someone figured out that the average height of six-year-old boys differed by several inches in these countries. South Koreans are thriving and most North Koreans don’t know any better.

  4. Dean February 3, 2011 at 1:54 PM -

    I’m not doubting the veracity of that list but how can anyone be less economically free than North Korea?

    Sudan, you are to be saluted for achieving the impossible.