F is for Freedom

April 5th, 2014 at 5:06 am by David Farrar

The hits F in their economic alphabet:

Trying to explain economic freedom to someone living in an economically free country is like trying to explain to a fish what water is. Like a fish in water, when we are free we rarely stop to consider what freedom is, why it is important to our livelihood, and what would happen if it was ever taken away.
 
Fortunately, New Zealand consistently ranks near the top of international indices measuring economic freedom. But this also means that we might take it too much for granted.
 
In its broadest sense, economic freedom is the ability for individuals to autonomously arrange their economic affairs and pursue greater prosperity. More specifically, it is the ability to exercise personal choice, participate in voluntary exchange, compete in markets, and enjoy the use of one’s property.
 
The choice to start a new business in any given field is an example of economic freedom. As is the ability to choose from ten different brands of bread at the supermarket. When you are able to sell your bike on Trade Me at whatever price you wish, this is also an example of economic freedom.
 
There is a role for government to play in economic affairs, but that role is limited. For the most part, it is to provide the legal structure to protect property rights and enforce contracts.
 
Of course, very few governments stick to those core functions. There are many other tasks that governments have taken on, such as the provision of roads and infrastructure, education, and health, to name a few.
 
But the more the government’s role is extended, the more economic freedom is threatened and diminished. The government harms economic freedom through corruption, over-regulation, taxation, and restrictions on voluntary exchanges.
 
While tax policies, subsidies, restrictions on foreign investment, or regulatory reforms by themselves may be undertaken with the best intentions, they all limit economic freedom. This has real material consequences. One only needs to observe the difference between North Korea and South Korea.
 
According to empirical research, high degrees of economic freedom are positively correlated with greater economic growth, higher average incomes, greater gender equality, higher life expectancy, and less poverty.
 
The value of economic freedom over crowd-pleasing government policies is only truly appreciated when it is gone. We should never take it for granted. Eternal vigilance is the price of liberty.

The link between economic freedom and prosperity is well documented.

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27 Responses to “F is for Freedom”

  1. Azeraph (604 comments) says:

    And the withdrawal bubble that Auckland has been in? Foreign investment is great but now we have people in their 30’s who have been saving for years but can’t get a house anywhere near their economic center they want to live in. How many here have actually talked to Law abiding young couples who only see renting as the only future they have?

    What’s the statistic for our young middle class achievers as opposed to our blue collar work force?

    An average crappy old 3 bedroom villa in Grey Lynn Auckland averages $900 – $1.2 starting. There’s a false classist system developing here along with a micro bubble perspective of personal status. Bitch nigga please Oh my god! I see it every day, even amongst young builders. I can only say from personal experience that you don’t see it in the UK. My personal reasoning is that we are still a young entity upon the world stage. Do you think countries develop ego’s? It has affected JK but that is taken from the media lens i have gathered the info from and is suspect.

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  2. gravedodger (1,546 comments) says:

    The stark contrast between the Koreas is such a valid one.

    Until the defeat of Colonial ruler Japan the population arrived at freedom as one national entity.

    The North ended up with a communist one party rule and the South struggled through a mess of emerging democratic process to where it stands today.
    A perfect study in, was it Churchill’s claim; “Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time”.

    Why any educated mind would portray the North as a success is total mystery yet there are many who do.

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  3. OneTrack (2,988 comments) says:

    gravedodger – it seems there are many in New Zealand who want to follow the North’s success. Well the North Koreans are all equal, and that’s the goal. Right?

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  4. Viking2 (11,372 comments) says:

    Azeraph (588 comments) says:
    April 5th, 2014 at 8:05 am

    If you want to live on a tiny narrow bit of NZ with major issues of access all because it is surrounded on both sides by the sea then you get what you want. High costs.
    There are plenty of places in NZ even more livable that don’t cost that.

    Oh you want to work in a hothouse or a uni or some other such place and they are all in that tiny land space then don’t be surprised that you pay Hong Kong prices for your utopia.

    Yet to understand why any business would want to incur the business costs of operating there. Of course a big chunk of those costs are born by their employees and customers. Clearly to much labour available and a lack of real competition for the customers and their money.

    Its a fact of life if you want to live in Grey Lynn so stop moaning or move out like sensible people do.

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  5. smttc (737 comments) says:

    GD, big difference between democracy and economic freedom.

    Democracy, while good, can enable the tyranny of the majority to be visited upon the economic freedom of the minority by governments of the socialist hue.

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  6. mikenmild (11,247 comments) says:

    I see that New Zealand ranks very highly on international surveys of economic freedom.

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  7. SW (240 comments) says:

    Is this article really drawing some sort of a parallel between governments that provide school and health services to governments like North Korea?

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  8. Yoza (1,788 comments) says:

    smttc (630 comments) says:
    April 5th, 2014 at 9:02 am

    GD, big difference between democracy and economic freedom.

    Democracy, while good, can enable the tyranny of the majority to be visited upon the economic freedom of the minority by governments of the socialist hue.

    No, mustn’t let the grubby public threaten the economic freedoms of predatory foreign corporates through the political process.

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  9. prosper (152 comments) says:

    AZERAPH

    I think you will find houses in England’s biggest city are more expensive than NZ,s biggest city. Having said that when you have a left wing council staffed by socialist planners restricting the supply of land,thus pushing up land costs so they can have a high ratable value in order to collect more money to expand their self-serving empires what do you expect. Look at your rates. In nearly all cases the land value is significantly higher than the house value. To add insult to injury you have planners collecting horrendous consent fees. On top of all this you have non citizens purchasing property sight unseen, as they get their money out of a communist country and launder it at the same time. Carter Holt and Fletchers ripping off kiwis with prices that are up to 100percent higher than the same companies supplying builders in Brisbane. Occupational health and safety dreaming up obscene regulations for contractors that increase building costs by up to 30percent.For example a third of the cost of sealing g a road is traffic management fees. I haven’t even got to parks and reserve fees etc.

    All this can be fixed by getting rid of socialist councils and giving center right governments enough votes took them to govern without having to combine with minor parties that may have different agendas.

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  10. ShawnLH (4,489 comments) says:

    “As for the moral status of majority rule, it must be pointed out that it allows for A and B to band together to rip off C, C and A in turn joining to rip off B, and then B and C conspiring against A, and so on. Democracy must be regarded as a historical error, economically as well as morally. Democracy promotes shortsightedness, capital waste, irresponsibility, and moral relativism. It leads to permanent compulsory income and wealth redistribution and legal uncertainty. It is counterproductive. It promotes demagoguery and egalitarianism. It is aggressive and potentially totalitarian internally, vis-à-vis its own population, as well as externally. In sum, it leads to a dramatic growth of state power, as manifested by the amount of parasitically – by means of taxation and expropriation – appropriated government income and wealth in relation to the amount of productively – through market exchange – acquired private income and wealth, and by the range and invasiveness of state legislation. Democracy is doomed to collapse, just as Soviet communism was doomed to collapse.”

    Hans-Hermann Hoppe: Democracy – The God That Failed: The Economics and Politics of Monarchy, Democracy, and Natural Order

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  11. prosper (152 comments) says:

    Shawn
    Given what you say is at least partially correct. What do you suggest. I need a positive comment to lift the depression you have inspired.

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  12. ShawnLH (4,489 comments) says:

    Prosper,

    Work hard, save your money, defend the Monarchy, and stop voting. In the long run social democracy and debt spending are self defeating. It will sooner or later run out of steam and collapse.

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  13. prosper (152 comments) says:

    Shawn.
    I am still depressed. I expect any money I have will be taxed away from me before the collapse. Have you been reading Ayrn Rand?

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  14. ShawnLH (4,489 comments) says:

    Prosper,

    Nah, Rand doesn’t interest me. She was a Liberal, I’m a Traditionalist Conservative. Edmund Burke is more my thing.

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  15. ShawnLH (4,489 comments) says:

    Prosper,

    you do realise I’m not remotely serious right? :)

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  16. wat dabney (3,709 comments) says:

    Yoza,

    mustn’t let the grubby public threaten the economic freedoms of predatory foreign corporates through the political process.

    The problem is that big government, which people like you created in order to provide rent-seeking opportunities for labour cartels such as state-sector unions, is equally available to big companies.

    This is just another reason why the economically literate argue for minimal government: it restricts all special-interest groups to the discipline of the free market. Such governments simply don’t have the power of patronage.

    In short, don’t complain about about a situation which you actively helped bring about.

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  17. ShawnLH (4,489 comments) says:

    I though you were an anarchist Yoza?

    Bit confused there son. :)

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  18. Fentex (925 comments) says:

    The correlation is clear, but the consequences of recognizing it isn’t.

    Some people think it’s an argument for liberalising laws and regulations in countries where they are too stiff and encumbering, but that ignores considerable context – there’s a reason situations differ place to place and it’s usually more than simply an arrogant or over-active treasury fiddling with regulations on trading, taxing and money movements.

    If a society doesn’t have a tradition of individual responsibility or political loyalty to abstracts like nation or constitution that encourage equal treatments any effort to free economic activity by deregulation becomes enabling of the politically powerful to assume more wealth and authority.

    And social change is a very different kettle of fish to simple regulatory change.

    We’ve seen a grand experiment about this in the real world over the last few decades with the liberalisation of economics in China and Russia. In China it has been much more successful than Russia at improving everyone’s circumstances.

    A very brief précis of a hypothesis why;

    Chinese culture has long been entrepreneurial, Russia’s has not. After a period of communal suppression of capitalist reward cultural pressure for a return to entrepreneurial wealth creation persisted in China and pressured authority to give it space – that is to say Chinas return to capitalist business was driven from below.

    Russia on the other hand commanded entrepreneurial-ism from above, and it has not succeeded as well because there is not memory of it in Russian culture, it is new and struggling against millennia of cultural barriers. It may eventually succeed, it may do little more than accumulate wealth in the oligarchy for new Tsars.

    The point is that culture and history have momentum that takes generations to deflect and can stymie ambitions.

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  19. ShawnLH (4,489 comments) says:

    “A very brief précis”

    You can get pills for that.

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  20. stephieboy (2,711 comments) says:

    Of course, economic freedom as practiced here is highly desirable.Nobody in their right minds would ever want to implement a Centralised Controlling planning entity like Gosplan as in the old Soviet Union. On the other hand nobody in their right minds could possibly entertain the anarchy and untrammelled “freedoms” of Libertarians as dished up by by ACT and the now defunct Libertariannz. ( both the Marxism of the Right )

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  21. ShawnLH (4,489 comments) says:

    F is for fuck :)

    Oops, I dropped something…

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  22. prosper (152 comments) says:

    Shawn
    That’s a relief I was hoping you weren’t serious.

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  23. ShawnLH (4,489 comments) says:

    I almost never am prosper, but the general gullibility of some folks on this blog is endlessly fascinating. :)

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  24. ShawnLH (4,489 comments) says:

    And they take themselves and their little debates way, way too seriously.

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  25. hj (6,882 comments) says:

    I DID but prompt the age to quit their clogs
    By the known rules of ancient liberty,
    When straight a barbarous noise environs me
    Of owls and cuckoos, asses, apes, and dogs;
    As when those hinds that were transformed to frogs
    Railed at Latona’s twin-born progeny,
    Which after held the Sun and Moon in fee.
    But this is got by casting pearl to hogs,
    That bawl for freedom in their senseless mood,
    And still revolt when Truth would set them free.
    Licence they mean when they cry Liberty;
    For who loves that must first be wise and good:
    But from that mark how far they rove we see,
    For all this waste of wealth and loss of blood.

    http://www.bartleby.com/4/305.html

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  26. publicwatchdog (2,516 comments) says:

    Whilst we are talking about New Zealand’s ranking in international surveys – how many Kiwinloggers are aware of this one?

    The Financial Secrecy Index – which provides a different ranking for NZ.

    Secrecy is an essential ingredient for corruption.

    NZ is ranked 48th.

    http://www.financialsecrecyindex.com/introduction/fsi-2013-results

    errrr….. wouldn’t you think given that New Zealand is ‘perceived’ to be ‘the least corrupt country in the world’ – that we arguably should be the MOST ‘transparent’ and the LEAST financially secret?

    http://www.transparency.org/cpi2013/results

    Does that mean that Transparency International’s ‘Corruption Perception Index’ – is actually a CROCK – and not worth the paper upon which it is written?

    That’s my considered opinion.

    Penny Bright

    ‘Anti-corruption /anti-privatisation Public Watchdog’

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  27. Yoza (1,788 comments) says:

    wat dabney (3,398 comments) says:
    April 5th, 2014 at 11:35 am

    Yoza,

    “mustn’t let the grubby public threaten the economic freedoms of predatory foreign corporates through the political process.”

    The problem is that big government, which people like you created in order to provide rent-seeking opportunities for labour cartels such as state-sector unions, is equally available to big companies.

    This is just another reason why the economically literate argue for minimal government: it restricts all special-interest groups to the discipline of the free market. Such governments simply don’t have the power of patronage.

    In short, don’t complain about about a situation which you actively helped bring about.

    What you describe as ‘big government’ is the consequence of centuries of policies to which you wish to turn back the clock. The more the few own the greater their need for a secure environment in which to exploit that accumulated wealth/power.
    Big government exists to protect those who have accumulated massive concentrations of wealth – which in turn imbues them with a disproportionate degree of authority – from those on whom the exercise of that control of capital is inflicted. In developed countries ordinary people have spent centuries building up institutions to defend themselves against the raw power of capital.
    We only need witness the disasters inflicted on those in ‘under-developed’ countries when concentrated capital is wielded against populations that do not have access to the sophisticated kinds of institutions, which defend the public and environment in modern Western societies, to understand the necessity of collectively organising to defend our way of life. Corporations are amoral entities that exist to return maximum profits to their owners, events such as environmental destruction and human rights abuses are cost/benefit calculations – they will take as much as they can for as little as possible.

    Minimal government would be fine, as long as it was organised from a participatory democratic foundation and not beholden to corporate power.
    The unbridled power of private tyrannies exercised against defenceless populations is the greater threat, the modern Western state is at least nominally responsive to public concerns.

    ShawnLH (1,291 comments) says:
    April 5th, 2014 at 11:37 am

    I though you were an anarchist Yoza?

    Bit confused there son. :)

    Not at all, see above.
    There is really only one central tenet of anarchism: The legitimacy of authority must be challenged, if that authority is found to be illegitimate we must seek ways to abolish it.
    You seem to be saying that wealth necessarily confers authority – I would argue this is obviously an illegitimate premise to anyone claiming anarchist credentials.

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