Is the US the Most Economically Libertarian Country?

By On October 10, 2012 · 20 Comments · In Libertarianism, Social Justice

More from Libertarianism: What Everyone Needs to Know.

Most people assume the United States is the most economically libertarian country. Not so.

Even though the US has the highest number (in both absolute and percentage terms) of self-identified libertarians, and even libertarian ideas get more play in mainstream US politics, the US is not the most libertarian country overall. It does not have the strongest commitment to economic or to civil liberties. Many of the countries that Americans and others are inclined to describe as “social democracies” or “socialist” actually are more libertarian than the United States.

Libertarian rhetoric is more prominent in the US than elsewhere. But talking libertarian talk is not walking the libertarian walk. We need to see what the governments of different countries actually do.

The Wall Street Journal and Heritage Foundation produce an annual Index of Economic Freedom. They rate countries for their respect for property rights, freedom from corruption, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, financial freedom, fiscal freedom, and government spending. Hong Kong, Singapore, Australia, New Zealand, Switzerland, Canada, Chile, Mauritius, and Ireland have higher overall scores than the United States.

… Australia, New Zealand, the United Kingdom, Canada, and Switzerland have higher levels of economic freedom. Many of the Scandinavian countries—which Americans often call “socialist”—beat the US on many central aspects of economic freedom.

I go on to argue that we should regard Denmark in particular as economically freer than the United States. Yes, Denmark has high tax rates, but on almost every measure of economic freedom, it trounces the US.

Denmark ranks much higher than the United States on property rights, freedom from corruption, business freedom, monetary freedom, trade freedom, investment freedom, and financial freedom. Luxembourg, the Netherland, the United Kingdom, and many other countries beat the US on these measures as well. Thus, many other European countries might reasonably be considered more economically libertarian than the US.

Elsewhere:

Denmark also rates 99.1 in business freedom, 90.0 in investment freedom, and 90.0 in financial freedom. In comparison, the US scores 91.1, 70.0, and 70.0 respectively on these measures.)

Denmark and Switzerland have remarkably effective welfare states, but that doesn’t make them social democracies by the standard American Left’s idea of social democracy. Rather, think of them as free market countries with strong, well-functioning social insurance programs. They may be examplars of the most statist version of bleeding heart libertarianism.

Hard libertarians would regard Denmark as unjust because it taxes some to provide for others. Neoclassical and classical liberals in contrast may look favorably upon Denmark or Switzerland.

When I was writing the book, the Fraser Institute still ranked the US 10th overall in economic freedom. However, it now ranks the US 18th overall, lower than Denmark.

As I have argued in previous posts here, there’s a difference between the administrative state–which tries to control, regulate, and manage the economy (and everything else), and the social insurance state, which taxes citizens and provides publicly-funded social insurance. Hard libertarians oppose both the administrative state and the social insurance state, because they believe both violate people’s rights. Classical liberals and neoclassical liberals dislike the administrative state for a variety of reasons. But they are more open to the social insurance state. The social insurance state, by itself, if run properly, still allows citizens an expansive range of economic freedom.

On that note, John Tomasi recently did a few lectures in Sweden on Free Market Fairness. Even if we put his lecture at Timbro aside, he found that Swedes were remarkably open to his ideas in a way that American academics were not. Tomasi wonders: Are American academics pushing hard to make the US what Sweden was between 1970 and 1990, but the Swedes know this is a mistake? Tomasi writes:

Been thinking: The growth of our understanding of the moral requirements of social justice has lagged behind the growth in our understanding of the economic problems facing socialism and social democracy alike. Countries that have honestly absorbed the institutional lesson (Sweden) seem especially open/eager to consider the moral one (Sweden, or at least most every Swede I talked with last week). Market democracy, nordic style…

 
  • http://www.facebook.com/les.nearhood Les Kyle Nearhood

    But even if some nations manage their public social insurance systems pretty well, there is still a (opportunity cost) problem. Lack of competition. If it were done through competitive free market companies using a government set standard, and with tax monies supplementing the poor. Then it could be even more free, and more efficient.

    • aaron

      For example, Denmark, if my understanding is correct.

    • adelawyer

      While I am not a libertarian, there is some truth to what you say. This is exactly what Switzerland has done. They don’t have a public option but health insurance premiums for basic coverage are set by law and are regulated like utility monopolies were here. The Swiss don’t favor government regulation in economic matters, and some were at first resistant to health insurance regulation, but their common sense prevailed: the economic decision to buy a new convertible is not the same as whether to save your son’s life; most people will pay whatever it takes to cure themselves or their loved ones. To some extent The Affordable Care Act approaches this model insofar that it mandates each person to have coverage (like they do in Switzerland), mandates certain coverage requirements and requires a certain percentage of premiums to be spent on care. What would in my opinion bring us closer to the Swiss model is the elimination of all state regulation (this is where I and a libertarian might agree) in favor of one federal regulatory scheme with true national competition, as you suggest. Much of the problem lies in the fact that state regulators have, in some instances, limited competition to just 2 or 3 carriers.

  • Sean II

    Don’t laugh at the United States. It isn’t easy to combine such a high level of statism with such an inconsistent system of social insurance, while maintaining a public image as the global bad boy of unregulated markets and untaxed millionaires. We had to work at that.

    Of course it would be a lot less depressing if there were any hope that all the libertarian talk here was really signaling some latent capacity for libertarian action. If that turned out to be true, the next crisis might precipitate a shift away from statism, instead of the usual sharp turn into the spiral.

    As it is, we’ll be lucky to trade places with Estonia on the economic freedom list if we do everything right and Estonia blows its knee out in warm-ups or something.

  • http://www.facebook.com/people/Jerome-Bigge/100003095962760 Jerome Bigge

    Repeal of prescription laws is the first step towards medical freedom in that it destroys the monopoly that doctors hold over access to medical drugs. Without these laws, the relationship between doctor and patient becomes more one of contractor to client where the client makes the decisions, not the contractor. Of course this also tends to reduce the incomes of the medical providers, which is one reason that the MD’s always oppose such ideas…

    • http://www.facebook.com/les.nearhood Les Kyle Nearhood

      unfortunately it will never happen in the USA where drug war hysteria remains high.

  • http://twitter.com/JadeQueen Mary Saunders

    Repeal of prescription laws might not happen in the U.S. any time soon, but it is going to happen elsewhere. The U.S. is going to bring up the rear on trusting the judgment of its people, probably for a while, unless Gary Johnson repeats his NM miracle on a national level.

  • http://twitter.com/JadeQueen Mary Saunders

    As for laughing at the U.S., I do it daily, even though I haven’t gotten around to watching much of Portlandia the series. I live here. I look out the window and amble around.

  • Bob_Robert

    The operative phrase being, “if run properly”.

    That makes it a subjective, rather than objective, judgement. What works for thee does not for me.

  • ThaomasH

    “Denmark and Switzerland have remarkably effective welfare states, but
    that doesn’t make them social democracies by the standard American Left’s idea
    of social democracy.”

    Maybe Mr Brennan needs to write another book on “the standard American Left’s
    idea of social democracy.” Does anyone advocate
    for “the
    administrative state–which tries to control, regulate, and manage the economy
    (and everything else)?”

    • Adrian Ratnapala

      So you mean the American left is general in favour of deregulation?

      • ThaomasH

        Of course not.  No one objects to regulations designed to mitigate market failures and information asymmetries.  Cost benefit analysis should be the touchstone of regulation/Pigou taxes.  But neither does anyone that I know of advocate for “the administrative state–which tries to control, regulate, and manage the economy (and everything else)?”

        Thomas L Hutcheson

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  • 1939393

    This is ridiculous. Half the listed states have universal healthcare and education. What a stupid list.

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  • adelawyer

    Funny how economic freedom can flourish with universal healthcare, robust taxation, quality public education, intelligent environmental regulation and smart mass transit. Just ask “socialist” Bernie Sanders.

    • Fallon

      Relative comparison, not an absolute comparison. Denmark does well against the US but falls well short of laissez-faire. Plus, Denmark is a free rider on defense, a large chunk of which is paid for by American serfs. In addition, the neo-classic liberal philosophers associated with Arizona, etc, tend to rely on utilitarian and/or Hayekian economic analyses; the degree of empiricism hides significant factors of opportunity costs and economic calculation issues.

      • adelawyer

        Agreed on defense – we spend more than the rest of the world combined. On that and social issues, I tend to be more in the libertarian camp (legalize most drugs, etc.). Centralized, statist economies suck in the long term – we all know that. I think most mature and rational people realize, however, that profit based incentives (the engine of capitalism), by definition, will not generally draw free market resources to a variety of endeavors, though unprofitable, benefit society in the long run. The libertarian ideology “answers” this in two ways: 1. by ignoring societal needs (e.g. there is no problem with US healthcare – costs are high because, hey, healthcare is expensive. If poor people can’t afford it then too bad (“then they had better do it [die] and decrease the surplus population”) or better yet, simply declaring there is no such thing as society (Rand, Thacher); or 2. by a fantasy belief that the market will address all that ails us. 1 is just denial and 2 is just nonsense. Like, yeah, we all know that the budding food service industry rage of the late 50′s was integration! Eh no. It took laws to regulate private behavior for the common good. Same for environment and worker safety. I mean the whole point is that, by definition, capitalism will not, and perhaps should not, address societal needs absent a clear profit incentive. After all, would you have invested in an early 60′s auto company boasting safety or pollution control? I would not have. That said, once intelligent laws are enacted, the market is often the most powerful catalyst for innovation.

        • Fallon

          Centralized statist economies suck– but where is the cutoff line? A farm is centralized.

          Further, I caution against making the classical liberal error of skipping justification for giving some people absolute power to regulate for the common good (the state) and getting right to “intelligent” policy and law rationalization.

          I agree that there are libertarians, most of them Cato Institute types, that fit your line on healthcare. In add, businessmen are usually this form of lop-sided libertarian.

          It is true that free market capitalism cannot answer moral questions. People will buy and sell humans capitalistically. But once the vast majority decide that better and better healthcare is something all should have etc, it is impossible to proceed without laissez-faire. For profit and losses, the associated price system and exchange based on private property, and sound money, are necessary to achieve the ends. Otherwise– it is mere emotional pleading. Economics does matter. And it isn’t about numbers– but reasoning.

          Lastly, certainly there are occasions where force is needed to regulate private behavior for the common good. But who will regulate the regulators? And what is the real cost of regulators of the state kind and how would one know without the mental processes of profit/loss calculation?

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