Blog author: mbrandenburg
by on Tuesday, December 11, 2012

On Nov. 28, the Canada-based Fraser Institute released the eighth edition of its annual report, Economic Freedom of North America 2012, in which the respective economic situation and government regulatory factors present in the states and provinces of North America were gauged.

Global studies of economic freedom, such as the Heritage Foundation’s 2012 Index of Economic Freedom and the Fraser Institute’s Economic Freedom of the World 2012, rank the United States and Canada as two of the most economically free countries in the world. But, as data from the North America report shows, not all sections of the countries are experiencing an equal level of economic freedom and it is important to look at areas in which this falters.

States and provinces were evaluated and ranked within three categories: 1) Size of Government; 2) Takings and Discriminatory Taxation; and 3) Labor Market Freedom. The Canadian province, Alberta, claimed the top spot as most economically free, followed closely by Delaware. New Mexico placed 59th, making it the least economically free state, followed by Prince Edward Island of Canada, notching the rank of least economically free area in North America (between the United States and Canada).

The Economic Freedom of North America 2012 report draws a clear link between prosperity and economic freedom, through a comparison of states and provinces. “In the United States, the relatively free Georgia does much better than the relatively unfree West Virginia. In Canada, British Columbia, where economic freedom has been increasing in recent years, has been experiencing considerably greater growth on a per-capita basis than Ontario, where economic freedom has been decreasing in recent years.”

Through a qualitative discussion of economic freedom, we can uncover perhaps even more about the value it holds for all countries and people. Those countries and regions of the world that have opened themselves up to competition and created conditions for business growth, have experienced much greater economic success than those that haven’t.

This distinction can be observed when looking at North Korea and South Korea, two countries similar in geography and language, yet very different in terms of political and economic freedom. South Korea has opened itself up to trade and embraced globalization, while North Korea’s growth is inhibited through isolation and a rigid, government-controlled economy. This control has stifled the entrepreneurial spirit and prevented North Korea from reaching high levels of prosperity.

Moreover, the creation of opportunity is important for individuals that have never experienced economic success. This is especially vital when focusing on poverty alleviation. Access to markets helps decrease poverty by creating opportunities. As Andreas Widmer states,

Being poor has nothing to do with one or two dollars per day. Being poor has something to do with being excluded from networks of productivity and exchange, that means cell phones, internet, banks, financial systems, educational systems, trading systems to be allowed to trade, to have free trade, to have products from here that are produced here, to actually be allowed into other countries. If we’re not allowing that to happen, you can’t have entrepreneurs [here] grow their companies properly.

When the state claims a large role in the economy and seeks to provide opportunity through its own means, economic freedom is diminished, along with the conditions to create prosperity. Rev. Robert Sirico, President of the Acton Institute explains:

The way in which people rise out of poverty is not through state-to-state aid, not at the generosity or behest of bureaucrats, no matter how well intended, no matter how good personally these people may be. But it’s through the opportunities that people have in their families, in their localities, to exchange value, to be involved in business.

Christian support for free trade and economic freedom has a long history. Spanish Catholic and Thomist, Francisco de Vitoria (ca. 1492-1546) explained why free trade between countries, when done fairly, constitutes a just action. He argued, “travellers may carry on trade as so long as they do no harm to citizens…any human enactment which prohibited such trade would indubitably be unreasonable.” Continuing with an example, he says, “If the Spaniards were to prohibit the French from trading with the Spanish kingdoms, not for the good of Spain but to prevent the French from sharing in any profits, this would be an unjust enactment, and contrary to Christian charity.”

In what seems like a rather obvious case for economic freedom, in its purest form, resistance to the practice still exists. As the Economic Freedom of North America 2012 report puts it:

In some ways it is surprising the debate still rages because the evidence and theory favoring economic freedom match intuition: it makes sense that the drive and ingenuity of individuals will produce better outcomes through the mechanism of mutually beneficial exchange than the designs of a small coterie of government planners, who can hardly have knowledge of everyone’s values and who, being human, are likely to consider first their own well-being and that of the constituencies they must please when making decisions for all of us.

At its core, economic freedom enables not only prosperity, but also the flourishing of human relationships. If this freedom is removed, then not only will economic success decline, but also trust, degrading the way individuals relate on a political, social, and economic level.