Tide may be turning towards greater economic freedom
“The tide is turning” towards economic freedom, wrote Milton and Rose Friedman in 1980 in their best-selling book Free to Choose. “The reaction against big government has been sparked by rampant inflation” and “the contrast between the ostensible objective of government programs and their actual results.” In Britain, that reaction in part led to Margaret Thatcher’s election in 1979, Ronald Reagan’s win in 1980, and Brian Mulroney’s election as prime minister in 1984.
Today, after 15 years of waning economic freedom, larger governments, green and net-zero initiatives and now rampant inflation, could the tide be turning again?
Liz Truss, an outspoken admirer of Thatcher, recently won the job of British prime minister with a Thatcheresque message. In her first official statement, Prime Minister Truss noted: “What makes the United Kingdom great is our fundamental belief in freedom, in enterprise, and in fair play… I have a bold plan to grow the economy through tax cuts and reform.” Last week, her Chancellor of the Exchequer, Kwasi Kwarteng, took the first steps to implementing it.
In the United States, as the mid-terms approach, Americans can start the process of potentially moving the country in a different direction towards greater economic freedom with an eye on 2024.
And of course, Pierre Poilievre was recently elected as the new Leader of the Conservative Party. Poilievre has been appealing to younger Canadians with his “take back control of your life” message: “I am running for Prime Minister to put you back in charge of your life and to make Canada the freest nation on earth… In a free country, smaller government makes room for bigger citizens.” Next federal election (scheduled for 2025), Canadians will have the opportunity to make their voices heard on economic freedom, which has waned in recent years as governments in Canada have expanded their roles.
The recipe for a pro-market government hasn’t changed. Reduce government spending to allow individuals, families, entrepreneurs and businesses—rather than politicians and bureaucrats—to decide where society’s resources are allocated. Reduce marginal taxes to encourage individuals to work, invest and undertake entrepreneurial activities. Secure and protect property and respect for the rule of law. Rein in inflation. Reduce regulations and remove barriers to trade.
These policies allow workers, entrepreneurs, investors, businessowners and families to make decisions about where to invest their labour, savings and entrepreneurial energies. Time and time again, when government allows individuals and families to have greater control over their economic lives, people prosper.
And that’s not just a talking point. The evidence is clear.
A new study published by the Fraser Institute examines more than 700 studies published in academic journals from 1996 to 2022. The majority of these studies, which all utilized the Economic Freedom of the World index (developed by famed economists including Friedman, Douglass North and Gary Becker) found that economic freedom leads to increased economic growth, productivity, investment, entrepreneurship and innovation, reduced conflict and civil unrest, improved human rights and social development, and better environmental outcomes.
In other words, if we want better economic and social outcomes, we should primarily rely on individuals, families, entrepreneurs and businessowners rather than politicians and bureaucrats to make economic decisions.
While COVID lockdowns and restrictions, rampant inflation and an energy crisis created by government policies have prompted some renewed support for greater economic freedom, that reaction may not fully take hold and, indeed, be short-lived and followed by a reversion towards ever-bigger government. But as the Friedmans optimistically noted in Free to Choose: “We are as a people still free to choose which way we should go—whether to continue along the road we have been following to ever bigger government, or to call a halt and change direction.”
Put me down for a change in direction.