Tag: economic freedom

Sixty Years On, China Has Prosperity, Still Needs Freedom

China’s rise from an isolated state-controlled economy in 1949 to the world’s third largest economy with a vibrant nonstate sector is something to celebrate on the 60th anniversary of the founding of the People’s Republic of China.

Under Deng Xiaoping, China’s transition from plan to market began in earnest in December 1978. For more than 30 years now, China has gradually removed barriers to a market system and increased opportunities for voluntary exchanges. Special economic zones, the end of communal farming, the rise of township and village enterprises, and the massive increase in foreign trade have enabled millions of people to lift themselves out of abject poverty.

Economic freedom has increased personal freedom, but the Chinese Communist Party has no intention of giving up its monopoly on power. China’s future will depend to a large extent on the path of political reform. Further strengthening of private property rights, including land rights, would create new wealth and a growing voice for limiting the power of government. It is doubtful that in another 60 years there will be single-party rule in China.

Congress to Lift the Travel Ban to Cuba?

Bloomberg News reports today that the U.S. House may pass a bill by the end of the year lifting the almost five-decade-old ban on travel to Cuba by American citizens. The step is long overdue. According to the article:

A group of House and Senate lawmakers proposed in March ending restrictions to allow all U.S. citizens and residents to travel to Cuba. [Rep. Sam Farr, a California Democrat] said the legislation, known as the “Freedom to Travel to Cuba Act,” also has enough votes to clear the Senate, where Senator Byron Dorgan, a North Dakota Democrat, and Republican Senator Michael Enzi of Wyoming introduced the legislation.

As Rep. Farr succinctly added, “If you are a potato, you can get to Cuba very easily, but if you are a person, you can’t, and that is our problem.”

“If you are a potato, you can get to Cuba very easily,” he said. “But if you are a person, you can’t, and that is our problem.”

I rebut a lot of what Sen. Dorgan has said about free trade and globalization in my new book, Mad about Trade, but on the issue of the Cuban embargo and travel ban, Sen. Dorgan and most of his fellow Democrats are pushing in the right direction, while most Republicans still vote to maintain our failed policies. For more on why the travel ban and embargo should be lifted, read my speech at Rice University in 2005.

Here is one issue where those of use who support less government and more economic freedom really can hope for progressive change.

Why Chile Is More Economically Free Than the United States

42-16335429In the 2009 Economic Freedom of the World Report, Chile is now #5, one place ahead of the United States.

In 1975, of 72 countries, Chile was No 71. How did this happen? The explanation lies in what I call the “Chilean Revolution,” because it was as important and transformative to my country as the celebrated American Revolution that gave birth to the United States.

The exceptional political circumstances of this period have obscured the fact that from 1975 to 1989 a true revolution took place in Chile, involving a radical, comprehensive, and sustained move toward economic and political freedom (from a starting point where there was neither one nor the other). This revolution not only doubled Chile’s historic rate of economic growth (to an average of 7% a year, 84-98),  drastically reduced poverty (from 45% to 15%), and introduced several radical libertarian reforms that set the country on a path toward rapid development; but it also brought democracy, restored limited government, and established the rule of law.

In 1998, The Los Angeles Times described the importance of the Chilean Revolution to the world:

In a sense, it all began in Chile. In the early 1970s, Chile was one of the first economies in the developing world to test such concepts as deregulation of industries, privatization of state companies, freeing of prices from government control, and opening of the home market to imports. In 1981, Chile privatized its social-security system. Many of those ideas ultimately spread throughout Latin America and to the rest of the world. They are behind the reformation of Eastern Europe and the states of the former Soviet Union today… which demonstrates, once again, the awesome power of ideas.

The role and achievements of Chile’s team of classical liberal economists is well known. They were the ones who in 1975, once the quasi-civil war was over, decided to carry out a principled, “friendly takeover” of the military government that had arisen from the breakdown of democracy in 1973 (here is my essay, published in “Society”, on that drama). Much less well-known, however, is that they were also the foremost proponents of a gradual and constitutional return to a limited democracy.

In fact, on August 8, 1980, a new Constitution, containing both a bill of rights and a timeline for the restoration of full political freedom, was proposed and approved in a referendum. In the period 1981-1989, what Fareed Zakaria has called the “institutions of liberty” were created—an  independent Central Bank, a Constitutional Court, private television and universities, voting registration laws, etc—since they were crucial for having not only elections but a democracy at the service of freedom. Then on March 11, 1990, an extraordinary event happened: the governing military Junta surrendered its power to a democratically elected government in strict accordance to the 1980 Constitution (here is my note on the restoration of democracy in Chile).

Since 1990, Chile has had four moderate center-left governments and, despite minor setbacks on tax, labor and regulation policies, the essence of the free-market reforms are still intact. The 1980 Constitution is the law of the land, and has been amended by consensual agreements among all parties represented in Congress. Not only is Chile now at the top of rankings on free trade (number 3 in the world after Hong Kong and Singapore) and transparency (less corruption that in most western European countries), but it is expected to be a developed country by 2018, the first in Latin America.

Nobel Laureate Friedrich Hayek proved, again, to have been a visionary when he stated in 1981: “Chile is now a great success. The world shall come to regard the recovery of Chile as one of the great economic miracles of our time.”

Monday Links

  • Burnt rubber: Obama’s decision to slap a 35 percent tariff on Chinese tires whiffs of senseless protectionism.

Entrepreneurship for Good

At last week’s Mont Pelerin Society meeting in Stockholm, Deirdre McCloskey argued that it was important for society to affirm entrepreneurship.  How right she is.

The economic benefits of the new technologies and processes constantly created by people with new economic ideas is obvious.  But the social benefits of such inventions also are enormous.

Consider James C. Marsters, who helped end the isolation of the deaf around the world.  The Wall Street Journal reported on his death:

As an orthodontist, a licensed pilot and a sometime-professional magician, James C. Marsters mastered fields challenging for anyone, even more so for a profoundly deaf person such as himself.

His greatest feat was to conjure the text telephone, or TTY, which for the first time gave deaf people independent access to the telephone via teletype machines. It was the first in a string of technologies that help deaf people communicate.

Mr. Marsters, who died July 28 at 85 years old, defied the isolation many deaf people of his generation experienced. He willed himself into the mainstream long before there were technologies and programs to help deaf people do so.

People like Marsters exemplify how the market encourages people to do good while doing well.  Markets are not perfect, nor are the entrepreneurs who drive them.  But then, human beings are not perfect.  However, human liberty – in the form of economic freedom in this context – is the best environment in which to foster a society that is both prosperous and good.

Miron, Calabria Join Cato Institute

Jeffrey Miron, Director of Undergraduate Studies at Harvard’s Department of Economics, has joined the Cato Institute as a Senior Fellow.

“I am delighted to be working with Cato,” Miron said. “This is a crucial moment in our nation’s history, and Cato’s mission - increased understanding of the virtues of limited government, free markets, individual liberty, and peace - has rarely been more important.”

Miron will help Cato’s economic team promote dynamic market capitalism and economic freedom through media appearances and policy analyses, in addition to speaking engagements and outreach to the academic community.  He is the author of Drug War Crimes: The Consequences of Prohibition (Independent Institute, 2004) and The Economics of Seasonal Cycles (MIT Press, 1996), in addition to numerous opeds and journal articles.

Miron will retain his affiliation with Harvard.  Prior to joining Harvard, he served as chairman of the Department of Economics at Boston University.  Miron received his Ph.D. in economics from the Massachusetts Institute of Technology.

Mark Calabria, a veteran staff member of the Senate Committee on Banking, Housing & Urban Affairs, has joined the Cato Institute as Director of Financial Services Regulation.

“I join Cato with a great sense of excitement and urgency,” Calabria said. “Cato has long been a strong, and sometimes the only, voice for expanding and protecting individual choice.  We are confronted with stark choices regarding the regulation of our financial markets: whether to expand the role of politics in deciding who will get credit and what institutions will fail.  In a time when markets and freedom are being questioned and attacked, Cato’s mission of understanding the impact of government proposals is all the more necessary.”

Calabria will lead Cato’s efforts in developing solutions to what ails the U.S. financial markets that do not include more oppressive government regulation.  He will also help educate the public, via media appearances and other outreach, as to how the government itself contributed heavily to the disruptions now occurring in the financial sector.

In addition to his work on Capitol Hill, Calabria served as Deputy Assistant Secretary for the Office of Consumer and Regulatory Affairs, U.S Department of Housing and Urban Development, and was also senior economist at the National Association of Realtors. Calabria earned his  Ph.D. in economics from George Mason University.

“We are delighted to have two of the nation’s most effective proponents of free markets and individual liberty on board now at Cato,” said Cato founder and president Ed Crane. “Mark Calabria and Jeff Miron are distinguished economists who will play an important role in advancing Cato’s mission in the months and years ahead.”

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Majorities Favor Soaking the Rich

We are in the middle of a nine-day debate at The Economist on the proposition that “the rich should pay higher taxes.” I’m on the “no” side of the proposition. French economist Thomas Piketty is on the “yes” side, arguing that we ought to impose an 80 percent tax on those with the highest incomes.

I need help! Thus far, readers are favoring Piketty 57 percent to 43 percent. Please go to the site and register your vote.

Are website visitors actually reading the statements, or do their votes just reflect their existing political biases? Are they mainly Europeans or Americans? We don’t know, but majorities in favor of 80 percent tax rates does not bode well for economic freedom.

On Friday, Piketty and I post our rebuttals to opening statements, and next week we make closing arguments.