Economic Freedom and Liberty

There is no doubt that some countries are far more economically free than others.

Having a free economy means having strong property rights, a generally stable form of money, and few government regulations.

Where there is more economic freedom, there is usually more prosperity. There is less poverty and a higher standard of living. When people are allowed to voluntarily trade and do business, it encourages savings and investment. It encourages entrepreneurism.

While there is always a risk in starting a business, the risk of government confiscation or interference is diminished in a society that generally respects property rights. An entrepreneur who is successful in a relatively free economy will get to reap the rewards of providing his goods and services.

In some countries, economic freedom outweighs civil liberties. For example, Singapore and the United Arab Emirates are two of the freest places on the planet, economically speaking. They are great places to find a job or do business — but they are not as good in terms of civil liberties and social freedoms.

On the other hand, some European countries are freer when it comes to civil liberties yet not as economically free — they’re often considered welfare states.

With that said, there is no question that there is a relationship between economic freedom and liberty in general. It is no coincidence that North Korea is probably the most authoritarian country on Earth and also has almost nothing in the way of a free market. It is an extremely impoverished country.

The United States in the 19th century was perhaps the most economically free country in history (not counting the 1860s, which was a period of war).

This was one of the greatest periods of growth in history, too. It was also a time of great civil liberties in the respect that government, particularly the federal government, had little involvement in people’s lives.

The one major contradiction of this time period was, of course, slavery. This is the glaring exception where liberty did not reign supreme.

Government Intervention and the Economy

Those who identify themselves as Republicans and conservatives (civilians, not politicians) tend to favor economic freedom, including lower taxes and less government regulation.

Unfortunately, many conservatives don’t care to pay a lot of attention to issues of civil liberties and foreign intervention — or worse, they cheer on big government when it comes to these things. There is something of a contradiction in thinking that the government is too incompetent to run our health care system and plan our economy yet is an efficient machine when it comes to fighting wars, stopping drug abuse, and keeping us safe from terrorists.

It must be stressed that economic freedom goes hand in hand with the general cause of liberty. It is rare that you have a government that will spy on you, control you, and intervene overseas, while also maintaining strong property rights and economic freedom at home.

And while this probably won’t come as a surprise, it takes a lot of money for a government to be active. Spying on people is expensive. Fighting a drug war is expensive. Regulating people’s behavior is expensive. Most of all, fighting foreign wars and occupying other countries is incredibly expensive, both in lives and money.

Fighting in a foreign war means buying and maintaining equipment. It means buying oil and gas to run the machinery. It means paying salaries and benefits to a large number of people. It means paying pensions and disability for injuries, both mental and physical. And this money has to come from somewhere.

It can either come from taxes or from inflation and debt. But even the latter scenario affects our economic freedom today. It is capital being diverted away from production and investment.

There is a misconception that debt is only a burden on future generations. In reality, it is a burden right now.

In other words, if you want a big government that is constantly fighting wars, and if you tolerate a big government when it comes to invading certain civil liberties, then you are probably not going to get a small government when it comes to taxes and regulations.

A Government as a Reflection of the People

Governments will typically expand and gain as much power as the populace will allow. In the long run, government is generally a reflection of the people. This isn’t to say that people deserve the government they get, but the government is generally limited by the consent of the people.

When Ronald Reagan was elected president in 1980, he was seen as the pro-liberty candidate. In terms of government spending, he didn’t live up to his reputation, as spending increased quite a bit on his watch.

One area where Reagan was successful in implementing a pro-liberty agenda was in the realm of income tax rates. During his eight years in office, he managed to get the top tax rate reduced from a whopping 70% down to 28%. But how did he manage to get this through a Democrat-controlled Congress?

There were some hard-core leftists that supported (voted in favor of) the legislation to reduce tax rates. Their support was really a reflection of the people.

These Democrats in Congress were receiving thousands of phone calls a day telling them to support Reagan’s tax-cut plan. They had almost no choice but to oblige or risk losing their jobs.

In other words, because Reagan received the support of the American people on cutting marginal income tax rates, it happened. When the will of the people is strong enough, politicians will change with the wind.

Consent to Being Ruled

The point here is that if you concede your liberty on some issues, then don’t be surprised when it is all infringed upon. If you ask the government do something on your behalf, it is going to take that as a green light to do everything on your behalf.

Republican politicians say they want more economic freedom but insist on curtailing civil liberties. Democratic politicians say they want greater civil liberties but insist on taxing the rich and increasing welfare.

So what happens?

Both sides compromise. The Republicans support bigger government for welfare programs. Democrats support bigger government to curtail civil liberties.

If you ask for bigger government in one area, you are probably going to get it everywhere. If you consent to big government, you are going to get big government.

That is why I believe that even if your main goal is to increase economic freedom and capitalism, it is also important to be aware of government in every area of your life. This includes everything from the government fighting wars thousands of miles away to the seemingly little things that go on in your hometown that are endorsed by your city council.

This is why we recently launched a new service called Liberty Briefing. And as a member of Wealth Daily, you can get it free right here.

Plus, my colleague Jeff Siegel has also put together a new report called, “The 5 Greatest Threats to Your Liberty.” This report is also free, and you can get a copy by clicking this link.

Look, if you want to properly build and protect your wealth, you must properly defend your rights to do so. And that means being acutely aware of any threat to your individual liberty.

We’ll help you do that at Liberty Briefing.

Until next time,

Geoffrey Pike for Wealth Daily