Free the Market

First Published: 2004-08-01

Some years ago, The Directors of the Nassau Institute arranged for Dr. Walter Williams to speak in Nassau. Dr. Williams, a prolific writer and popular public speaker, has been described as "the peoples" economist, a reputation acquired from his talent for demystifying economics. One of his lectures began with "Why is there poverty?

He stated, "poverty is not complicated, it has been man’s global position throughout history" and the causes are straightforward. People are poor for one or more of the following reasons:

1) they cannot produce things valued by others

2) they can produce things valued by others but are prevented

3) they volunteer to be poor

The truly mysterious question Dr. Williams asked is how come there is affluence? How has a tiny proportion of man’s population (mostly in the West), for only a tiny part of man’s history (mainly in the 19th and 20th centuries) managed to escape the fate that befell his fellow man? How did western people become so productive and even affluent?

The causes of affluence are complicated, however it is mostly found in capitalist countries with freer markets. It is also associated with the relationship of economic and political freedom. In Capitalism and Freedom published in 1962, Dr. Milton Friedman made the statement:

"Historical evidence speaks with a single voice on the relation between political freedom and a free market. I know of no example in time or place of a society that has been marked by a large measure of political freedom, and that has not also used something comparable to a free market to organize the bulk of economic activity".

No scholarly effort had been made up to 1984 to explore the relationship until Dr. Michael Walker of the Fraser Institute decided to measure economic freedom in many countries around the world. By 1986 he had arranged for a series of symposiums co-hosted by Milton and Rose Friedman and the project was launched.

Initially, Dr Alvin Rabushka, Dr. Friedman’s colleague at the Hoover Institute, provided a "Preliminary Definition of Economic Freedom" in which he outlined the key attributes of economic freedom and provided guidance for measuring them. His interest in the question derived from his studies of Hong Kong. In the 2004 Economic Freedom Report Hong Kong is at the top of the list of 123 countries.

Other academics, including several Nobel Laureates contributed to the project and finally in 1996 the First Economic Freedom of the World Report was published.

The 2004 Report covers years 1975 to 2002 rating and ranking the123 countries. The Bahamas was ranked 7th in 1975 and 57th in 2002, indicating steady decline over twenty-seven years.

When it comes to "freedom" the evidence of this report mocks the slogan "better in the Bahamas", it appears to be getting "worse".

Is there a relationship of economic freedom to wealth and poverty? The answer is yes. The most economically free countries are among the most prosperous. Why is the Bahamas in a losing trend? Dr. Williams gives us the clue. (Bahamians) "can produce things valued by others but are prevented from doing so".

Obviously Bahamians are not "choosing to be poor" and there is ample evidence from the past to show that something of value can be produced. Therefore the question becomes what is preventing the production of things valued by others.

The answer lies directly with government because it is the single entity that can legitimately interfere with market exchange where wealth is created.

Individuals create wealth in a nation, not government. To explore where the Bahamas is headed on the "freedom index" ask the following questions of the government:

– What is it doing to promote free exchange in a globalizing world, and/or what it is doing to prevent it?

– What is it doing to encourage the creation of world-class industries so Bahamians can proudly say "made in the Bahamas"?

– What is it doing to build legitimacy in the areas of education, trade and commerce?

– Explain the poor record of protecting life and property?

– What is wrong in the judicial system to explain why one judge would publicly chastise another about her "objectivity"?

– Explain the failure to control recurring deficits.

These are only a few of the questions, answers to which could explain whether the Bahamas will rise or continue to drop in the ranking on the Freedom Index. Not listed above is the most compelling question of all:

Does government really understand what it has been doing for the past twenty-seven years to get the country into fifty-seventh place when it once was seventh?

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