Economic Freedom and Conservatism

Economic Freedom and Conservatism

Published: Feb 3, 2011 at 5:12 pm

The Heritage Foundation‘s annual analysis of global economic freedom has a wealth of information on how embracing the conservative principles of individual liberty and limited government (spending) promote prosperity for all.

The individual chapters can be downloaded from here. Some excerpts:

Increased Government Spending Prolongs Economic Slowdowns

In light of the economic crisis, many advanced economies’ governments have stepped up their direct interference in the economy with government spending. Though volumes of evidence have highlighted the negative results of massive government spending, in a time of crisis, some have tried the Keynesian policy prescription of stimulating demand with government spending. That spending, more than any market factor, has posed the greatest risk to economic dynamism. Relying on government spending in the form of various stimulus packages not only has failed to promote growth and employment, but also has seemed to prolong the crisis by hampering private-sector investment. Bloated government debt has turned the economic slowdown into a fiscal crisis in many countries, with economic stagnation fueling a long-term employment crisis. (Executive Highlights, pp. 3-4)

Countries that reduced government spending had economic growth rates almost two percentage points higher in 2009 than countries whose government spending scores worsened, and countries with the highest rates of government spending had gross domestic product (GDP) growth rates 4.5 percentage points lower on average than countries where government spending was best contained. (Chapter 1, p.13)

Economic Freedom Propels Innovation

One proven path to stimulating economic growth is to advance economic freedom by promoting policies that generate a virtuous cycle of innovation, job creation, productivity growth, and higher living standards that help create the social and economic resilience to sustain and empower individuals in a rapidly evolving economic environment. (Chapter 1, p.15)

Economic Freedom Promotes Entrepreneurial Dynamism

Many economies have managed to expand opportunities for their citizens by enhancing their economic dynamism and vitality. Economic freedom is highly correlated with societies’ openness to entrepreneurial activity that creates new jobs and increases opportunity and choice for individuals in advancing their own well-being. (Chapter 1, p.15)

Free Markets Improve the Environment

[A] command-and-control approach to “going green” is a fundamentally misguided one. It is the nations whose economies are ranked as most free that do the best to protect the environment, while the least free ones do the worst. (Chapter 4, p. 53)

Many mistakenly believe that rising wealth harms the environment as per capita usage of energy and other resources increases. Indeed, some activists and academics pursue environmentalism as if it were a crusade against materialism. However, such views are out of step with the empirical evidence. In reality, anything that jeopardizes continued economic growth likely also jeopardizes continued environmental improvement.  (Chapter 4, p. 56)

Most significantly, a well-developed system of private property rights, enforced through an effective legal system, provides for better stewardship of natural resources than is provided by a system that is characterized by no clear ownership or overwhelming government ownership. (Chapter 4, p. 57)