Lands of Liberty 1998

Objectivists typically measure America's freedom by looking backward or forward-backward to the early republic or forward to their ideal republic. But another useful standard can be obtained by looking outward-to the world's other republics, and to its non-republics as well. Fortunately, two organizations now make that easy to do.

For the last twenty-five years, Freedom House has conducted an annual survey of world freedom and summarized the results in Freedom Review. (This article uses the journal's "1997 Freedom around the World.")

However, as Freedom House itself recognizes, its survey is limited to two aspects of freedom: political rights and civil liberties. The obvious missing element is economic freedom.

Last year, the Fraser Institute of Canada published a work to rectify that omission: Economic Freedom of the World: 1997 Annual Report, by James Gwartney and Robert Lawson. Integrating the results of this survey with Freedom House's thus allows one to make at least a comparative estimate of how liberty is faring around the world, though it should be noted that the Fraser report reflects the state of economic freedom in 1995.

Political Rights

To call a system democratic is to say only that its citizens determine the actions of its government, directly or through representatives. It says nothing about the scope of that government. Still, when restricted by individual rights, democratic mechanisms are an important part of a free society. The fundamental principle of liberty, after all, is that a person ought to be in charge of his life, in all its aspects. Since government is the means by which people carry out the extremely important activity of defending themselves against coercion, it follows that they ought to be in charge of that aspect of their lives. If we had our rights protected by a benevolent monarch, we would be like children let out on our own-but within a yard fenced off by our parents.

For evaluating a country's level of democracy ("political rights"), Freedom House uses an eight-point checklist: free and fair elections for the chief executive and for legislators; real power for representatives; a significant opposition; the right to organize new parties, and so forth.

Freedom House then places countries in one of seven categories, from 1 (most free) to 7 (least free). Out of 191 countries surveyed, fully 57 (30 percent) win a most-free 1 for political rights; 31 are in the democratic doghouse with 7's.

All but one of the twenty-three West European countries surveyed garner a 1. Odd-man out is Prince Rainier's Monaco, with a 2. In East-Central Europe, six states formerly under communist dictatorship are rated "most free": The Czech Republic, Estonia, Hungary, Lithuania, Poland, and Slovenia. Africa has four 1's. But in all Asia, only two states are given top honors: Israel and Japan. However, Oceania is a treasure trove of democracy, with ten states top-ranked: Australia, New Zealand, and eight small island-states, half of the latter being members of the (formerly British) Commonwealth. In the Americas, twelve states get 1's, including nine Commonwealth nations.

Civil Liberties

Freedom House uses a thirteen-point checklist for civil liberties, including such items as: free speech and press; freedom of assembly; equality before the law; an impartial judiciary; and a strong civil society that is independent of government.

Given today's emphasis on democracy, it is no wonder that fewer countries get top marks for civil liberties. Of the 191 countries surveyed, Freedom House rates only 29 (15 percent) "most free" in this field. The rot can be seen even in Western Europe. Of the 23 countries rated most free politically in that region, six (Belgium, France, Germany, Great Britain, Italy, and Spain) drop to 2's in civil liberties, while Greece is a 3. All 6 of the East European countries top-ranked politically fall to 2's on civil liberties. In Africa and Asia, no country is rated "most free" with regard to civil liberties: Japan is a 2; Israel a 3. However, Oceania continues to do well. Australia and New Zealand both retain top honors, as do half the small island-states. In the Americas, too, six states receive 1's.

Interestingly, when one turns from political freedom to civil liberties, the number of countries rating an abysmal 7 declines from 31 to 17, perhaps because human-rights groups focus their efforts on countries with the worst abuses.

Economic Liberty

To measure economic freedom, the Fraser evaluation uses seventeen components, grouped into four broad categories-money and inflation, government operation (where high ratings indicate a nonpolitical allocation of goods and services); takings (where high ratings indicate solid protection of property rights), and the international sector (where high ratings indicate the freedom of citizens to trade with foreigners). The seventeen components are rated from 0 (low) to 10 (high), but they are also weighted when summing up a country's score. For example, the top marginal tax rate (subsumed under "Takings") is the most heavily weighted component.

In addition to giving countries a numerical score, the authors assign letter grades. An "A" is 8 to 10; a B is 7 to 7.9; a C is 6 to 6.9; a D is 5 to 5.9; an F is anything below 5.0; and an "F-minus" is anything below 4.0.

So, how does economic liberty fare?

Not well. Only three countries merit A's and only nine receive B's. The United Kingdom is a straight-B, up from a high-C five years earlier. Australia squeaks in with a B-minus (7.0), but that is up from a C-minus in 1990. Three Asian countries are B's: Thailand; Malaysia, and the Philippines. But it will be interesting to see how their economic freedom holds up through the Asian crisis.

Surprisingly, Costa Rica (7.1) and Panama (7.0) make the B-list, while such "capitalist" states as Canada (6.9) and Taiwan (6.8) do not. Lastly, and most surprising, is the presence of a B-level country from Africa: Mauritius, fifth in the world with a 7.6. Clearly, libertarians have given this island-state too little notice.

The Free World

How can one sum up these results? Freedom House arrives at a composite rating for countries by averaging their scores on political rights and civil liberties. Suppose we say that a country, to be free, must have either a 1.0 or a 1.5; that is, it must have a 1.0 in one category and no worse than a 2.0 in the other. Fifty-five independent countries make that grade.

Now add in economic liberty. To be free across the board, let us say, a country must also have an A or B from Gwartney and Lawson. What are the results?

In Western Europe, the United Kingdom and Switzerland are free. (Luxembourg was not rated for economic liberty.) All of Eastern Europe and Asia is barren ground. Mauritius upholds the honor of Africa. New Zealand and Australia pass the test, as do Costa Rica and the United States. The island nations of Oceania were not rated economically and of the West Indies candidates the two that are economically rated fail the test.

In short, seven countries may be called "free" in a sweeping, if ultimately comparative, sense. Is there any way to award bronze, silver, and gold medals?

There is. Only three of the seven free states garner a perfect 1.0 from Freedom House, that is, they are among the world's "most free" states in both political rights and civil liberties. The decisive factor, then, must be economic freedom.

By this standard, the bronze goes to Switzerland. According to Gwartney and Lawson, Helvetia trails the second-place finisher by 0.5 points.

The remaining two countries are third and fourth on the economic-liberty list, behind Hong Kong and Singapore, which are out of the running on the grounds of political-civil liberty. But in economic liberty the United States trails New Zealand by the narrowest possible margin: 0.1. Thus, America wins the silver-and New Zealand wins the gold medal as the freest country on earth.

What made the difference? Thanks to Alan Greenspan, the United States is already a perfect 10 in the broad category "Money and Inflation," and thus outranks New Zealand's 9.7. In two of the other broad categories-"Takings" and the "International Sector"-both countries received exactly the same scores. So where did New Zealand pull ahead? In the category "Government Operation." The United States got an 8.2; New Zealand 8.7. Why? Because New Zealand's legal system got a 10, America's a 7.5, in large measure because of U.S. liability law.

"Wait 'til Next Year"

Obviously, the United States need not improve greatly to beat New Zealand next time out. Not only did America lose by the smallest possible margin, but neither country is a bastion of economic liberty: New Zealand and America trail Hong Kong by 1.3 and 1.4 points, respectively.

The reasons are many, but in the broad category of "Takings," both countries got an anemic D-plus (5.8). And, in both, that included a miserable F-minus (3.0) in the component "Transfers and Subsidies as a Percentage of GDP." In plain terms, these two nations have a very bad habit of taking money from one person and giving it to another.

In the broad category of "Government Operation," the United States got an overall A (8.2), but the component "Government consumption as a percentage of total consumption" was a D-minus (5.0).

Similarly, in the broad category of "International Sector," the U.S. got an A (8.6), but the component "Size of Trade Sector (as a percentage of GDP)," which the authors take to reflect non-tariff trade barriers, was another F-minus (3.0).

So, if Americans can liberate their economy in four ways-cut transfers, cut the size of government, improve liability law, and ease non-tarrif trade barriers-then, next time, they can win the gold.

Roger Donway is the editorial director of The Objectivist Center

Read some of the reader responses to this article in: Who's the Freest of Them All?