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'Fixers' of a broken system

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By Antony Davies & James R. Harrigan
Saturday, Nov. 24, 2012, 8:56 p.m.
 

In the 200 weekly polls that Rasmussen Reports has conducted over the past four years, 65 percent of Americans have said that the country is moving in the wrong direction. The numbers have fluctuated, but not once in four years has a majority of Americans said that the country was moving in the right direction.

Like stubborn drivers, politicians of both parties refuse to admit they are lost, and the longer they keep driving, the worse our problems become. In crises, politicians feel the need to “do things.” It never seems to occur to them that they — and their incessant tinkering with the economy — are precisely the problem.

Across countries, states and time, economic data tell a uniform story: The road to wealth, equality, a cleaner environment and less exploitation is economic freedom. But Washington has been driving in the opposite direction for at least 50 years.

Consider the Fraser Institute's Economic Freedom of North America and Economic Freedom of the World reports for evidence. The United States, for decades among the five freest countries in the world, has plummeted to 18th place as of 2010, the last year for which data are available. Today, Americans enjoy less economic freedom than do the people of Hong Kong, Australia, Canada, Finland, Chile, the United Kingdom, Denmark and 10 other nations.

For decades, a political cancer has been growing. It feeds on power, replacing the rights and responsibilities accorded free people with the restrictions and entitlements accorded children. This cancer methodically destroys markets — places where people come together freely to exchange talents and treasure. In its wake, it leaves people beholden to a government that tells them whether they may work, what they may buy and what they will pay.

The cure to this cancer is freedom. Countries with more economic freedom have greater gender equality and less income inequality. This isn't because rich countries tend to be both more free and more equal. Even among the poorest countries, those with more economic freedom enjoy more equality. In developing countries, child labor rates decline as economic freedom increases.

Over the past 25 years, unemployment in the most economically free states averaged 5.2 percent versus 5.8 percent in the least free states. That difference is equivalent to 460,000 jobs. Over the same period, median household income was 7.8 percent greater in the most free states, the poverty rate was 1.6 percentage points lower and there was more income equality.

Even though there are significant differences among the states, the American economic system is largely dictated by Washington. Everywhere we turn we are bombarded with dire warnings of the looming fiscal cliff, but precious few have the nerve to speak the obvious truth: Politicians put us on the edge of this cliff by attempting to do things they had no business doing.

The right thing to do is also the simplest. Stop meddling in the economy and our lives. People must be free to make their own economic decisions and to live with the consequences of those decisions.

All Washington need do is to get out of the way.

Antony Davies is associate professor of economics at Duquesne University and an affiliated senior scholar at the Mercatus Center. James Harrigan is a fellow of the Institute of Political Economy at Utah State University.

 

 
 


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