Required Reading

Required Reading
The only links we expect you to use are the links to the Fraser Institute's Annual Report and the links in The Index to the countries of your choice. We hope interest and curiosity will lead you to use some of the other links provided.

The index measures how countries score on a list of 50 independent variables divided into 10 broad factors of economic freedom. The higher a country's score on a factor, the greater the level of government intervention in the economy and the less economic freedom there is. The Heritage Foundation's view is that countries with the most economic freedom also have higher rates of long-term economic growth and are more prosperous than are those with less economic freedom.

Depending on their score, countries are then separated into four categories: Free, Mostly Free, Mostly Unfree, and Repressed.

Criticism

Some economists and commentators have criticized the Index on several grounds—asking, for instance, if Canada's slightly higher income tax rates make it a less economically free country than the United States. Critics of the index's methodology most commonly take issue with its equation of regressive taxation, low tax rates generally, and weak worker protection regulations with economic freedom. Some critics go further, saying that the index judges countries against a specious list of 'ideal' economic and fiscal policies, which reflect the Heritage Foundation and Wall Street Journal 's own laissez-faire economic and fiscal policy ideas more than they do a substantive concept of economic freedom. For such critics, the list is simply a promotional tool for laissez-faire policy, rather than a meaningful index of economically free countries.

In response, proponents point out that the indexes and their subcomponents have been used in much independent research published in numerous peer-reviewed papers. That the creators of the indexes support laissez-faire capitalism does not invalidate the empirical research.

Current ratings

The most current ratings are for 2005. Note: two countries sharing the same rank received a tie score. For example, Ireland and New Zealand are tied for the rank of 5th most economically free country.

An Annual Report similar to the "economic freedom" index

by Dr. Khalil Ahmad

"No nation was ever ruined by trade."
Benjamin Franklin (1706-1790)

Had history followed this course, no economic and social progress would have been possible. For instance, if to save the jobs of the typists or say calligraphists or in like cases government had imposed duties on the new products and restrictions on their use were we able to go ahead with computers and information technology? Akbar, the great moghul emperor, was shown an early printing press by a foreigner. He rejected its use on the same pretext that our calligraphers would be rendered jobless.

The opponents of trade propagandize that trade is bad for the poor, and that to protect jobs and local industry, we need protection from foreign competition through trade.

On the whole, what do these news items amount to? Clearly, they amount to Protectionism, the opposite of Free Trade. The poultry association, the tobacco manufacturers, all of them and many others in the same situation clamor for Protectionism because it serves their interest, and it is understandable. But, why do the people fighting for the cause of poor favor import duties, restrictions on free trade, and advocate protectionism? It is quite unintelligible.

In Pakistan, protectionism is usually justified by businesses who claim that open trade causes poverty, as illustrated by recent newspaper headlines: “Heavy duty on chicken meat import sought” by the Pakistan Poultry Association, and “Call to stop Chinese chicken import” demanded by the Pakistan Veterinary Medical Association.

A news item reads as: Call to stop Chinese chicken import
'Pakistan Veterinary Medical Association has demanded of the government to stop imports of frozen chicken from China besides imposing duty on such imports. The President of PVMA said the imported frozen chicken meat was much cheaper than the locally produced chicken.' (The News International June 2, 2003)

Another news item reads as: Heavy duty on chicken meat import sought
'Karachi: Pakistan Poultry Association (PPA) has demanded of the government to impose heavy duty on the import of chicken in order to protect the local chicken industry from plunging into crisis. The office bearers of PPA said that two consignments of 25 [tons] of chicken had already been imported from China which would have drastic consequences for the local industry and the country will suffer a loss of Rs.14 million in GDP and thousands of people attached with the industry would be rendered jobless. The Convener Press and Public Relations of PPA said that imported chicken is much cheaper in comparison to local chicken but the public gets no relief from it as its full consignment goes to hotels and catering houses.' (The News International June 6, 2003)

Whose interests the stopping of cheaper chicken import from China or duty imposed on it will serve? No doubt, not the interest of consumers.

Yet another news item reads as: PTC urges [government] to check duty evasion, smuggling
'The Managing Director Pakistan Tobacco Company (PTC) urged the government to check duty evasion and smuggling which is seriously hurting the tobacco industry. The Managing Director further stated that the loss to the government annually is around Rs.6 billion at the current rate in which evasion amounts to Rs.4.2 billion and smuggling Rs.1.8 billion.' (The News International June 7, 2003)

Isn't it another case of avoiding open competition to fleece the consumers? Of course, the smugglers provide cheaper and better things that is why people buy them, and, in turn, the smugglers earn profit from this 'illegal' trade. And, why the producers and importers try to evade the duty? Because it increases the cost of a product and makes it less competitive in the market, so the people had to evade such duties to be successful in their businesses. Why don't these Poverty Politicos ask the government to eliminate or reduce such duties, instead?

And yet another news item reads as: Duty on used monitors fails to boost TV sales
'The imposition of 25 per cent import duty on used computer monitors in the budget FY 2003-2004 has failed to hold back the declining sales of both the imported as well as the locally manufactured television sets. The price of used monitors is so low that even with the addition of 25 % import duty, the monitors are still considered cheap by the lower and middle income group buyers who are the biggest seekers of this item. Used monitors are not only used with unbranded or second hand computers but used as television sets too by adding a device known as 'TV Card' which has a remote facility to view at least 256 channels; and this type of a modified television plus computer monitor with better picture quality (is far cheaper) than any new brand television set.' (The News International July 12, 2003)

Whose interests this 25 % import duty on used monitors did serve? Hasn't the advancement in technology (made by some 'greedy' capitalist to earn profit) brought things in the reach of low income groups? And, even the import duty purported to serve the interest of the TV set importers failed to stop this benefit to the poor.

Will the opponents of free trade answer these two questions: Is the loss to the government is the loss of the people? Or, is the loss to the people is the loss of the government? It is these answers that determine who is in favor of the poor and who is not. As a principle, the good of the people should be considered the good of the government since government is instituted for the sake of people and not vice verse. The poor benefit from free trade and a government that seeks the good of people should follow what is in the interest of the people. It should not seek protectionist policies that serve only a limited section of society.

Moreover, economic decisions should be judged against a background of long term consequences. If an uncompetitive industry or a business closes down, the causes which played this 'havoc' start working toward the birth of other businesses. New vistas open and investors and producers find new ways to do business to fulfill their own and others' needs. This is what economic history tells.

Also, economic decisions are judged by their consequences for all the people and not this or that limited section of society. Surely, the number of people attached with an industry doomed to failure is quite limited and no policy should be formulated to provide them at the cost of other people. And, as to the losses to the government, as a result the government will have to be limited that it must be to let people prosper. In other words, the bureaucracy and ruling politicians will have to be economical and efficient and careful in spending the tax money of the people.

Another blessing of free trade is that it minimizes the possibilities of war which is one of the greatest enemies of people. And though small Also, free trade brings people of various countries closer not only economically and politically but culturally and intellectually also. In addition, this mitigates or diminishes the aversions, differences, and hostilities between the peoples of those countries or creates tolerance for them; and, as a result may evaporate the causes giving rise to wars between those countries. The French Frederic Bastiat (1801-1850) aptly described this argument in a few words thus: 'If goods do not cross borders, soldiers will.'

Here, it needs to be clarified that country, people, government, etc. are abstract terms and they mislead us enormously and in enormous ways. By the word, or the country, 'Pakistan' we do not mean its land, rivers, mountains, etc. but its individual citizens and nothing else. Similarly, government is no sacred entity; it is the collection of individual persons invested with various powers to serve the people. They cannot claim more wisdom than the people they are required to serve. So, a prosperous Pakistan is another name for prosperous individual citizens of Pakistan. Free trade brings prosperity to individual citizens and thus to Pakistan. And, of course, if the people of Pakistan prosper, this will benefit the government.

Finally, we must admit an economic fact of utmost significance that we are all producers and consumers, simultaneously, of products and services. We all seek maximum value for our money, time and resources. But only through voluntary exchange determination of the point at which demands of both producer and consumer happen to balance rests with a free market and not with any other authority acting in the name of people or something else. Only a free market where voluntary exchanges take place among producers and consumers allows an open competition to exist among various producers-cum-consumers

[The writer is associated with Alternate Solutions Institute, Lahore, a think tank dedicated to the promotion of economic freedom in Pakistan. The motto of A. S. Institute is: "Welfare of the People by the People"]
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The Consumer - Victim of Statism
By Aslam Effendi

[Aslam Effendi has authored three books which will be published both in English and Urdu by Alternate Solutions Institute, Lahore. For Details read “Aslam Effendi – A Free Marketeer in Pakistan” ]

During the 20th century, 200,000,000 people became the victim of state violence and lost their precious lives. But even more people became victims of another type of state tyranny and that is tyranny against consumers by denying them the many benefits from free trade.

It is an unchallengeable truth that free trade benefits manufacturers, buyers, sellers and consumers; but when the state controls the economy or interferes with the economy, all parties suffer except a few who control trade for their own economic benefit or the benefit of their cronies under the cover of statism. This means that 100 per cent free trade is never possible as long as the system of statism exists on this planet. However, those countries with less free trade restrictions benefit more than those countries with more trade restrictions.

Statism has divided trade into two sections – one section is domestic trade and the other section is international trade: this is indeed unfortunate, for in trade there is no such thing as domestic trade or international trade, all trade is one because the whole world is one market. And when the whole world is treated as one market, the consumer has a big choice to buy the quality items at the price that suits him from any country that could meet his requirement. Similarly, manufacturers could import those items that they need for production, thus enabling them to make good quality items at the most attractive rates. Free trade could also benefit manufacturers by enabling them not only to import good material for manufacturing good things but also inviting labor from those countries where labor is cheap. This would not only help to reduce the price of the products they produce but also provide jobs for millions.

Free trade doesn’t mean bilateral trade or trade between two countries with the blessings of the state. Genuine free trade means free trade with all the countries on this planet without any political and economic restrictions. There is so much talk about the world being a “global village” but in reality industrialists and businessmen are imprisoned within the artificial walls of so many states scattered like cancer cells throughout the planet.

Let me give a few examples of how statism raises the price of various items artificially making the consumers the worst victims of economic exploitation. States protect those domestic industries that are producing substandard items and thus deny consumers to buy similar items, far cheaper and of better quality, from other countries. The state protection of inefficient industries has the blessings of those in power and who have their own economic interest in protecting such dying industries.

So many industries die even before they start because of bureaucratic restrictions: for example, in Pakistan an industrialist has to deal with over 50 different unproductive government departments run by bureaucrats who are no better than parasites. So many industries are killed by the tax department; and those that survive are taxed heavily, the burden ultimately falling on the shoulders of the unfortunate consumers. The customs check posts charge custom duty on certain items that raise the price of imported items ten times above the market rates.

Those businessmen who, at great risk of their lives, provide consumers with certain banned items are dubbed as “smugglers”; their goods seized and many are imprisoned, although in trade there is no such thing as “smuggling”, because when God created this planet He did not mark it with artificial frontiers. Denying the consumer the right to buy certain items, with his own money, is the worst form of state tyranny.

Politicians and bureaucrats, under the umbrella of statism, talk about world peace, brotherhood of mankind; about the world having become a global village; about poverty alleviation; but all this is empty talk as long as consumers become victims of state tyranny; all this is empty talk as long as consumers are denied the benefits of free trade and a one world market.