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Heritage Economic Freedom Index: Autocracy Wins Again

January 20, 2010

I see Mike Gibson has already beat me to the first post (“Canada Now Boasts North America’s Freest Economy”), on the declining status of the US, but I’ll still chime in with some comments.

The key point I want to make is that the top two countries on the list are not democracies.

Singapore is a “one-party democracy” which was basically ruled by LKY for decades.  Regardless of your position on  Bryan Caplan’s idea that a one-party democracy can be stable w/o political repression if the country is small enough, in practice the result of one-party rules is that it functions as an autocracy.  And a damn good one!

And Hong Kong, once the fiefdom of Sir John Cowperthwaite, is now a special zone run by non-democratic China.  In neither case was it a democracy.

Also, we can clearly see the “Crisis & Leviathan” effect – 8 out of the top 10 countries saw economic freedom decrease, the US had the greatest plunge, and the average country dropped by 0.6 out of 100.

Let this serve as your annual reminder of my thesis about economic freedom in the post-1912 world: Functioning democracies bring moderate governance quality and moderate economic freedom, a great improvement in many cases over their previous form of government.  But they do not bring high levels of economic freedom, and in fact, democracy is antithetical to a truly free market.  (This is due to structural issues such as the consistent triumph of concentrated interests over dispersed ones.)

Instead, we see the highest levels of economic freedom from countries ruled by a single strong, competent, benevolent individual – which is Moldbug’s current suggestion.  Perhaps rule by prediction market will prove better – and in fact just based on modern trends towards networks, groups mechanisms, and so forth, I think it is highly likely that in the long-term, some form of aggregation will beat autocracy.  But democracy is not that form, for unlike markets, it aggregates ignorance, not knowledge.

The idea of being ruled by autocracy may trigger a negative emotional reaction in you, and with good reason, considering the horrors of the past.  But those horrors were in a world without free movement.  As long as our autocrat must compete for citizens, rather than enslaving them, then we will get Starbucks, not Stalin.

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11 Comments
  1. January 20, 2010 8:27 pm

    Likewise seven of the top ten nations are former British colonies. Though I’m not sure that that necessarily clinches the case for colonisation myself.

    The ‘mother country’ languishes in 11th place unfortunately.

  2. January 20, 2010 8:52 pm

    In what sense are Singapore and China run by a single individual?

    • January 20, 2010 11:38 pm

      LKY had vastly more power in Singapore, and Cowperthwaite in Hong Kong, than the presidents of the US, Canada, Australia, New Zealand, etc.

  3. January 20, 2010 9:07 pm

    “Functioning democracies bring moderate governance quality and moderate economic freedom, a great improvement in many cases over their previous form of government. But they do not bring high levels of economic freedom, and in fact, democracy is antithetical to a truly free market. ”

    Moderate compared to what? Something you thought up? Do you know that a “truly free market” as you conceive it is not like a frictionless plane?

    I like the “let a thousand nations bloom” idea of trying out lots of different forms of government and seeing which works best. Objective discovery processes are better than feats of imagination. Now, I understand that you are very confident that your favorite imaginary system of social organization will lead to better governance and greater freedom than the best liberal democracies. That hunch is a good reason for trying to implement that system and seeing if it vindicates your hunch, but it’s not a reason for anybody to simply posit its success and then use that posit to calibrate our scales of governance quality or economic freedom.

    • January 21, 2010 12:04 am

      Moderate compared to what? Something you thought up?

      Moderate compared to the economic freedom of the US pre-1929, which is not an imaginary case. Whether greater freedom than that is possible is an open question – but history clearly shows that assuming a lack of progress in a technology is foolish, and governance is a technology. If you don’t believe it is ever worthwhile to imagine a technology that performs better than any past one, well, I weep for your desolate life :). Except I don’t think that’s what you actually believe for any other technology – you just have the very odd belief that when it comes to governance, unlike every other technology, we have already reached the ultimate pinnacle.

      I like the “let a thousand nations bloom” idea of trying out lots of different forms of government and seeing which works best. Objective discovery processes are better than feats of imagination.

      We agree completely.

      Now, I understand that you are very confident that your favorite imaginary system of social organization will lead to better governance and greater freedom than the best liberal democracies.

      Nope, that is not my claim, or at least, not my strong claim. My strong claim is: there is a significant market of people (libertarians) who want lots of freedom and very high quality governance. In a LATNB world, we will see greater variety and greater quality of governance, including much better serving of niche customer segments (just like in any competitive industry). Therefore, libertarians will get libertopia, or at least something more like it.

      My opinions are much less strong about what system of social organization will lead to this, but I do have moderate confidence in a few specific principles, such as that the current version of democracy is antithetical to high levels of economic freedom. Given the empirical evidence of the 20th century, and public choice theory, I think that is hard to argue with, but you are welcome to try.

      I have moderate but lower confidence that democracy cannot be tweaked to result in high levels of economic freedom, due to public choice theory which suggests that democracy has large, consistent structural weaknesses. But I may be underestimating the cleverness of future mechanism designers.

      I also have moderate confidence in the promise of autocracy, the empirical evidence is clear that it leads to the most economically free societies (occasionally) and horrible hellholes (usually). In a world with free entrance/exit, this is fine, as we can just go to the great places and avoid the terrible ones.

      Beyond that, I have vague guesses and theories about the implementation side, but mostly I just have faith that a competitive market will provide better products. And eventually, products that are clearly superior to the current “industry standard” of democracy.

  4. AMW permalink
    January 21, 2010 3:43 pm

    Before we get too gung-ho about autocrats, let’s not forget that at least 9 of the bottom 10 scoring nations are also highly autocratic: Turkmenistan, Democratic Republic of Congo, Libya, Venezuela, Burma, Eritrea, Cuba, Zimbabwe and North Korea.

    Liberal democracy may be second worst, but there’s a lot of daylight between it and first place. And despite two very notable exceptions, I’d hazard a guess that 98% of people living under autocratic regimes world-wide live in filthy poverty and economic slavery.

    • January 21, 2010 8:10 pm

      It’s important to distinguish between autocracies, where the line of succession between subsequent governors is assured by some superstition or tradition, and dictatorships, where the leader holds power through political suppression, personal charisma, or military might.

      As far as I’m aware, autocracies are generally successful and dictatorships are generally unsuccessful.

  5. January 21, 2010 6:48 pm

    Democracies aren’t all bad, one positive thing we can say about functional democracies (than you Public Choice) is that they’re strongly discouraged from committing mass genocide. Sure, there have been exceptions, but I’m willing to bet they’re outliers.

    • Jayson Virissimo permalink
      January 24, 2010 8:10 pm

      Of course “functional democracies” are going to look pretty good. By defining any democracy with bad outcomes as “nonfunctional” you defined away most of its problems. You could similarly distinguish between “good monarchies” and “bad monarchies”, and it should be no surprise that “good monarchies” are very well run countries. Perhaps we should try “good monarchy” as opposed to the “so-so republic” we have currently. If only politics were as easy as coming up with the right definition.

  6. January 26, 2010 12:13 pm

    The economy has an impressive record of market reforms and benefits from its openness to global trade and investment. The banking sector is characterized by sound regulations and prudent lending practices, and well-implemented structural reforms have allowed the New Zealand economy to weather the recent global financial and economic crisis relatively unscathed.

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