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22 April 06
Freedom
and Prosperity
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In
his fascinating 1998 treatise on economics “Eat the Rich”,
PJ O’Rourke investigated why some parts of the world are
rich and others are poor. He compared the state of affairs in
a range of countries from
Cuba
to
Hong Kong
,
Albania
to the
USA
, and concluded that the whole miracle of the modern
industrial economy is based on the wealth-creating attributes
of hard work, education, and responsibility, along with
property rights, the rule of law and a democratic government.
With
these as cornerstones of a modern economy firmly in place, he
believes that the free market - the engine room of economic
growth - is able to operate effectively, with “the
most-important part of the free market” being “the part
that’s free”.
The
degree of freedom found within an economy is an important
indicator of national prosperity. The Heritage Foundation, in
conjunction with the Wall Street Journal, publishes an annual
guide to the economic freedom of nations. They believe that
“Wealth comes
from the actions of people, not the actions of government, and
the freer people are to direct their efforts to where they are
most productive, the greater the wealth created”.
In
their 2006 Index of Economic Freedom (click here to view
>>>, 161 countries are compared against a list of
50 independent variables in order to determine their relative
economic freedom. The lower the score, the greater the freedom
and prosperity of a country, whereas the higher the score, the
greater the level of government interference in the economy
and the less economic freedom the country enjoys.
Topping
the list is Hong Kong on a score of 1.28, followed by
Singapore
on 1.56, and
Ireland
on 1.58. The
UK
ranks 5th with a score of 1.74 and
New Zealand
on 1.84 is 9th equal, along with
Australia
and the
US
. Unfortunately for us,
New Zealand
’s score trend is now heading in the wrong direction.
The
freedom to strive to succeed, underpins an inborn human drive
to improve our own lives, as well as those of our families and
our communities. Progressive governments recognise this by
encouraging individuals to pursue their dreams and goals. They
know that the energy of a nation does not spring from the
efforts of the government; what makes a country buzz is the
collective endeavours of tens of thousands of people all
pursuing their hopes and aspirations on a daily basis.
Smart
governments understand the power of the people and
pro-actively encourage it, by removing obstacles to progress.
That includes reducing the size and scope of government
through less regulation, lower taxes, and a flexible labour
market. It is not unusual for those countries that rank at the
top of the economic freedom charts, to achieve growth rates of
over 8 percent, to have dramatically cut company tax (in the
case of Ireland down to 12.5 percent), and to be prioritising
the reform of under-performing public services through
privatisation and the introduction of competition.
It
was Thomas Jefferson who commented: “My reading of history
convinces me that most bad government results from too much
government.” While the optimal size of government has been
estimated to be around 23 percent of the total wealth produced
by the nation, most countries, including New Zealand (at
around 40%), have governments that consume much more that
that. That is a key problem.
Nowadays,
New Zealanders face excessive rules and regulations. As
ordinary citizens, this hampers our ability to successfully go
about our daily lives, to run our small businesses, and even
to receive assistance from a bloated and increasingly
ineffective public service.
Last
week I highlighted some of the problems in our public health
system - including the fact that there are now 12,000
administrators for the 12,000 hospital beds - concluding that
the driving force in health is no longer the health and
well-being of patients, but the health and well-being of the
system itself. Interestingly, in
Britain
, where the National Health Service is facing a similar
under-performance crisis, people are being shed from the
system, but it is not patients from the waiting lists who are
being sent home, it is public servant administrators who are
being let go!
In
fact, I find it difficult to understand why New Zealanders
have become so complacent and accepting of failure,
effectively allowing the government to blame and punish
patients, instead of having to accept responsibility for
creating a bureaucratic mess and widespread systemic failure.
That’s
why it was such a breath of fresh air yesterday to hear three
high profile doctors standing up and speaking out about
government failure. They explained that the medical profession
had been disempowered and disenfranchised by a health system
that is now “rotten to the core” and “grossly
inefficient” (you can listen to the Morning Report interview
“New Zealand’s Public Health System In Crisis” by
clicking here>>>).
So,
if big government can be dangerous to our health, what is the
optimum size of government? The NZ Centre for Political Debate
guest comment this week (click here to view>>>)
comes from the Heritage Foundation’s economic and tax expert
Dr Daniel Mitchell, who addresses the vexed question of what
constitutes the proper size of government. Dan has also
referred NZCPD readers to the Market
Center Blog, which discusses these issues in more detail at www.freedomandprosperity.org.
One
posting that caught my eye led to “Business Week Online” and an
article about Apple Computers. Apple is moving some of its
operation out of
California
to
Nevada
to take
advantage of their business-friendly laws. According to the
Nevada Commission on Economic Development, the state has
business incentives that are hard to match: no company tax, no
capital gains tax, and no income tax!
Over
the last six years, with 30,000 new public servants and record
government spending,
New Zealand
is being transformed into a big government nation. As a
result, our fundamental freedoms are being eroded: running a
businesses has become a bureaucratic nightmare, and every
where you look new laws and restrictions are being proposed or
introduced. An army of ‘do-gooders’
have the ear of government, and government itself, with it’s
track record of vindictiveness against those who dare to speak
out, bullies and conditions us to accept second best and
failure.
While
we are still a country that performs better than most – a
‘rich’ country by PJ O’Rourke’s standards – those of
us who value freedom as being crucial to our Kiwi-way, can now
see it slowly but surely slipping away.
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This
weeks poll.
The
poll this week asks, do
you agree with Thomas Jefferson:
“… that most bad government results from too much
government.”
To take part in our online poll
>>>
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