Justin Katz notes with relish a report in the Wall St Journal that places the United States for the first time out of the list of top ten economically free nations. Analyzing the data, Katz concludes that “it appears that we’re losing ground in the very areas that make it possible for families to forge their own futures” but in actual fact the Economic Freedom Index, created by the conservative think tank the Heritage Foundation (in concert with the Wall St Journal) does not measure the economic freedoms of families, but the economic freedoms of corporations and the one per centers.
For instance, when assessing labor freedom the Index factors the ratio of minimum wage to the average value added per worker, hindrance to hiring additional workers, rigidity of hours, difficulty of firing redundant employees, legally mandated notice period, and mandatory severance pay. Heritage gets this information from the International Finance Corporation (IFC). A look at the relevant IFC page shows that the factors under consideration have little to do with the rights of workers, but with the ease with which business owners may hire or terminate workers.
For the purpose of IFC measurements, and therefore for the Index so lauded by Katz, labor rights, such as the right to join trade unions or the right to collective bargaining, are irrelevant. The IFC assumes that the worker is fairly compensated, that is, the worker “earns a salary plus benefits equal to the economy’s average wage during the entire period of his employment.” Fair and equitable pay is assumed, and therefore outside the scope of the Index’s concern.
The Economic Freedom Index has been under fire before. John Miller, writing for Dollars and Sense, said the index “tells us little about economic growth or political freedom” and “is a slipshod measure that would seem to have no other purpose other than to sell the neoliberal policies that stand in the way of most people gaining control over their economic lives and obtaining genuine economic freedom in today’s global economy.” Miller, an economics teacher, has many more criticisms in his excellent piece, and is well worth reading.
The Index is naked punditry masquerading as economic analysis and undermines real efforts towards passing legislation that will help to reform the business climate and contain the ever growing power of the corporatist state. Moving up the Index rankings is as simple as rolling back legislation that restricts the ability of businesses to act as they please, while simultaneous ensuring that the “rule of law” and “property rights” are strictly enforced to the advantage of the “haves” over the “have nots.” Under such conditions, it would be all but impossible for all but a very privileged few families “to forge their own futures” as Katz put it.
The Economic Freedom Index is yet another conservative lie, a product made to generate the kind of headlines neoliberal pundits can use to beat the rest of us into submission. Crap like this is read with head nodding seriousness by legislators (and potential future governors) as a basis for legislative action, and it needs to be called out and resisted.