SpeakFreely’s Oscar Gill-Lewis spoke with Matthew D. Mitchell, Senior Fellow at the Fraser Institute’s Centre for Human Freedom, about the Human Freedom Index, the difference between economic and personal liberty, socialism, and competing conceptions of freedom.
Oscar Gill-Lewis: Matthew, thank you for joining me.
Matthew D. Mitchell: Thanks for having me.
OGL: Can you tell us about the Human Freedom Index? What does it include that the Heritage Economic Freedom Index and other indices like it don’t?
MM: It might be best to start with the building blocks. The Human Freedom Index, which is co-published by the Cato Institute and the Fraser Institute, grew out of the Economic Freedom of the World index, which is a Fraser Institute publication. There are basically two large international economic freedom indices: one produced by Heritage and one produced by Fraser. They are both attempting to measure the economic freedom of countries.
In general, I’m an economist, and I favour competition, so I think the two indices have probably benefited from the existence of one another and improved over time as a result.
One major distinction between Economic Freedom of the World and Heritage’s index is that we do not include measures of corruption in ours. The reason is that when we attempt to measure economic freedom, we are not measuring my view of good policy or Bob Lawson’s view of good policy. We’re simply trying to measure the degree to which countries permit people to make their own economic choices.
One of the things we then want to do is see how economic freedom relates to things people care about, such as poverty, lifespan, income and corruption. If you put corruption into the index itself, the index becomes much less useful for measuring how economic freedom relates to corruption.
There are other, more nuanced differences between the two, but that is one of the bigger ones. Then we have a different publication, the Human Freedom Index, which we co-publish with Cato. It takes the 46 indicators of economic freedom from Economic Freedom of the World and adds, I think, another 41 indicators of personal freedom. Together, those give you human freedom.
The idea is that the economic freedom index asks: does this country permit you to make your own economic choices? The Human Freedom Index asks whether it permits you to make both your economic and personal choices.
So it isn’t just whether you are able to buy and sell or start a business. Those are economic choices. It also looks at whether you can enter into relationships with others, how free you are to criticise the government, how free you are to move around the country, and things like that.
OGL: That’s fascinating. You see countries such as the UK ranking relatively highly, while Singapore tends to rank much lower because it doesn’t perform as well on personal freedom. And, if I’m not mistaken, Switzerland is at the top.
Do you think the Human Freedom Index fails socialism from an ideological standpoint, or do socialist systems fail the index because they don’t actually produce human freedom?
MM: Essentially, by definition, a socialist country cannot perform very well on a Human Freedom Index if it actually follows through with the policies socialism is supposed to implement. If a country sets out to create a socialist state, the simplest definition of socialism goes back to Marx: the abolition of private property and public ownership of the means of production. That tends to mean more centralised control. In practice, it often means things such as setting prices.
All of these things limit the ability of individuals to make their own choices. So, essentially by definition, a country that is aiming for socialism does not end up ranking very highly. An interesting example would be a country such as Vietnam, which is nominally socialist but has in reality permitted considerably more economic freedom than it used to. Even China, after the reforms beginning in 1978, became significantly more economically free. You can start businesses in China in a way that you couldn’t before 1978.
So some countries are nominally socialist but aren’t exactly socialist in practice.
OGL: Right. You can have billionaires in China, and Vietnam has plenty of private companies.
Kristian Niemietz has also written about the recurring pattern socialist systems seem to go through: first there is a honeymoon phase, and then, when things go wrong, you reach the “that wasn’t real socialism” phase.
I think a lot of people went through something like that with Venezuela and Cuba. It starts with promises such as free healthcare and eventually you can end up rationing food.
You said that when a country sets out on a socialist project, it is almost by definition not supporting human freedom. But thinkers such as G. A. Cohen have argued that socialism is a means of achieving liberation.
Why do you think socialist countries fail at that project?
MM: That’s a great question.
I think some of it starts with the definition of freedom. There are essentially two different ways to think about it. In my view, one is more straightforward than the other, and that is the definition I use. The older definition is freedom from—negative liberty.
You are free if nobody is stopping you from doing what you want to do. I go back to Epictetus, who asks whether a person is not free if he may do what he wants to do. It is about following your own will. The other definition is a positive conception of liberty: the idea that you are not free unless you are actually able to do certain things.
An easy way of illustrating the distinction is basketball. Under the negative definition of freedom, I am perfectly free to play basketball and try to dunk on a regulation hoop. I’m not going to succeed, but nobody is preventing me from trying. Under a positive definition of freedom, however, you might say I’m not truly free to dunk because I lack the ability to do it.
There are a couple of problems with positive freedom, in my view. One is that, for me to enjoy positive freedom, I need resources. Somebody has to lift me up so that I can dunk. I have to command your resources, or somebody else’s resources, to give me that ability.
Likewise, if I say I am not positively free unless I can afford a particular standard of living, then resources have to come from somebody else in order to grant me that freedom.
So, by definition, it has to limit the freedom of others. This is important to the basic idea of what rights are. A right implies an obligation. If I have a right to life, you are obliged not to murder me. But if I have a right to a car, then somebody is obliged to furnish me with a car.
Think about how much more demanding that is in terms of other people’s rights. So to me, notions of positive freedom are somewhat self-defeating because they undermine what I regard as the more fundamental idea of freedom: that I need to be free from coercion by others.
Interestingly, though, you can still make the case that we want to live in a society where people have cars, homes, heating and other resources. As the philosopher David Schmidtz might put it, those things can be elements of justice. Maybe they aren’t the whole thing, but they can be elements of it. I certainly want to live in a society where those who are least well-off have resources and have healthcare.
And this gets us back to the indices and the empirical project of measuring these things. As it turns out, the two goals are not necessarily in conflict. People who live in societies with more negative liberty—more freedom—also tend to have more material resources. They tend to have better healthcare, better environments, longer lifespans and more cars.
Interestingly, some of those things might initially sound as though they should conflict. They have more cars and yet better environmental outcomes. So the theoretical tension between positive well-being and negative liberty doesn’t show up empirically as much as you might expect.
OGL: Absolutely. And that’s one of the things you notice when people talk about rights. They sometimes want to establish so many different rights that those rights actually conflict with one another, because rights create obligations and duties. Michael Cannon has also made the argument that the healthcare system most capable of providing for everyone is a free-market system, or at least something much closer to one. In terms of the Human Freedom Index, has working with it changed the way you think about which institutions matter?
MM: I think it has changed some of my views, and I think it has also changed the views of the profession. Let me start again with economic freedom, because we’ve been measuring economic freedom for much longer than we’ve been measuring broader human freedom. So we have a much better sense of how it works. One lesson that has emerged is that, across the broad range of countries, the size of government matters less than some of the other components of economic freedom.
Property rights matter enormously. Monetary policy matters. Your freedom to access money that will maintain its value matters quite a bit. Regulation matters.
Eventually, the size of government matters too, but it tends to matter more in wealthy countries. Take a country such as Sudan, where the protection of persons and private property is relatively weak. If I were advising that country, the first thing I would say is not necessarily that it needs to reduce the size and scope of government. The priority is ensuring that people are secure in their persons and their property. Doing that might even require the government to become somewhat larger.
But for Western countries where property rights are already relatively secure, the size of government matters more. Those countries are often well past the point at which increases in the size of government are beneficial. They reach a point where further growth of government begins depriving the country of needed economic growth. So one thing that comes out of the economic freedom research is that different things matter in different contexts.
You asked specifically about human freedom. I would love to have this conversation again in five years, when we have more studies using the Human Freedom Index and a better understanding of questions such as how freedom of speech affects freedom of movement, political freedom and other kinds of liberty. We’re still at a relatively nascent stage with the index when it comes to definitively answering those questions.
OGL: That’s really interesting. We’ll definitely have to speak again in five years. Let’s move on to the Realities of Socialism project, which Fraser Institute has worked on with a number of other institutes. Some of the countries examined include Denmark and Estonia, both of which recovered relatively quickly from socialist policies. The UK seems to be experiencing a somewhat similar decline, although you could argue that it isn’t really moving towards socialism so much as entering a kind of statist death spiral.
I would argue that a lot of this comes from the political process. Individual actors have little incentive to behave in a way that may be good for the country in the long term if doing so does not serve their own immediate interests. Why is the UK experiencing these problems? Is there a public-choice explanation? And what might a public-choice solution look like?
MM: One book I would recommend here is a classic of public choice: Mancur Olson’s The Rise and Decline of Nations. He actually uses the UK as one of his examples. The basic story is that Olson looked around the world and asked why the countries defeated in the Second World War—particularly Germany and Japan—were performing so strongly relative to some of the victors, and why the UK in particular was growing so slowly.
His argument was essentially that stability and economic growth unfortunately create fertile ground for special interests. Those interests grow, they ask for privileges, and those privileges begin to gum up the system. They create inefficiencies, and eventually you have a problem that is very difficult to escape.
Olson’s thesis was that perhaps Germany and Japan escaped some of this because defeat in war created an absolute crisis that swept away many of the old special interests. They could, in a sense, begin again with a cleaner slate.
The United States and the UK, meanwhile, suffered from a kind of sclerosis caused by the slow accumulation of special interests acquiring privileges over time. You can debate the historical timing. You can debate the extent to which war and crisis really sweep special interests away. But I think the general idea—that special interests gradually accumulate privileges, interfere with markets and make the system less efficient—is very difficult to argue against. And I think that is where a lot of Western countries find themselves today, including the UK and increasingly, unfortunately, the United States.
OGL: One thing Olson discusses in The Rise and Decline of Nations is that as economies develop, you get more lawyers, and some of the activity surrounding that can become antithetical to growth. Take the UK. We planned to build a tunnel near Stonehenge. The tunnel still doesn’t exist, but around £180 million was spent just on planning. So there is a clear incentive for lawyers and other interests to make building increasingly difficult.
MM: That’s true. And it gets at something about the way our minds work. We often want to interpret the world in terms of teams. There is a socialist team and a capitalist team. And if the socialist team is winning, we assume it must be because socialist ideas are winning. Ideas certainly matter. But other things matter as well—especially institutions and interests.
In many cases, you get policies that we might describe as socialist not because there is some pamphleteer out there persuading everyone of socialism, but because a particular special interest benefits from the policy. Think about almost any inefficient or unjust intervention in a market: a price control, a new tax, a regulation, a barrier to entry, a tariff, or an erosion of property rights. There is almost always some special interest that benefits. That is exactly the story you’re describing with lawyers.
OGL: Can I push you for a solution?
MM: Absolutely. I actually try to keep a good list of solutions because I like being an optimist. It is psychologically better for me, and I like reminding my classical-liberal friends that there have been major victories. If you look at the course of history, you are simply blind if you don’t recognise that economic freedom has been extended to many groups that previously did not have it.
Women, minorities and African-Americans are obvious examples in the United States. If you think we are less free today than ever before, then you are probably looking only at a very narrow group of people. There were periods in American history when women and African-Americans faced profound legal restrictions on property ownership and economic participation. The removal of those restrictions was a major triumph.
There are other examples. In 1929, the average US tariff on dutiable imports was around 59 percent. Before the recent increases in tariffs under Donald Trump, it had fallen below five percent. Most countries around the world have dramatically reduced tariffs.
Governments are also much less likely to turn to comprehensive price controls than they once were. Richard Nixon imposed sweeping wage and price controls across the US economy in the early 1970s, covering everything from petrol to meat, and predictably shortages followed. Government ownership of enterprises has also become much less common.
So in many respects the world has improved, and I think we can draw lessons from those successes. One lesson is that institutions matter. The World Trade Organization, for all its faults, deserves a significant amount of credit for the liberalisation of trade. The basic idea that “we’ll lower our tariffs if you lower yours” helps. And having an institution through which countries can contest what they regard as unfair trade barriers also matters.
Institutions matter, but ideas matter too. You cannot understand the abolition of slavery, or the economic liberation of women, without recognising that ideas changed. In the United States there was the infamous Bradwell case. A woman had studied law and passed the relevant examination, yet Illinois denied her the ability to practise law simply because she was a woman.
You would be completely blind to world history if you failed to recognise the importance of changing ideas about who deserves access to economic and personal freedom. That is a tremendous achievement. And sometimes you need entrepreneurs. Uber is a good example. For a long time, public-choice problems made urban transportation markets almost a textbook case of regulatory capture. Taxi companies had captured the regulators, and it seemed almost impossible to introduce meaningful competition.
What eventually changed things was technological innovation—and arguably a little bit of rule-breaking. Uber entered many cities and essentially said: these may be the existing rules, but we’re going to operate anyway, and we’re going to offer something so obviously superior from the consumer’s perspective that it will be politically difficult to shut us down. And it worked.
So sometimes technological change is a major part of the story. The exact answer will differ from place to place. But if you look throughout history, you can find plenty of examples of economic freedom increasing and the state retreating. It does happen.
OGL: Public-choice problems, incentive problems and rent-seeking remain serious issues. Socialist systems tend to suffer from these problems even more extensively than Western capitalist systems, but we still see versions of them here. Scotland, for instance, has reintroduced rent controls, and England is pursuing significant interventions in the rental market as well.
You could divide the major problems socialist systems face into three categories: the control problem—the tendency towards coercion or tyranny; the knowledge problem; and the incentive problem. Do you think one of those explains the failure of socialist systems more than the others, or is it the interaction of all three?
MM: I think it’s more the interaction of all three. They complement one another in a very perverse way. Take the incentive problem. It becomes extremely difficult to persuade people to work and produce when the incentives are poor—when they don’t enjoy the fruits of their labour, when they cannot start businesses and when they cannot behave entrepreneurially.
That then creates the control problem. If you cannot persuade people to work voluntarily, you eventually have to compel them. There were periods in the Soviet Union when a very significant portion of the workforce was engaged in forced labour. That is how you get projects such as the White Sea Canal, which cost tens of thousands of lives to construct and, in the end, was barely useful because parts of it were far too shallow.
So the incentive problem invites the control problem. Then there is the knowledge problem. Even if you have entirely well-intentioned central planners—and at various times you really do find true believers who sincerely thought they were doing the right thing—those planners lack the knowledge conveyed through prices.
Prices emerge from free people making their own choices and voluntarily trading their property. If you eliminate that information, you are simply not going to plan very effectively.
And when planning fails, what do you do? You often resort to still more control. So all three problems reinforce one another.
Once you become deeply embedded in the system, though, I think the control problem begins to loom especially large. Power corrupts, and absolute power corrupts absolutely.
Once political actors control the means of production, they can use that control to solidify their own political position. One example I often use is the arts. Why did socialist states end up controlling painting, theatre, cinema, television and radio? Because controlling those things was a means of consolidating political power. And they did it quite literally by controlling the means of production.
If you wanted to be a painter, what were your means of production? Paintbrushes, canvas and paint. How did you get access to those things? You might have to become a member of an official union. And how did you become a member? You produced the kind of art the socialist state wanted you to produce. You can see smaller versions of this even in Western societies.
If the state has the ability, through institutions such as the FCC, to control what comedians can say on air, it has a degree of control over the means of artistic production—and that power can be used politically. So I think all three problems interact. But over time, the control problem tends to become increasingly important. One of the things it eventually does is eliminate the true believers. By the end of many communist experiments, there were relatively few people left who genuinely believed the system worked. It had become obvious to many of them that it was broken.
OGL: Last question. Could you explain what you mean by the “pathology of privilege”?
MM: It is essentially the idea that any system in which people can obtain special advantages and privileges creates a whole host of problems.
First, it is inefficient.
People expend scarce resources seeking privileges and then defending the privileges they already possess.
It also undermines faith in markets.
If somebody becomes successful, you want people to believe that they succeeded because they created value for consumers.
But once government privileges become widespread, people begin asking whether someone succeeded because they created value for consumers or because they created value for a politician and knew the right people.
So the pathology of privilege is the idea that, over time, handing out favours and privileges—and treating some people differently from others—takes a toll on both the economy and the political system. You can certainly find examples of it in Western capitalist economies. But by the end, it was glaringly obvious in socialist economies.
OGL: Where can people find more of your work?
MM: Realities of Socialism is a project at the Fraser Institute.
We have several books, podcasts, videos, infographics and lots of data that people can share.
At FraserInstitute.org, you can also find our Economic Freedom Index and the Human Freedom Index.
OGL: And you’re on Twitter as well?
MM: Yes, of course.
OGL: Awesome. Matt, it’s been a pleasure. Thank you so much.
