Voice For Liberty

Tag: Property rights

  • Importance of economic freedom explained in Wichita

    Yesterday Robert Lawson appeared in Wichita to deliver a lecture titled “Economic Freedom and the Wealth and Health of Nations.” The lecture explained how Lawson and his colleagues calculate the annual “Economic Freedom of the World” index, which ranks most of the countries of the world in how the “policies and institutions of countries are supportive of economic freedom.” The conclusion is that economic freedom is a vital component of well-being, income, health, and both personal and political freedom.

    Robert LawsonRobert Lawson

    The Economic Freedom of the World annual report is available in its entirety at FreeTheWorld.com.

    Lawson started his lecture by noting two methods of organizing an economy. There’s the way of Adam Smith, in which liberty, private property, and free trade are paramount, and government is to have a limited role. The other way is that of Karl Marx, where society would be planned and controlled by a central authority according to a national strategy.

    Lawson said he became interested in measuring freedom as a way to investigate the truth of the claims of Smith and Marx. By collecting data about economic freedom, we could learn more about which system — economic freedom or planned economies — works best.

    Lawson defined economic freedom as consisting of free markets, private property and personal choice; freedom to trade both within a country and foreign trade; freedom to enter markets; and security of property and the rule of law. He said that there is a role for government in this system to protect property rights and provide basic infrastructure, but the role of government is limited.

    Measuring economic freedom is complex and multidimensional. Data comes from 141 countries using 42 components that are grouped into five broad areas: size of government, including expenditures, taxes, and enterprises; legal structure and security of property rights; access to sound money; freedom to trade internationally; and regulation of credit, labor, and business. Ratings are on a scale from zero to ten, with ten representing the most freedom.

    Some of the components of the ranking are based on objective data, while some are subjective, perhaps from a survey. Lawson said that the report and book detail the methodology used in creating the index.

    The result is that Hong Kong ranks as most economically free country. Singapore is second, which Lawson said poses a problem. Singapore is economically free, but it is not politically liberal in terms of civil liberties. There is a strong positive relationship between political freedom and economic freedom, but there are exceptions like Singapore.

    The United States ranks sixth. Sweden is ranked fortieth, which is still in the upper quartile of countries. Lawson said that while Sweden has a reputation as a welfare state, the U.S. and Sweden are not all that different. Taxes in Sweden are about 50 perfect higher than ours, and Sweden has many more labor regulations, but otherwise the countries are similar.

    The big differences in the world, Lawson said, are between countries like the U.S. and countries like Venezuela and Zimbabwe.

    China is ranked eighty-second, below the midpoint. Lawson said that China is a problem to rank, having Shanghai which is relatively free, and then outer provinces which are still tightly controlled and repressive.

    Russia ranks eighty-third, right below China. Some of the former Soviet republics like Estonia are doing well, but the Ukraine has made little progress towards freedom.

    India ranks eighty-sixth. It is not an economically free county, but is more free now than in the past, Lawson said.

    To show how economic freedom impacts the lives of people, Lawson used a series of charts that showed the impact of economic freedom on various measures.

    Economic freedom is very important in determining the incomes of people. The countries in the highest-ranking quartile of the economic freedom index have a per-capita income of $32,443. For countries in the lowest quartile the income is only $3,802. Economic growth rates are higher in the freer countries, too, although the difference is not as great as with income.

    Lawson said that a frequent criticism of free economies is income inequality. He showed a chart presenting the share of income earned by the poorest ten percent in each country, grouped by quartile. There is very little difference between the groups. “It doesn’t really matter what kind of economic system you have — free market or not — it does not correlate in any way with income inequality. It’s simply not true that market economies, in general, are more unequal.”

    A follow-up, Lawson said, is that if you are poor, where do you want to be? The answer is in the economically free countries. The per-capita income of the poorest ten percent in the least economically free countries is $896, while in the most economically free it is $9,105.

    Life expectancy is also positively correlated with economic freedom, ranging from 59.40 years in the least-free countries to 79.12 in the most-free countries.

    Is there a relationship between economic systems and the environment? Lawson showed a chart showing that the free countries do better in a measure of environmental performance.

    Lawson said that political rights and civil liberties are also strongly associated with economic freedom, the example of Singapore notwithstanding. India is another exception, being a fairly liberal democracy but ranking low in economic freedom.

    Speaking about the United States, Lawson said that the numbers are likely to go down in the future. While the U.S. ranks above the world average, its measurement of freedom has been declining since 2000. At the same time, the rest of the world is on an upward trend. “It’s no longer accurate to say the United States is among the very top tier in the economic freedom index,” Lawson said, adding that he blames George Bush for this. The decline is partly due to the increasing size of government, but the largest cause of the decline is in the area of property rights. This area is measured largely by surveys asking people how they feel about property rights in America. The perception, Lawson, said, is that the security of property rights are on the decline.

    A question from the audience asked about reliance on foreign aid. Lawson replied that the economic freedom index methodology doesn’t include foreign aid. But there has been research done using the index and foreign aid, which concluded that countries get more foreign aid when they do worse on the index. Furthermore, after receiving more foreign aid, countries do worse in the index.

    A question about the cost of living in countries was answered by the use of purchasing power parity.

    Responding to a question about deficits, Lawson said that the size of government deficits doesn’t enter into the index calculations. The amount of government spending is part of the index, however. Lawson said that Milton Friedman argued that it wasn’t very important to freedom whether the government runs deficits. The size of government spending is important, Friedman said, with the method of financing the spending much less important.

    A question revealed that health care doesn’t play a part in the index calculations, as the composition of spending is not a factor. If the U.S. government decides to spend more on health care, its rating will probably decline, as government spending is in the index.

    A question asked how it can be that China and India are growing very rapidly, but still rank low in the index. Lawson answered that it’s the change or increase in the index that has been important for these two countries. There has been great change in both countries. “It takes only a tiny bit of relaxation to see a flourishing of growth in both China and India.” He added that both countries need to continue their reforms in order to maintain their rates of economic growth.

    Lawson added that regulation, not taxation, is the biggest threat to prosperity and economic freedom in America.

    Lawson’s lecture was sponsored by the Gilder Lehrman Institute of American History and underwritten by The Fred C. and Mary R. Koch Foundation.

  • Smoking is healthier than fascism

    There’s a Facebook group named Vote NO on Statewide Smoking Ban (Smoking is healthier than fascism). Started by Wichita activist Wendy Aylworth, the description of the group starts with the rallying cry “We must stop this tyranny of the majority!”

    Yes, we must.

    I’m tempted to tell you — like many people do when discussing matters of public policy — whether I smoke cigarettes. But does that matter?

    It shouldn’t, because if it does, we shift the basis of policy decisions from “what is right and just and promotes freedom and liberty” to “what is my personal preference.” And there’s too much of that going on.

    Smoking bans are only the start of increased government regulation of more and more aspects of our lives. These things can backfire. As government control becomes more pervasive, smoking ban busybodies may well find themselves coming under onerous regulation that they don’t like. Once started, it’s hard for government to stop.

    We ought to remember the words of C.S. Lewis: “Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience.”

    For more articles from this site on smoking bans and the harm they cause, click here.

  • Lord’s Diner debate focused on wrong issues

    At today’s meeting of the Wichita City Council, an item no longer on the agenda still caused some controversy.

    The Lord’s Diner, a charitable organization, had proposed buying a city-owned building at 21st and Grove and making a second site for their effort to feed Wichita’s poor.

    Opposition from community groups, however, drove the Lord’s Diner to withdraw its plans.

    In today’s meeting, council members Sue Schlapp and Paul Gray spoke in favor of the Lord’s Diner’s plans on the basis of its charitable and humanitarian activity.

    Council member Lavonta Williams, who represents the district where the proposed site exists, responded without mentioning the community’s real objection to the plan: they don’t want the type of people the Lord’s Diner serves congregating in the vicinity of the proposed location.

    Mayor Carl Brewer spoke of how this has been a complicated issue. Council members must do the right thing, he said, which may not be the same as what the community wants. He said he recognizes the need to feed everyone, and there are people all over town that need help: “These are people who cannot help themselves.”

    He said that people in key leadership positions said things that were “very bitter, very venomous,” and that citizens should “charge it to the mind and not the heart,” adding that “some people take desperate measures to be able to get what they want.” He asked that citizens not judge an entire community by the actions of a few.

    The mayor said he sees an opportunity, and he urged everyone to work together.

    What hasn’t been mentioned in the debate over this matter is that the proposal by the Lord’s Diner is a lawful use of the property. If we want to have a system that respects private property rights, that’s the only thing that matters.

    Wichita Eagle reporting is at City takes Lord’s Diner proposal off table after diner pulls its offer. An informative blog post by Brent Wistrom is at Council members vent as Lord’s Diner plan sinks.

  • Wichita downtown revitalization discussed on Kansas Week

    Bob Weeks discusses planning for downtown Wichita revitalization and what he learned on his trip to the Platinum Triangle in Anaheim, California. Host Tim Brown and guest Randy Brown also appear. From the KPTS Television show Kansas Week, August 14, 2009.

    The article referred to is Wichita’s getting ready to plan.

  • Wichita’s getting ready to plan

    As the City of Wichita develops a grand plan for downtown revitalization, can we have a process that is freedom-friendly and respects property rights? I went to Anaheim to find out.

    Leaders in Wichita — both private and public sector — believe that Wichita needs a plan for downtown. To support this, the city is seeking to develop a Downtown Revitalization Master Plan, a “a twenty-year vision for its thriving downtown.” Right away I want to ask: if downtown is thriving, why does it need revitalization?

    The document Wichita used to lure planning firms to apply for the planning job is full of ambitious and colorful language: “a community synergy that is contagious,” “casting a grand vision to realize our potential,” “the bold vision the community is seeking.”

    The danger we face is that Wichita’s plan will end up like almost all other urban plans — a top-down effort micromanaged by politicians and bureaucrats, people whose incentives are all wrong. We already have the structure in place, with our mayor promoting the plan for downtown as his signature achievement, and a tax-supported downtown development organization headed by a young and energetic planning professional.

    There is a different way to go about redevelopment, a way that respects freedom and property rights, while at the same time promising a better chance of success.

    Last month I visited Anaheim, California, to learn more about the Platinum Triangle. This is an area of low-rise warehouses and industry that the city thought would be a good place for redevelopment. (Anaheim’s old downtown was redeveloped starting in the 1970s, is fairly nondescript, and has not met expectations.)

    What Anaheim decided to do with the Platinum Triangle is to employ “freedom-friendly” principles in the district’s development. Or, as the subtitle to an article written by Anaheim Mayor Curt Pringle states, a “Foundation of Freedom Inspires Urban Growth.”

    Here are the important things that Anaheim has done that are out of the ordinary:

    No use of eminent domain to take property. The forceful taking of property by government for the purposes of giving it to someone else is one of the worst violations of property rights and liberty that we can imagine. But it’s a prime tool of redevelopment, one that the planning profession says is essential to their efforts to reshape cities.

    In Kansas, we have a relatively new eminent domain law that, on its face, should provide strong protection to property owners. It’s unknown whether this protection will be effective when a city such as Wichita asks the legislature to allow the use of eminent domain, which is what the law requires. If a city makes the case that the success of Wichita and thousands of jobs depend on the use of eminent domain, will legislators go along?

    Overlay zoning that respects existing land use. Instead of replacing existing zoning, the city added an “overlay zone.” This meant that while the land had new permissible uses and restrictions, existing rights were protected. It’s only if existing property owners wanted to pursue new development that they would have to conform to the new development standards contained in the overlay zoning.

    No public subsidies or incentives. In California, they’re called redevelopment districts. In Kansas, we call them tax increment financing or TIF districts. In either case, this mechanism allows property owners to, in effect, retain their own increased property taxes for the benefit of their developments, something that the average taxpayer — or real estate developer not working in a politically-favored area — can’t do.

    The City of Wichita views TIF districts as a powerful tool for development. The city has many existing TIF districts, and we can expect that others will be created to support downtown revitalization. While many people recognize and agree that the taking of land through eminent domain for economic development is bad, the taking of tax revenues through TIF is subtle. Most citizens don’t know this is happening.

    Anaheim did a few other things: it streamlined the permitting process, reduced parking regulation, developed a broad-based environment impact report, and relaxed requirements for balancing commercial and residential uses.

    It also used a “first-come, first served” housing permit allocation process. Instead of allocating housing permits to each parcel, permits were allocated to a much larger district. Developers could claim them through a competitive process and use them flexibly.

    What’s been the result in the Platinum Triangle? After the district was formed in 2004, development started at a fast pace. But the housing crisis in California has definitely put a damper on the pace of development. An illustration: In a loft project in the Platinum Triangle, condos originally priced at $400,000 are now offered at $250,000. It’s expected that as the housing crisis eases, developers will go ahead with their plans.

    The Platinum Triangle offers a distinctly different model for redevelopment than that practiced in most cities. A few other cities in California have noticed and are adopting Platinum Triangle-style, freedom-friendly, principles.

    The question we in Wichita now face is this: Will Wichita adopt a freedom-friendly approach to downtown revitalization?

  • Environmental myths of the Left

    One of the powerful stories radical environmentalists — or any environmentalists for that matter — tell is how the river in Cleveland caught on fire. Water burning: that’s a real environmental disaster. Government must step in and do something!

    Today the Competitive Enterprise Institute tells the true story. It turns out that it was not capitalism gone wild that caused the fire, but too much government and lack of property rights.

    Progressivism, Not Capitalism, to Blame for Cleveland River Fire

    Washington, D.C., June 22, 2009 — Today is the 40th Anniversary of the famous Cuyahoga river fire in Cleveland, Ohio. The U.S. Environmental Protection Agency is celebrating the anniversary, because it “led to positive results, including creation of the U.S. Environmental Protection Agency and passage of major environmental laws such as the Clean Water Act in 1972 [which meant] we paid attention to how much pollution manufacturers were putting into waterways like the Cuyahoga. The legislation set limits on pollution, and gave EPA the power to fine industry for violating those limits.”

    Yet this received wisdom mischaracterizes what happened in 1969 and the reaction to it. Thanks to the work of free-market environmental scholars like Prof. Jonathan Adler of Case Western University (a former CEI scholar), we know the truth about the Cuyahoga River, which includes facts like:

    • The fire of 1969 was not regarded as a big deal in Cleveland. The Cleveland Plain-Dealer covered it in 5 paragraphs on page 11 and firefighters were quoted as calling the blaze “unremarkable.”
    • The fire was under control within 30 minutes and no TV crews made it there on time. The images most people remember were stock images of an earlier fire in 1952.
    • Local industry had in fact been trying to get the river cleaned up for decades. A paper company had sued to prevent the city dumping sewage into the river as early as 1936. A real estate company actually won a victory in such an attempt in 1965, but this was overturned by the courts.
    • What prevented clean-up was government control. The City of Cleveland claimed a “prescriptive right” to use the river as a communal dumping ground. The State of Ohio operated a permit system that encouraged using the river that way.
    • Cleanup actually started after the 1952 fire, with fish reappearing in 1959, although this was delayed because of state and local government control over the river.

    Competitive Enterprise Institute Senior Fellow Iain Murray wrote about the Cuyahoga River Fire in his 2008 book, The Really Inconvenient Truths: Seven Environmental Catastrophes Liberals Don’t Want You to Know About-Because They Helped Cause Them. Murray said “the Cuyahoga River Fire of 1969 is an environmentalist myth. It is a myth because it was a minor incident, and it is a myth because it actually demonstrated government’s role in environmental degradation.”

    Murray added that “real riparian property rights would have stopped the fires from ever happening. You don’t spit on your own doorstep. Instead, Cleveland declared common ownership and invited spitting.”