On Wednesday, February 29th we were visited by two speakers representing the Charles Koch Foundation. The Koch Foundation and its various groups are non-profit charitable institutions that work to increase knowledge of economic freedom in the United States.
The first to speak was John Hardin. John holds a PhD in History from University of Maryland College Park. The topic of his lecture was "
Prosperity and Economic Freedom". Originally from South Carolina, John spoke in an enthusiastic southern accent and with a sense of urgency.
He began by noting a very recent spike in prosperity: in the 1800s, he cited, 85% of the world's population lived in absolute poverty. 200 years later - present day - the absolute poverty rate had dropped to 17%. To give an example, he noted that in the 1800s, a person would have had to work 2.5 hours to buy a 3lb. chicken, but now, the average worker can afford that in only 14 minutes of work. In addition, the infant mortality rate has been cut in half since the 1960s. The quality of life of the average person has increased significantly - but why?
Dr. Hardin argues that there is a strong relationship between economically free countries and income per capita, life expectancy, overall happiness, civil rights, and other benefits. Even within the United States and Canada, Hardin argues that states with more economic freedom enjoy more prosperity. He uses a five point rubric to examine the economic freedom (or lack thereof) of a specific locality:
- Size of the government relative to the economy
- Regulation
- Sound Money: Low inflation; the government's responsibility to keep prices stable despite incentive to print money and spend.
- Free Trade: Lowering barriers to trade (taxes, tariffs, quotas, etc).
- Rule of Law: Simple and certain definition of property rights, enforcement of contracts, etc.
The United States has been struggling in some of these categories, however, and there has been a noticeable decrease in certain measures of our prosperity. The rate of youth unemployment (defined as involuntary unemployment for people between the ages of 18-29) has increased by 20% from 2000 to 2009. There has been a 600% increase in the size of government in the last 50 years relative to the size of the economy. Dr. Hardin also pointed out that there was no appreciable difference in the size of government between Republican and Democrat leadership, making the issue far larger than partisan politics. In very recent memory, during the Bush Jr. years from 2000 to 2009, the size of government rose by 4% - more than the 3.4% average since 1946.
The U.S. government is facing an unprecedented increase in unfunded liabilities, and according to Hardin, there is no working plan for the control of these debts. Programs like Social Security, Medicare, and Medicaid represent 45% of our spending. While he maintains the programs have honorable ends, the means for their payment could be disastrous. The interest we owe (and must pay) on these massive debts is projected to increase to 20% of our budget in the next 15 years.
With the ballooning of government programs comes the inevitable increase in the regulation that must monitor it. George Washington University's Regulatory Studies Institute reports that the cost of establishing and enforcing laws is at a historic high. Compliance costs for businesses represent an annual loss of 1,752 billion dollars. Big businesses often fight for regulation, because their size offers a competitive advantage in legal work, lobbying, and other political means which can afford them profitable pseudo-monopolies. In one case, General Electric fought against the companies that produced incandescent lights so they couldn't cut into the market share. This is a popular tactic in agricultural and manufacturing industries as well. Our regulatory freedom ranking has dropped from 2nd in the world in the year 2000, to 27th in 2009 according to GWU's Regulatory Studies Institute.
We know our prosperity is positively correlated with our economic freedom, and evidence by many measures shows our economic freedom is decreasing. Dr. Hardin left us with an ominous rhetorical question: if we know these things to be true, when will we start to
really feel a decrease in our quality of life?
After Dr. Hardin's talk, Rodney Vessels spoke about various opportunities with the Koch Foundation and other organizations. If you are interested in an internship program with the Koch Foundation, you can visit
http://www.charleskochinstitue.org. There are also job opportunities available at
http://www.kochassociateprogram.org, and at
http://www.libertyatwork.org. For more information about economic freedom, you can visit
http://www.economicfreedom.org, or visit their Facebook page by looking up "Economic Freedom".
- Ariel Castro, University of Nevada, Reno Economics Club
