COVID's hidden victim: freedom
The COVID-19 pandemic swept over the planet in early 2020, resulting in more than a million deaths in the United States and many millions more around the world. Unfortunately, these lives weren't the only casualties. The pandemic also walloped economic freedom — that is, our freedoms to buy, sell, move, hire, fire, invest and earn income and keep it.
Economic freedom took a big hit in the global financial crisis of 2007-09 — but this time the blow was three times worse. The potential impacts of economic freedom's decline range from lower incomes and greater poverty to shorter life expectancies, fewer years of schooling, and less overall happiness.
The loss of economic freedom shows clearly in the recently released Economic Freedom of the World (EFW) report, published annually by the Fraser Institute in Canada and co-published worldwide by a network of think tanks, including the Cato Institute in the United States. Countries scoring higher on the report's index — those with more economic freedom — generally have smaller governments, lower taxes, more secure property rights and efficient legal systems, stable monetary and price environments, freer trade with foreigners, and fewer economic regulations.
The latest EFW index tracks economic freedom in 165 nations. Places like Hong Kong, Singapore, the United States, and Switzerland have traditionally scored at or near the top of the scale, while countries like Zimbabwe, Argentina, Congo, and Venezuela are typically found near the bottom of the list.
The policy responses to the coronavirus pandemic in almost all nations included massive increases in government spending, monetary expansion, travel restrictions, regulatory mandates on businesses related to masks, hours, and capacity, and outright lockdowns. These policies undoubtedly contributed to a widespread erosion of economic freedom from 2019 to 2020 — in 146 of the 165 jurisdictions to be exact.
The EFW report tracks the global average for the 123 nations with complete data since 2000, and it fell from 7.00 in 2019 to 6.84 in 2020. Although small, the 0.16-point decline is by no means trivial. In addition to surpassing the global financial crisis, the loss in just one year erased a full decade's worth of hard-won gains in the global average.
The EFW index contains no direct measures of health care or public health policy. The index would undoubtedly have turned downward more severely if it included indicators specific to the pandemic, such as mask mandates or restaurant capacity constraints. The measured decline in economic freedom is almost certainly an understatement of the reality.
In addition, the most recent report relies on 2020 data. While much of the spending associated with the pandemic occurred in 2020, the inflationary effect of the expansionary monetary policies did not show up until 2021 and 2022. I expect the global EFW average to decline even more when the 2021 and 2022 data are integrated into the index.
I take no position on the efficacy of the various policies designed to deal with the coronavirus pandemic from the perspective of public health; they very well may have saved millions of lives, or they may have been ineffectual. That is a question for epidemiologists and health economists to work out. My concern is economic freedom and its benefits for human well-being. On that margin, the new EFW report delivers a sobering message — government policies in response to the pandemic were a catastrophe for economic freedom.