Heritage In Focus: Index of Economic Freedom

Tim Kane explains how freedom is measured and why economic freedom matters

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News & Politics

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• Foundation
• Focus
• Economic
• Freedom
• Index
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• Stark

[luizcadu]

If economic freedom equals economic prosperity, why are the BRIC countries all below 110 in the economic freedom ranking?

[sdfkjllshadflhadfshl]

As of 2010 we are no longer considered Free, our current score has dropped to 76 and we are no longer in the top 10.

[Psychosmurf547]

government gets involved. Unions are not bad so long as they are only used to prevent abuses by employers and provide lawyers with which to settle legal disputes with their employers.

[Psychosmurf547]

If the wage is too low, there are labor shortages. If the wage is too high, employers will lose too much money. The market then controls how many will be hired and at what wage. Any deviations from this will result in the problems above. If this is not a "fair wage" then define what is. The problem with unions is that they often make deals that protect ONLY union members, and screw over the rest. This is basically like the corporate version of making a monopoly. And both get much worse if the

[Psychosmurf547]

"Wages can get very low before fleeing workers start to become a problem."

All right, I agree with that. The real trouble, however, is that as the wage level rises, employers are less and less able and willing to hire new workers, and more willing to fire the current ones. At the same time, at higher and higher wages, more and more workers are willing and able to work. So there is a market clearing wage at which employers are willing to hire just as much as workers are willing to work.

[rspawn]

"The struggle between employers and workers ensures an agreement on the wage."

Ensures an agreement, but not a fair agreement.

The struggle between employers and workers is not on a level playing field, because with lots of money you can buy both political- and public opinion. All to many workers are unorganized because they have been convinced that labor unions are bad for them. And before that, big corporations spend a lot of money on union busting.

[rspawn]

"Corporations do want to reduce costs. However, they do not want to reduce the wages of their best workers to the point that they will flee to their competitors."

That's hardly relevant if many corporations give low wages, as they do. Wages can get very low before fleeing workers start to become a problem. Otoh in some way what you say is true, if the "best workers" are the CEO's.

Apparently corporations do hire a lot of workers that they think are not-so-good, and pay them low wages.

[Psychosmurf547]

No, capitalism is about making as much profit as possible by creating an amount of capital that would be optimal to produce the maximum amount of supply at the current price-level. Corporations do want to reduce costs. However, they do not want to reduce the wages of their best workers to the point that they will flee to their competitors. Also, workers don't have to accept low wages, they can go on strike. The struggle between employers and workers ensures an agreement on the wage.

[rspawn]

"Capitalism does not exploit workers"

Capitalism is about creating capital by making as much profit as possible, by reducing cost as much as possible. Workers' wages are a cost that corporations want to reduce as much as possible.

That's why nowadays most jobs that the big corporations create are crappy jobs in China.

"workers wouldn't work if they thought they were being cheated"

It's not much of a choice between not having any income and having a crappy job.

[Psychosmurf547]

It is the government's fault for allowing itself to be corrupted. Corporations do not make a profit at the expense of others. They make a profit by hiring workers to create products of value. The workers are then paid the agreed upon wage for their labor. It is the government that has allowed these corporations to block competition and abuse the markets. Capitalism does not exploit workers, workers wouldn't work if they thought they were being cheated. They work because they think they will gain