If you advocate for people to have more income, longevity and education (human development), then you should also advocate for the State to get out of the way, or interfere less, so that they are free to offer their work, products and services to each other (economic freedom). The conclusion of multiple surveys is reinforced by a new study by Lucas Pedrosa, master in economics and specialist in public management, for the Millenium Institute, released last week. In short, the analysis concluded that more than half of a country’s human development can be credited with promoting economic freedom. On the other hand, the relationship with social inequality, although it exists, is weak.
The researcher points out that, if a country wants to be more generous to improve the lives of its citizens, the focus of public policies must be to ensure private property, legal security, lower taxes, lower public spending and a better business environment. “The debate on the reduction of inequalities, despite its merits in terms of social justice, leaves something to be desired in its aims — it is inefficient in achieving human development, having a low impact”, concludes the master in economics. “In contrast, economic freedom, little discussed, has a much stronger effect on increasing human development.”
Income, longevity and education are factors taken into account when calculating the Index of Human Development (HDI) used by the United Nations. Pedrosa collected a historical series of the world HDI, as well as the Gini index, which estimates economic inequality. As there are different calculations of a country’s economic freedom, the author chose the Index of Economic Freedom (ILE) from the American Heritage Foundation. He also took other statistics like per capita GDP, which is the wealth produced by a country divided by the number of inhabitants. In all, the analysis combined 80 to 90 countries, depending on the test.
Results
Although it confirms the belief of the “progressives” and the “left” that human development does not go hand in hand with inequality (in fact, the greater the inequality material of a country measured by the Gini, the lower the local HDI tends to be), the author considers that this relationship “is weak”. Only 11,4% of a country’s human development status can be explained by the level of inequality.
While European countries have low inequality and high development, Latin America, including Brazil, belies the pattern by having both HDI and Gini relatively high on the global stage. Unsurprisingly, a high HDI goes hand in hand with a high per capita GDP: those with more money live better.
The study also investigated whether the amount of wealth in the hands of the richest fifth of the population would have a negative impact on human development. The answer is yes, but once again, the impact is low: income concentration explains only 52,5% of the human development status. Taking the poorest one-fifth of the population, however, no relationship can be inferred. How much income is in the hands of the poorest, therefore, does not seem to be relevant to a country’s HDI. From this, the researcher concludes that “social inequality impacts negatively, but weakly, human development”.
The index of economic freedom is complex and takes into account several factors such as freedom of investment, GDP growth, health of public finances, legal security, labor freedom, commercial freedom and property rights. Investigating each of these factors separately, the analysis points out that the relationship between the last two — commercial freedom and property rights — with the reduction of inequality is important. However, the relationship between economic freedom and inequality is also relatively weak (one explains only 13,1% of the other).
The strongest result of the study is the relationship between economic freedom and human development. The freer individuals are, the better they live. Human development can be explained in 52, 1% by economic freedom, according to the two indices involved (HDI and ILE, respectively). In social sciences, the relationship can be considered strong, as the author comments. “More than half of the increase in the level of human development can be explained by an increase in a country’s economic freedom,” he wrote.
A common criticism of this type of research is that the fact The fact that two things go together (the existence of a correlation) does not necessarily imply that one caused the other. In an interview with Gazeta do Povo2015, Pedrosa recognizes this, but argues that “the causality between these variables has already been verified in several previous works, as can be seen observe in research” that he cites in the study.
Concern with the poor or aversion to the rich?
Philosopher Harry Frankfurt agrees with Pedrosa about the mistake of focusing on reducing material inequalities. In his book “On Inequality”, by 2015, he speculates that one of the reasons for the obsessions with equitable distribution of resources is that “the very idea of having an equal share is in itself considerably more transparent and intelligible than the idea of having enough”. That is, it is easier to understand what it means to have the same amount as someone else than to understand which minimum amount is sufficient, below which the person suffers from objective poverty.
“A egalitarian condemnation of inequality as something inherently bad loses much of its force”, comments the philosopher, “when we recognize that those who are worse off than others can still be better off”. For Frankfurt, what should concern us “is whether people have good lives, not how their lives compare to the lives of others”. Poverty is the problem, not inequality.
But there is a psychological barrier for many defenders of income “redistribution” policies to follow the reasoning of the philosopher and economist. A study by Chien-An Lin and Timothy Bates, both of the Department of Psychology at the University of Edinburgh, Scotland, found that supporters of the idea of redistribution to combat inequality are distinguishable not only by compassion but also, importantly, by malicious envy. . It’s the kind of envy that wants the successful to fall rather than the unsuccessful to rise. It is difficult, in fact, to transform into concern for the poor something that is an aversion to the rich.
The findings of the Millenium Institute are corroborated by many other studies. In one of them, considered by specialists such as Bryan Caplan one of the best in economics in recent years, Justin Callais, from the University of Louisiana at Lafayette, and Vincent Geloso, from George Mason University, tested the direct and indirect impacts of economic freedom on mobility of income between generations. They concluded that components of economic freedom such as property rights are more important than inequality as determinants of social mobility, that is, the opportunity for the poor to move up in life.
“ I usually say that Brazil is a country where society doesn’t like politicians, but loves the State”, says Lucas Pedrosa to Gazeta do Povo. “In whatever problem there is, it is the first entity they turn to. They are always asking for a law against this or that; or public investment in such and such an area”. He does not deny that the role of the State is fundamental in terms of security and infrastructure, “but its role in all areas of human life is Sovietism”. As for Lula’s return to power, he thinks things won’t change much. Brazil “flirts with the abyss”, he reflects, “but at ‘the right time’ we take a step back”. Thus, our country is “condemned to mediocrity”, not becoming Venezuela or Argentina, but also far from being Sweden, the United Kingdom or the United States.
