Free Market vs. Command Economy
The organization, Citizens for Free Enterprise with chapters in Arizona and Georgia, recently announced its presence in Nebraska. The group’s mission “is centered on strengthening the free enterprise system and helping entrepreneurs achieve success.” Investopedia defines a free enterprise system as “an economic model where private individuals and businesses make most decisions about production, pricing, and trade with minimal government intervention.” Government’s role is as a “limited authority that enforces contracts, protects property rights, and maintains safety rules.” Free enterprise systems are analogous to “free market” or “market” economies. At the other end of the spectrum are “command” economies where governments control prices along with the supply, manufacture, and distribution of goods.
Pure market or command economies are rare. Democratic countries have greater elements of market economies. Communist countries tend more towards command economies. Most countries have elements of both, and economists in general consider them mixed. Most economists argue market-oriented economies are healthier and more efficient than command economies, but recognize such economies can mean less economic stability and equity. Countries generally try to balance economic growth and efficiency with equity.
Even in the U.S., the government has its hand in many aspects of the economy. Subsidies, price controls, retirement programs, regulations, and providing public goods (roads, military, healthcare) are examples. The Heritage Foundation’s Index of Economic Freedom ranks the world’s economies on a variety of factors it believes are critical to a free market economy. Factors include property rights, judicial effectiveness, government integrity, tax burden, government spending, fiscal health, and freedom for business, labor, monetary policy, investment, and financial. According to the index, the U.S. ranks 22nd among countries in economic freedom with a score of 72.8 points. Singapore, Switzerland, Ireland, and Australia lead the rankings with indexes above 80. Canada, too, scored ahead of the U.S. with an index of 75.6. Mexico scored 59.8. China scored 48.3. North Korea (3.1), Cuba (25.2), and Venezuela (27.3) scored the worst.
The U.S. score improved last year, up 2.6 points from the year prior. The Foundation wrote, “Gains in monetary freedom, government spending, fiscal health, and investment freedom have outpaced the lower score in trade freedom, reflecting the positive impact of major regulatory and tax reforms on economic growth, investment, and business confidence.” A rising index is good, but further improvement might not occur in the near term. Additional trade barriers, government investments in private companies, and growing government debt bespoke of more government influence. Perhaps the slide could be a reason for the Citizen for Free Enterprise’s activities.