Economic freedom, power reserves, and declining births

* My article in BusinessWorld last Monday, October 3.
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The Asia Liberty Forum 2022 was successfully held last week Sept. 29-30 at Shangri-La The Fort, sponsored by the Atlas Network and Foundation for Economic Freedom (FEF). Among my old friends from the US who came were Simon Lee, formerly with the Lion Rock Institute-HK, Philip Thompson of the Tholos Foundation, Joe Lehman of the Mackinac Center, Kris Mauren of the Acton Institute, Fred McMahon of the Fraser Institute in Canada, and Basanta Adhikari of Bikalpa in Nepal.

The day before, Sept. 28, there was an Economic Freedom Audit of the Philippines, presenting the results from the Economic Freedom of the World (EFW) Index which is done annually by the Fraser Institute. EFW 2022 showed the Philippines’ global rank was No. 66 out of 186 countries and territories covered. It is higher than Thailand, India, Laos, Vietnam, and China.

But the impact of the COVID-19 lockdown is not included in the report. The two years of lockdown were a triumph of Big Government and saw the retreat of economic freedom. Many free market leaders themselves did not oppose the mandatory shutdown of many businesses and shops, mandatory stay-home orders, mandatory distancing, and mandatory vaccination. Mandatory means choice and individual freedom are zero or near-zero.

ECONOMIC FREEDOM DETERIORATION INDEX

I will attempt to measure and quantify the impact of mandatory shutdowns of many businesses (lockdown) and mandatory vaccination by introducing the concept of an Economic Freedom Deterioration Index (EFDI). A more direct term would be Economic Freedom Bastardized by Lockdown Index but EFDI is the more pragmatic term.

This is a rough measurement with limited components and countries covered. For this exercise, I use only four components: percent changes in mobility from the baseline period January to Feb. 6, 2020 of Google COVID-19 Community Mobility Reports’ 1.) Transit Stations (TS), and, 2.) Retail and Recreation (RR); 3.) GDP growth percentage points increase from 2019-2020, and, 4.) Gross debt/GDP ratio percentage points increase from 2019-2021 (Table 1).

I assigned scores of 1 to 5. The higher the score, the bigger the deterioration in economic freedom. For the four components, here are their respective scores:

TS: below 10 is 1; 11-20, 2; 21-30, 3; 31-40, 4; larger than 40 is 5.

RR: below 10 is 1; 11-20, 2; 21-30, 3; 31-40, 4; larger than 40 is 5.

GDP points increase: below 3 is 1; 3.1-6, 2; 6.1-9, 3; 9.1-12, 4; larger than 12 is 5.

Debt/GDP points increase: below 4 is 1; 4.1-8, 2; 8.1-12, 3; 12.1-16, 4; larger than 16 is 5.

Then the respective weights: I assigned TS with 15%, RR also 15%, GDP points decline is 40%, and Debt/GDP points increase 30%. The score multiplied by respective weights gives the respective index, shown in Table 2. The Philippines under the previous Duterte administration has the worst EFDI among eight economies covered.

Other researchers can expand on this and introduce more components and factors, assign different scores and weights, and cover more countries. I hope to do that someday....