- personal choice
- voluntary exchange coordinated by markets
- freedom to enter and compete in markets and
- protection of persons and their property from aggression by others.
Each of these four elements can be measured; and according to these measures, the Philippines is not as economically free as newly liberalized economies such as Lithuania, Latvia, and Estonia. To the degree that each nation in the world is economically free, its citizens (including its poorest citizens) also enjoy roughly as much prosperity. FreeTheWorld.com has an annual ranking of all countries that report on all four measures, and the data does support the idea that free markets mean economic progress.
Let’s go through all four measures of economic freedom:
- The first and most important measure in my mind is the degree to which private property is respected by the government and the laws of the land. A free market system requires strong but simple laws regarding property ownership. Until China grants full respect to property rights, for example, it cannot call itself a free market system. Unfortunately in the Philippines, we subscribe to the idea of property ownership as "stewardship", which has resulted in the watering down of the principles of private property. In the Philippines, your title to land you own is not as sacred a document as it is regarded here in the U.S. by way of laws, traditions, people’s habits, etc. In Pinas, your tenants, for example, can grab your land from you by way of land reform laws.
- Personal choice is the next important component of freedom. A system of rules and enforcement like local traffic laws demand strict adherence to those rules, but nowhere in the rules should it prescribe my DESTINATION. The purpose of traffic rules is to prevent us from killing each other in accidents, but never to dictate WHERE we are supposed to go.
- Voluntary exchange means that ideally you and I, or Costco and I, or you and Sam’s Club can enter into mutually beneficial transactions without interference from government. The percentage of sales tax, then, is inversely proportional to this freedom.
Voluntary exchange also means that I can work for anybody I wish, and in exchange for my labor get paid accordingly. As long as the employee-employer relationship is beneficial to both parties, employment continues. I can leave the company I work for anytime, and they can fire me anytime also ("at will" employment).
- Freedom to enter and compete in markets means there should be no laws governing WHO can enter a business. I can be crazy enough to compete with Microsoft myself, and nobody can stop me even to protect myself from financial ruin. Microsoft, in turn, is not constrained to crush me. On the other hand, anybody, even a newcomer such as Google, can topple Microsoft because there are no special rules about entering its business.