Economic Freedom and Regulation

Here is a little score card that reveals the condition of the regulatory structures for the U.S., Greece, and Spain in relation to the 141 countries measured in the 2011 Economic Freedom of the World Report, produced by the Fraser Institute:

Country Overall Economic Freedom ranking Regulation Credit Market Regulation Labor Market Regulation Business Regulation
United States 10 27 116 5 27
Greece 81 129 132 128 87
Spain 54 101 70 118 81

The US has fallen from an overall ranking of 2nd place just a few years ago, helped in part by the ranking of 116th worst in the area of Credit Market Regulations.

The North American report puts Missouri in the middle of the pack: 28th of 60 (U.S. states and Canadian provinces). That is roughly the 47th percentile. The 47th percentile on the World report would make us competitive with Namibia or just one point better than Haiti. Missouri political football fans should congregate under the Capitol dome and demonstrate their disgust in unison by shouting: “We are number 28 – we are number 28”.

Note 1: The report measures a total of five areas: 1) Size of government, 2) Legal system & property rights, 3) Sound Money, 4) Freedom to trade internationally & 5) Regulation


A penny for your thoughts

Our family was getting into the minivan at a gas station the other day when I spotted a penny on the ground. I nudged my 8-year old son to turn back and pick it up. He shook his head, “You can’t buy anything with that,” and continued to his seat inside. I glanced over to a fellow pumping gas just across us, likely about 70ish, who had heard my son just as clearly as I, and we both had a chuckle. I then reluctantly agreed aloud, “You know, he’s right, though.”

My grandfather turned 96 this spring. I fondly recall many of his stories about growing up decades ago, roaming the Midwest in search of work in the 1930’s. A factory in Chicago, a local egg route, and as a farm hand in the Dakotas for the wage of a dollar a day.

People expect a dollar to be a store of value. It is to some degree, at least for short to intermediate periods of time, anyway. But long term, what a crap deal holding a buck is. If my grandfather had taken a dollar from a full day’s hard work and stuck it in cookie jar and pulled it back out today, he’d still have a dollar, sure, but what he could buy with it now is a lot less. Back then, it would buy a few loaves of bread, now only about half a loaf (this despite the great advances in agriculture, delivery, and food processing which should drive prices DOWN!)

What a bad deal to work so hard, to prudently save for a rainy day, just to have a lot of that value rot away. That penny my son found too worthless to pick up now was worth a few pieces of gum decades ago.

Government spends more than it takes in, passes laws to make credit too easy, and sets up back-stopped mortgage-buying enterprises, so more money is printed one way or the other. And that feels good to those getting the benefit of the new money, so they can buy more stuff than they could otherwise afford. The economic indicators look perpetually positive, and we feel magically wonderful as a nation since everybody has been “making more.”

But there’s a back side to this gravy train. Food prices are creeping up and savers are earning no interest; no wonder we are scratching our heads. Maybe some of us are starting to realize that value is evaporating from our own pockets. However it’s nothing new in human history: you can’t create value out of thin air; value is just sucked in from somewhere else; in this case, holders of dollars…or pennies…or, in my son’s case, those who have become indifferent to a penny.

By the way, after he refused that small coin, I reached down and put it in my own pocket before getting into the driver’s seat. As I always do, I examined the coin’s date, not as a collector, but because pre-1982 pennies are mostly real copper, so the melt value is about 2 cents – it awards me more than a penny’s worth of pleasure finding those (pre-1964 dimes and quarters have 90 percent silver- so hold onto those, too.)

Somewhat ironically, a few minutes later at a garage sale, my son found a toy he had been really wanting for his stuffed animal collection for the giveaway price of 10 cents. …”Ya know, son, if it’d been a dime we’d found, I could help ya out…”

Steve Spellman

Missouri Diversity

Thoughts on localism and federalism

I attended an all-day work-related training session the other day in Clayton, Missouri, an up-scale suburb of St. Louis. While driving there along I-70 I passed through Chesterfield (another nice suburb), Lake St. Louis (a smaller St. Louis suburb), and Wright City (a small town on I-70.) On the way I stopped at a McDonald’s in rural Montgomery county.
These communities are just a small sampling of the many diverse areas in just one portion of our state, not to speak of the Ozarks, our farmlands, and the like. Though we have many differences, we have much in common: language, general culture, and an overall consensus on basic law and order. So it is all fine and good that we are all included in the state of Missouri, and it’s okay that we’re all part of the United States of America.
But as I get further from home, regional difference increase, as people’s ideas of what they want their community to look like and what the law of the land is start to diverge. Particularly as lawmaking and regulations start controlling in increasing, intricate detail our economic and social behaviors (for good or ill), it makes more sense to make those decisions as close as possible to where the affected people live. Ultimately in a free society, the local jurisdiction is the individual person, then family unit, then on from there.
In a free society some individuals will make bad choices, as will municipalities. I can’t say that I agree with some local decisions like New York City’s recent ban of big sodas or Los Angeles looking to ban plastic shopping bags. But at least those ideas are isolated within those jurisdictions, and a whole state or our whole region are not contaminated by such rotten laws. Same even if Missouri or Minnesota finds it must subsidize ethanol…until the Feds jump on board, that is. Clayton and Columbia and Cabool have many things in common, but not always their distinctly different ideas about the role of government. As do I from my neighbor a 1/4 mile down the road, for that matter, whether it’s about welfare, road quality, marriage definitions, curfews, zoning, income/sales taxes, or the school curricula.
Oh, but back to my training session. The instructor was a really sharp guy, hailing from Rhode Island – actually I learned he summers in Rhode Island, winters in Miami Beach, and travels the nation consulting with multimillionaires. I therefore reckon he might have different views of the world than rural McDonalds patrons, Clayton residents, or even myself. Still, God bless him and his communities, and God bless mine, too. Let’s each do our own thing, and interact in voluntary cooperation as we see fit. However, laws affecting all 330 million of us in this great country should be as few as possible.

Steve Spellman