‘Diseased’ economic freedom

May 10, 2010 Letters

Dear Editor,

Every year, we see the Heritage Foundation/Wall Street Journal economic freedom scorecard, the so-called Index of Economic Freedom; and every year, people not in support of the PPP/C Government, generally await with bated breath for these munitions; these provide some amusement to some of these people until its utility value wears out; or until they see the light of day that these scores mean nothing.

And we should know that the architects at Heritage Foundation use these scores, inter alia, as a bargaining tool to negotiate exorbitant consultancy deals with many poor countries; which, in the eyes of the Heritage Foundation, need help to improve their economic freedom status.

And in their own backyard, the U.S. economy went berserk with its superfluous economic freedom via extreme deregulation, that is, full economic freedom; the Heritage Foundation in partnership with the Wall Street Journal recently calculated the U.S, score for economic freedom in 2010 as 78; this ‘diseased’ economic freedom makes the U.S. a mostly free country.

Just look at the financial disaster this kind of freedom created – a credit tsunami, an international financial meltdown, an international credit crunch.

Nonetheless, with more aggressive regulations in the pipeline on business and financial activity, we may very well see a reduced score on economic freedom for the U.S. in the ensuing years.

How did the U.S have the pleasure of cuddling the credit tsunami? Indeed, it started with applying the Heritage Foundation’s high economic freedom status.

The credit tsunami was a product of irresponsible lending and irresponsible borrowing through cheap loans and 100% guaranteed loans over the last 10 years. Numerous households still cannot afford their mortgages, with millions of families facing foreclosures. And the lending institutions are still in dire straits.

The irresponsible lending and borrowing gained added impetus through increasing deregulation; aided and abetted by former Chairman of the Federal Reserve Board Dr. Alan Greenspan, both the instigator and cheerleader of energized deregulation.

He believed that subprime mortgage originations brought on the frozen credit markets. Subprime mortgages (borrowers with low credit scores, usually under 620) pooled and traded as securities attracted excessive demand from international investors. And these mortgage-backed securities were sold at extraordinarily high risk-adjusted market rates.

For this reason, to present some corrective measures to the financial meltdown, the Emergency Economic stabilization Act of 2008 gave birth to the Troubled Asset Relief Programme (TARP) to effect the necessary repairs to the economy, that is, to return capital flows to consumers and businesses; to restore confidence among banks and other lending institutions; so much for deregulation and economic freedom.

We should know, too, that Guyana, not long ago, received the Millennium Challenge Corporation’s (MCC) two-year, US$6.7 million Threshold Programme to enhance Guyana’s performance on MCC’s Fiscal Policy indicator. The funding, inter alia aimed at assisting the Government of Guyana to introduce the new value-added tax (VAT) system, and aid the government toward quality spending.

I mention the MCC because Guyana had to do well to gain selection on 17 Indicators, with Ruling Justly; Investing in People; and Economic Freedom as categories; the Indicators were: Civil Liberties; Political Rights; Voice and Accountability; Government Effectiveness; Rule of Law; Control of Corruption; Immunization Rates; Public Expenditure on Health; Girls’ Primary Education Completion Rate; Public Expenditure on Primary Education; Business Start Up; Inflation; Trade Policy; Regulatory Quality; Fiscal Policy; Natural Resource Management; and Land Rights and Access.

Guyana’s economy is a work in progress. Let’s be careful how we interpret foreign reports in relation to their validity and integration with local values.

Prem Misir

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‘Diseased’ economic freedom

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