Has any period better exemplified the power of economic freedom than the pandemic?
Sure, that might seem an odd question right now. After months of being stuck at home, or commuting to jobs politicians have deemed “essential,” or having the contours of your social or dating activities dictated to you by Matt Hancock, what possible inspiration could this period of constraints and coercion give us on the importance of economic liberties?
Well, they say you don’t know what you have until its gone. But, as author Clarissa Wild once said, the “truth is, you knew what you had, you just never thought you’d lose it.” And though everyone has given up much in the shared sacrifice of the pandemic, how we’ve each felt the pain of the last years’ experiences and unexpected restrictions has brought home the importance of an economic truth: value is subjective.
For some of us, the temporary closure of pubs hit us hardest. For others, it was not being able to attend football matches. Those with the travel bug have no doubt gotten cabin fever by being grounded from jet-setting. Parents of young children have felt the acute loss of not being able to share experiences from days out at attractions with their kids, and with those children’s grandparents.
Despite lockdown sceptic politicians demanding a cost-benefit analysis of the high-level shutdowns, no bureaucrat or economist could have totted up the personal losses of value associated with these unfulfilled desires or trades, ill-summarized as they are in the aggregated measure we call GDP.
But that value cannot be determined objectively by some central planning bureaucrat highlights too how real value creation can be delivered once this emergency has passed: by unleashing the power of experimental entrepreneurialism and free choice. We need free markets—governed again by the discipline of commercial and consumer freedoms—to determine where resources are best put to fulfil our individual tastes and goals.
There’s historical precedent for this. A recent paper on how countries fared after the 1918 Spanish flu pandemic found that those with more economic freedom—in particular those with fewer regulatory restrictions or barriers to international trade—saw much better performance in terms of output. Matt Ridley has outlined how much better Germany’s economy performed post-war than ration-sticky Britain.
Quelle surprise, you might say. But think of it: the case for freedom is even stronger today. After a year of disruption, our reawakening economy will require perhaps more tinkering and adjustment than usual, with the supply and demand for products volatile in the face of reopening sectors, novel or pent-up demands everywhere, and businesses trialling experiments between home and office working.
Despite their hubris, no politician or policy wonk will know what spatial and sectoral distribution of activity is “best” for the economy as it reawakens—lacking, as they do, that implicit knowledge of what we now want, what we might want, where we want it, and how we work best.
Only the trial and error process that comes from entrepreneurial market-tested competition—the democratic expression of the millions upon millions of votes with our wallets, our capital, and our decisions of where to put our labour, guided by freely set market prices—is the guarantor of real value creation.
That’s why we must now re-make the case for a robust return to economic freedom as the constraints are lifted, cognisant that there are those who want to impose their own subjective values on us using the power of government.
So, no: any “return to normal” should not mean Rishi Sunak and Boris Johnson cajoling us back to our February 2020 lifestyle through sponsoring rail season tickets or subsidising our lunches in the hope of justifying the sunk costs of furlough funds.
The brave new post-pandemic world shouldn’t mean Mark Carney or Mariana Mazzucato or Lord Deben determining government-led “missions” to shape the contours of our industry or banning us from reviving beloved activities.
Our economic success does not necessitate Onward or the Resolution Foundation mapping out plans to revive towns or to “reset the UK’s economic framework.”
What we need is a return to the “normal” of free markets—devoid of the state tilting the deck, telling us what we can’t buy, or telling us where we can and can’t work.
Only economic freedom can deliver on our subjective values, objectively speaking.