At Bleeding Heart Libertarians, Jason Brennan takes up the question of which country is most libertarian and lodges a complaint against global “economic freedom” indices:
This index may understate how anti-libertarian the United States is. After all, the index penalizes countries if their governments spend large amounts on social insurance. Yet classical liberals and neoclassical liberals are not in principle opposed to government social insurance. [That is, they will accept it under certain conditions.]
Thus, suppose we separate the idea of the administrative state—which tries to control, regulate, manipulate, and manage the economy—from the social insurance state—which provides tax-financed education, healthcare, or unemployment insurance. On the Index of Economic Freedom, many countries that rank lower than the US have far less extensive administrative states than the US. For instance, Denmark ranks much higher than the United States on property rights, freedom from corruption, business freedom, monetary freedom, trade freedom, investment freedom, and financial freedom. Luxembourg, the Netherlands, the United Kingdom, and many other countries beat the US on these measures as well. Thus, many other European countries might reasonably be considered more economically libertarian than the US.
Jason makes a legitimate point here: a dollar transferred to a social security recipient is less violative of freedom than a dollar spent hiring a drug enforcement agent or antitrust litigator. This is so even for those declassé Rothbardian absolutists, for whom the immorality of taxation is compounded when it is used to fund further violations of people’s rights.
However, even a bleeding-heart libertarian should see really existing welfare states as problematic for two basic reasons. First, the overwhelming majority of social benefits in all Western democracies go to the non-poor. In the U.S., Social Security and Medicare dwarf Medicaid and other antipoverty programs. Second, even the antipoverty programs are paternalistic: public health insurance, food stamps, and housing vouchers are favored over unconditional cash grants. My sense is that libertarians of all flavors should be uncomfortable with these two aspects of modern welfare states.
If the point is that government expenditure on social insurance should “count for less” than government consumption (expenditure on the wage bill and goods for the government’s own use) and regulatory distortions in economic freedom indices, then I agree — but so do the authors of the economic freedom indices. In the Heritage/WSJ index, total government spending and taxation together account for just 20% of the score. In the Fraser index, government spending, taxation, and enterprises together account for, again, 20% of the score.
No doubt the U.S. is less economically free than some other countries, but I see no reason why the existing measures would get its relative place wildly wrong. Now, a more serious concern is that these indices ignore personal freedom. It’s hard to see how the country with the most prisoners per capita in the world could place anywhere near the top of any global ranking of countries on freedom tout court.