Freedom is based on the principle that an individual is aware of and responsible for his or her own actions. If you choose not to take care of your own life and make decisions, this means that you accept someone else making those decisions for you. Let us have a look at economic and political freedom.
Today, many people believe that individual freedom is a political issue, and poverty and prosperity are economic issues. However, economic and political freedom are not separate from each other, but have a close relationship. Mongolia’s society needs to review this relationship and have a discussion about it. We have to see the path before us clearly.
Economic freedom is a necessary but insufficient condition for political freedom. This can be seen from the examples of Hong Kong and Singapore. Political freedom is neither necessary nor sufficient in insuring economic freedom. For instance, many countries that were colonies in the past are still poor and do not possess economic freedom, despite having political freedom and holding elections. However, if political freedom in the form of democracy is paired with economic freedom, it allows a country to achieve development and prosperity rapidly. Amartya Sen, a Noble Prize winning economist, says that no famine has ever taken place in a democracy.
This week we are marking the 25th anniversary of Mongolia’s first free, democratic election, which was held in 1990, and put us on the path towards political freedom. But, where is our economic freedom? Where is our progress?
POLITICAL FREEDOM OUTPACING ECONOMIC FREEDOM
Today political parties have their own theories, ideologies, and values developed to bring about socio-economic development. People freely choose from those political parties in elections, and the political party that acquires the most votes is given ruling power. The democratic system, freedom of choice, and civil liberty are stated in the Constitution of Mongolia (de jure) and we have the freedom of speech (de facto). The Constitution says that the supreme principles of the activities of the state shall be ensuring democracy, justice, freedom, equality, national unity, and respect of law.
About economic freedom, it is stated in the Constitution that Mongolia shall have an economy based on different forms of property, taking into account universal trends in global economic development and domestic trends. The Constitution also says that the state recognizes and accepts all forms of both public and private property and shall protect the rights of owners by law. Although the phrase “universal trends” was not defined, we have always understood that it refers to the market economy. It can be seen from the development of the private sector, efforts to strengthen it, and the privatization of certain public entities and properties.
There are only two ways to regulate the economic activities of millions of people. One is by force, and the other is by voluntary exchange based on market principles. Even though Mongolia chose the market economy path, the regulations enforced by the government are not decreasing in number or extent, but increasing in some instances. There are a number of ways to measure how much influence government regulations have on the economy and individual income. One of them is the index of economic freedom published by the Heritage Foundation, in conjunction with the Wall Street Journal. The index measures the economic freedom of almost every country in the world.
MONGOLIA’S ECONOMIC FREEDOM
On the index of economic freedom, Mongolia was ranked 97th out of a total of 118 countries in 2014. There was a 2.8 point decrease in Mongolia’s ranking compared to 2013. The ranking is measured by how much the per capita income in a country is dependent on its development policy, institutional capacity, and environment. The index of economic freedom, which has been published annually for 20 years, shows that almost 80 percent of per capita income is dependent on the policy pursued by a government and its institutional capacity and activities. The extent of economic freedom is largely influenced by property rights, government regulations, and underground economies.
The driver of the market economy is the desire and capability to accumulate wealth through income, savings, and trade. The most important thing is the belief that an individual has to be the owner of his or her property or business, in order to earn, save, invest, and conduct business activities. No one else has the right to use the property of others without permission.
In terms of protection of property, Mongolia scored 30 out of 100 points and is ranked 70th. Hong Kong has the highest score (90) followed by Singapore, Australia, Switzerland, New Zealand, Canada, and Chile. This means that protection of property is three times as weak in Mongolia as compared to these countries. A clear example is assets like land, homes, and livestock, which do not go into economic circulation in developing countries because their governments have not consolidated their property rights.
Having exceeded the scope of its primary objectives to ensure safety, security, freedom, and protection of property, the government is now too involved in the business sector, imposing various restrictions. It leads to different terms of competition, which increases corruption. It is worrying that Mongolia is ranked 116th in terms of corruption. Mongolia’s underground economy, which is made up by entities that are not formally registered and do not pay taxes, has become almost as big as the mainstream economy. Currently, income tax is 10 percent, and the maximum rate of taxes imposed on business entities is 25 percent. If this is combined with VAT and other taxes, the tax load on gross national income is approximately 33 percent. The external debt of the government has already exceeded half of our economy, thus, we are unable to shrink the underground economy. It makes it difficult to make the labor market more efficient and reduce unemployment. A special feature of our underground economy is the people who individually conduct mining activities (commonly referred to as “ninjas”). There are almost 100,000 ninjas in Mongolia today. In addition, ten percent of our workforce is based abroad.
Political freedom does not automatically bring about economic freedom. On the contrary, when economic freedom is promoted, the economy flourishes with improvement in livelihood and better education. When this happens, changes are naturally demanded for a more democratic system. Therefore, Mongolians have a lot to do in order to increase our political freedom. Currently, a few groups of politicians who have managed to make selfish use of political freedom and banded together under the name of political parties have been consistently restricting Mongolia’s economic freedom to create advantageous situations for themselves.
Nevertheless, Mongolians will not give up and divert from the path of economic freedom and market principles. We will go forward, overcoming the challenges and difficulties ahead. We have political freedom irreversibly established. Half of our population is made up by a younger generation under 30 years old. Therefore, it is strongly hoped that Mongolia will soon have greater economic freedom, which will allow Mongolians to work for our home country, see the fruits of their hard work, and have better livelihoods. May our economic freedom flourish as strongly as our political freedom.
See more at: http://jargaldefacto.com/
Freedom is based on the principle that an individual is aware of and responsible for his or her own actions. If you choose not to take care of your own life and make decisions, this means that you accept someone else making those decisions for you. Let us have a look at economic and political freedom.
Today, many people believe that individual freedom is a political issue, and poverty and prosperity are economic issues. However, economic and political freedom are not separate from each other, but have a close relationship. Mongolia’s society needs to review this relationship and have a discussion about it. We have to see the path before us clearly.
Economic freedom is a necessary but insufficient condition for political freedom. This can be seen from the examples of Hong Kong and Singapore. Political freedom is neither necessary nor sufficient in insuring economic freedom. For instance, many countries that were colonies in the past are still poor and do not possess economic freedom, despite having political freedom and holding elections. However, if political freedom in the form of democracy is paired with economic freedom, it allows a country to achieve development and prosperity rapidly. Amartya Sen, a Noble Prize winning economist, says that no famine has ever taken place in a democracy.
This week we are marking the 25th anniversary of Mongolia’s first free, democratic election, which was held in 1990, and put us on the path towards political freedom. But, where is our economic freedom? Where is our progress?
POLITICAL FREEDOM OUTPACING ECONOMIC FREEDOM
Today political parties have their own theories, ideologies, and values developed to bring about socio-economic development. People freely choose from those political parties in elections, and the political party that acquires the most votes is given ruling power. The democratic system, freedom of choice, and civil liberty are stated in the Constitution of Mongolia (de jure) and we have the freedom of speech (de facto). The Constitution says that the supreme principles of the activities of the state shall be ensuring democracy, justice, freedom, equality, national unity, and respect of law.
About economic freedom, it is stated in the Constitution that Mongolia shall have an economy based on different forms of property, taking into account universal trends in global economic development and domestic trends. The Constitution also says that the state recognizes and accepts all forms of both public and private property and shall protect the rights of owners by law. Although the phrase “universal trends” was not defined, we have always understood that it refers to the market economy. It can be seen from the development of the private sector, efforts to strengthen it, and the privatization of certain public entities and properties.
There are only two ways to regulate the economic activities of millions of people. One is by force, and the other is by voluntary exchange based on market principles. Even though Mongolia chose the market economy path, the regulations enforced by the government are not decreasing in number or extent, but increasing in some instances. There are a number of ways to measure how much influence government regulations have on the economy and individual income. One of them is the index of economic freedom published by the Heritage Foundation, in conjunction with the Wall Street Journal. The index measures the economic freedom of almost every country in the world.
MONGOLIA’S ECONOMIC FREEDOM
On the index of economic freedom, Mongolia was ranked 97th out of a total of 118 countries in 2014. There was a 2.8 point decrease in Mongolia’s ranking compared to 2013. The ranking is measured by how much the per capita income in a country is dependent on its development policy, institutional capacity, and environment. The index of economic freedom, which has been published annually for 20 years, shows that almost 80 percent of per capita income is dependent on the policy pursued by a government and its institutional capacity and activities. The extent of economic freedom is largely influenced by property rights, government regulations, and underground economies.
The driver of the market economy is the desire and capability to accumulate wealth through income, savings, and trade. The most important thing is the belief that an individual has to be the owner of his or her property or business, in order to earn, save, invest, and conduct business activities. No one else has the right to use the property of others without permission.
In terms of protection of property, Mongolia scored 30 out of 100 points and is ranked 70th. Hong Kong has the highest score (90) followed by Singapore, Australia, Switzerland, New Zealand, Canada, and Chile. This means that protection of property is three times as weak in Mongolia as compared to these countries. A clear example is assets like land, homes, and livestock, which do not go into economic circulation in developing countries because their governments have not consolidated their property rights.
Having exceeded the scope of its primary objectives to ensure safety, security, freedom, and protection of property, the government is now too involved in the business sector, imposing various restrictions. It leads to different terms of competition, which increases corruption. It is worrying that Mongolia is ranked 116th in terms of corruption. Mongolia’s underground economy, which is made up by entities that are not formally registered and do not pay taxes, has become almost as big as the mainstream economy. Currently, income tax is 10 percent, and the maximum rate of taxes imposed on business entities is 25 percent. If this is combined with VAT and other taxes, the tax load on gross national income is approximately 33 percent. The external debt of the government has already exceeded half of our economy, thus, we are unable to shrink the underground economy. It makes it difficult to make the labor market more efficient and reduce unemployment. A special feature of our underground economy is the people who individually conduct mining activities (commonly referred to as “ninjas”). There are almost 100,000 ninjas in Mongolia today. In addition, ten percent of our workforce is based abroad.
Political freedom does not automatically bring about economic freedom. On the contrary, when economic freedom is promoted, the economy flourishes with improvement in livelihood and better education. When this happens, changes are naturally demanded for a more democratic system. Therefore, Mongolians have a lot to do in order to increase our political freedom. Currently, a few groups of politicians who have managed to make selfish use of political freedom and banded together under the name of political parties have been consistently restricting Mongolia’s economic freedom to create advantageous situations for themselves.
Nevertheless, Mongolians will not give up and divert from the path of economic freedom and market principles. We will go forward, overcoming the challenges and difficulties ahead. We have political freedom irreversibly established. Half of our population is made up by a younger generation under 30 years old. Therefore, it is strongly hoped that Mongolia will soon have greater economic freedom, which will allow Mongolians to work for our home country, see the fruits of their hard work, and have better livelihoods. May our economic freedom flourish as strongly as our political freedom.
See more at: http://jargaldefacto.com/