Think tank makes recommendations for Puerto Rico's prosperity

The Puerto Rico Institute for Economic Liberty explains the role of free markets and economic freedom in the goal of development.

Jorge L. Rodríguez

Jorge L. Rodríguez, founder and chief executive officer of the Institute for Economic Freedom for Puerto Rico (ILE), will give a lecture on "Free Markets and Economic Freedom - Their Impact on Prosperity in Puerto Rico. (Provided)

Economic freedom is correlated with greater job opportunities, higher wages, less emigration and a reduction in poverty rates, said Jorge L. Rodríguez, founder and chief executive officer of the Institute for Economic Freedom for Puerto Rico (ILE).

"When society uses people's talents, creativity and innovation as an engine of prosperity, society prospers and provides more well-being because more people are participating in the market," said the spokesman for the ILE, a nonprofit think tank that promotes ideas and solutions based on the free market. "On the other hand, when unnecessary barriers are put in place that prevent people from entering the market, wages are lower and opportunities are fewer," he added.

Free markets and economic freedom are different concepts that go hand in hand, explained Rodríguez, who will be a speaker at the Industry Awards Luncheon to be held during the MIDA Conference & Food Show 2024, June 13-15, at the Puerto Rico Convention Center in Miramar. At the event, organized by the Chamber of Marketing, Industry and Food Distribution (MIDA), Rodríguez will deliver the lecture: "Free Markets and Economic Freedom - Its Impact on Prosperity in Puerto Rico".

Economic freedom is the right of every individual to earn an honest living; that is, his or her right to work, produce, undertake, sell, consume and exchange goods and services without unnecessary government intervention. It is an economic philosophical concept that comes from the classical liberalism school of thought, which is based on the idea that economic activities should be as free as possible from government intervention.

The free market refers to an economic system where prices, products and services are determined by market forces (supply and demand) and not by state intervention. Meanwhile, economist Juan Lara, in an essay published by the ILE, defined free enterprise as "a mode of economic, political and legal organization in which people can exercise their entrepreneurial initiative, without restrictions by the government or other entities".

"Free market is the arena where the individual expresses himself and obtains his economic freedom," Rodriguez illustrated.

According to the ILE founder, the free market is based on four main pillars: individual freedom, rule of law, private property rights and limited government. "In societies where all four pillars are healthy, the playing field is in good shape and, when you enter the economy, the chances of prospering and getting out of poverty are much higher," said Rodriguez.

"Economic freedom is related to higher per capita incomes, less poverty, greater job opportunities, less outbound migration, fewer child deaths, and more longevity," the ILE founder mentioned.

For example, research published in 2020 in the Journal of Institutional and Theoretical Economics studied the relationship between economic freedom and poverty rates in 151 countries over a 20-year period, using World Bank poverty data, and found evidence that economic freedom, as measured by the Heritage Foundation's Index of Economic Freedom, is associated with lower rates of poverty.

Another study published in 2013 by the trade journal Contemporary Economic Policy, which used two decades of data for all 50 states, found that economic freedom is associated with lower unemployment and higher labor force participation.

"States with more economic freedom have lower out-migration and states with lower levels of economic freedom have higher out-migration. There is a relationship between not having job opportunities and going to states with more opportunities," Rodriguez said.

As for Puerto Rico, the ILE recently reported that the island ranked last, for the second consecutive year, among the 51 U.S. jurisdictions included in the Economic Freedom of North America 2023 report, published by the Fraser Institute of Canada. This study measures the degree of economic freedom in 93 provincial and state governments in Canada, the United States and Mexico.

Among the ILE's recommendations to increase economic freedom in Puerto Rico, Rodríguez mentioned to stop controlling the in-land freight hauling prices. "The food industry, which MIDA represents, including the consumers who end up paying the costs, is greatly impacted by the prices of ground transportation, which are controlled by the Public Service Commission, which does not allow trucking companies to compete under a free market and be innovative," he said.

Another recommendation is to review the inventory tax. "The food industry is impacted because if it has little inventory, it will not have the best offerings for customers, but if it has a lot of inventory, the government penalizes it. In addition, businesses in Puerto Rico face unfair competition from online purchases from off-island businesses with no inventory tax," he said.

"We must review which laws should be repealed, revised or approved to increase economic freedom, individual income and development," Rodríguez concluded.

This article was originally published in Spanish in El Nuevo Dia.

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