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Thank you for coming. Thank you for logging in.
And thank you for allowing me the honor to share this stage with such wondrous speakers.
I'm going to talk about liberty and prosperity today, in the confines of this circle,
in English and in under eighteen minutes. We'll see if Jack Bauer can do that.
But let me start by allowing myself the liberty to quote one of my favorite
citations and definitions of liberty from the great Cervantes, who did this
great book called Don Quijote de la Mancha. This is Don Quijote, speaking to Sancho Panza:
"Liberty is one of the most precious gifts which heaven has bestowed on man;
with it we cannot compare the treasures which the earth contains or the sea conceals;
for liberty, as for honor, we can and ought to risk our lives; and, on for the other hand,
captivity is the greatest evil that can befall man."
It was written 400 years ago, but it was as actual at that time as it is today,
because whether you believe it or not, there is about 2.3 billion people in this world
who are living under a regime considered not free. But there is good news: take a look at these graphs.
This is a graph that was made based on data from an institution called the Freedom House,
it's available obviously on the Internet; and what we can see is the behaviour
of the last 35 years of an index that they have been compiling over those years.
Look at this: 22% of the countries in 1973 were considered free:
1 out of every 5 countries were free just 35 years ago, not even a generation;
45% were considered partially free and 1/3 were not free.
So, if you were a Martian coming to the Earth,
you'd had one of three chances of landing the place where there was no liberty.
Population: 34% of the population of the Earth in 1973 was considered free;
23%, partially free; and 44% was considered not free:
1.3 billion of free people; 1.7 billion of not free people.
There were more people not free than free.
Fast forward 35 years, a jumping almost double of the countries that are free;
we still have 34% partially free, but there is a significant 10% drop in the countries that are not free.
Something happened along the way of those 35 years that liberty has prevailed over tyranny.
How about people? Well, I can tell you that for the first time in human history,
there's more people living under free regimes: 2.9 billion, but there's still 2.3 billion who are not free.
By the way, if you are wondering, Guatemala is over here [partially free]. So we still have a lot of work to do.
But the good news is that there's freer people, freer world that hasn't come free.
Many people have paid, even with their lives for that gift that Cervantes wrote about 400 years ago.
So, this is the good news; take another look at it: this is an index compiled by the Cato Institute,
and it's called the Economic Freedom of the World Index, it measures, as its name says, economic freedom.
And, it is interesting because there's not one single definition of freedom,
but they compile five gross variables to define how free different countries
and different citizens of those countries are.
If the government is too big, it may be ch... for you, so the smaller the government, the better.
If the government is functioning to preserve the security, property and the life of their citizens,
it means it's working okay; so there's economic freedom. If the citizens have access to sound money,
meaning that they can perform their transactions with the minimum security that
the purchasing power of money is going to be there, it means is good for economic liberty.
Freedom of trade: basic freedom to exchange internationally;
if the government doesn't put many blocates to the commerce, that qualifies good as well.
Regulation: Can we open these wonderful companies that we've been telling?
Can we perform in the market with the security that the government is going to enforce
the contract and is not going to block them. Regulation is important for labor, for credit, for business.
Good news: We've been doing better over the last 30 years.
Since 2008, 102 countries that have been part of this index report a 20% improvement in economic liberty.
There is a correlation between the Freedom House and the Cato Institute numbers.
So, what does this mean? Does liberty pay off?
Do the people that live in free countries versus not free countries experience a difference?
Let me show you the data as it has been compiled.
Economic freedom has been measured dividing the countries into four, what they call quartiles.
Groups of 25% of countries that belong to most free, second most free, third most free and least free.
People that live in most free countries have a gross domestic product per capita
of production of the goods and services in the year;
they produce about thirty-two thousand dollars per year per person on average.
That means that if you land in these countries,
you'd be likely to be eight and a half times richer than if you live in a country least free.
No wonder, many people want to go to the United States.
You can make only $3,800 in a country classified as least free.
The good news is that if you move along this line, if you start improving on legal repairs,
if you open your economy, and if you secure the property rights, and follow up that list that I just showed you,
there's hope.
You can move along from $3,000 to $7,000 to $14,000 all the way up to $32,000.
Liberty pays off. It means that even the poorest citizens in these countries have hope.
What the study finds is that if you take the income of the poorest 10% of that 102 countries sample,
you will see that the most free countries, the poor people of that most free country can earn about
$8,000 per person on average per year.
Compare that to $900 in the least free countries. So, you can make about nine times more.
No wonder there's immigration because people in these countries, they'd rather be poor in the United States
or any other country considered most free that in a poor country considered least free.
So, this is not a recipe, but there's a lot of room of what we can do to start harvesting
the benefits of liberty -- of economic liberty, as the Cato Institute has defined.
Liberty also has another quality, it creates a virtuous circle.
If you measure not only economic liberty but other liberties in these countries, such as political rights,
civil liberties, you will find according to this index, which means the lower the better, that most free countries
also experience the benefits of other freedoms, such as democracy, the right to vote to fair and free elections,
whereas these three countries, not suprisingly, offer an environment in which liberty and other liberties are not respected either.
Look at this graph, this is my favorite graph, I call it "Freedom has spillover benefits graph".
Clearly, most of the world has moved in the right liberty direction, but what I like to see from this graph,
which is a creation of the United Nations Development Program (UNDP), is that the freer the world, the freer the world.
This is what they call the "Human Development Index"; it's a combination of the education of the people,
the income per person, and the life expectancy. The closer this index gets to one, the better,
the better quality of life, as measured by those three variables.
So, even though we have seen throughout these graphs that not all countries have moved from free to not free,
or from free to least free; what we see is that almost all of them have moved in the same direction,
meaning that almost all of them (each one of these lines is a country) almost all of them have an upward slope direction.
You can see some exceptions, but these are mostly countries torn by war. So, obviously, there's not much freedom in a war.
But, even countries that are not free, had benefit from the development, the invention and the
creativity of countries -- citizens of countries -- that are free. The Internet is all over the world,
regardless of the qualification of the country: whether it is free, partially free or least free.
So, look at China, which is right now considered a not-free country.
Certainly, a little bit of economic liberty in that country has paid off a lot in terms of human development.
So, indeed, liberty, although a gift that not everyone in the world has, pays off.
So, is there a catch in this history? Is there something wrong in this picture? Indeed, it may be.
Like Jefferson is said to said: "The price of freedom is eternal vigilance."
Many people have walked this road of liberty over the last 35 years or for that matter,
over the course of human history; and many of them have made huge sacrifices.
Right now, it's kind of funny, but the threat, the biggest threat to liberty could be the biggest advantage to preserving our liberty.
Let me explain, you saw that index of economic freedom, it has size of government, it has the quality of the laws, the quality of the regulations.
That service is provided by the government, but the one that is supposed to protect our liberty could be also the one
that would take it away from us.
Who, do you think, the population in the Middle East is trying to get their liberty from: the so-called Arab Spring?
They are trying to recuperate their liberty from their government. Remember what Cervantes said:
"Liberty is one of the most precious gifts which heaven has bestowed on man..." Not "which government has bestowed on man."
We need a government to protect our liberties, not to threaten them.
So, in this eternal struggle of liberty, we find out that the eternal vigilance may be eternal vigilance against
the only institution that can legally, although not legitimally, take that liberty away from us. Who would have thought,
only five years ago, not 35 years ago, five years ago, that pigs would be something else than a good source of bacon?
I mean pigs as in the term Portugal, Ireland, Grece, Spain, as countries that are classified under almost in the brink of the falls,
in the brink of economic chaos; add to that Italy, who according to this portion of The Economist is really on the edge right now;
who would have thought that spending wealth that you do not have and passing the bill to the next generation in the form of a
huge public debt would be in economic havoc?
Who would have thought only five years ago that this would be a drawing that represents the U.S. citizen change to the greatest bill in history?
Who would have thought that Standard and Poor's, the rating agency, would downgrade the debt of the United States?
Hey, I teach a course in Finance and the books are full with something called "risk-free rate."
Turns out that we are going to re-write those books again because now there is not such a thing as "risk free" any more.
See what happens when government officials spend the money that you haven't created yet. Yet, they can pass the bill to you,
your sons and daughters or your next generations. So, there is a reality check now.
Who would have thought only five years ago that we could see this map of America turned upside down.
There is a famous singer in Guatemala called Ricardo Arjona; he has a song "If the North were the South."
Well, the song is real now. After learning over the 70s and the 80s of the mismanagement that government did on our debt,
our finances, now the North looks like the South and the South looks like the North.
Those who do not learn from mistakes of the past are doomed to repeat them.
So, as I encourage you to take the next 35 years and to grab your liberty with your hands,
and to create new and exciting enterprises, and to read as many books as you can, and not let anyone tell you what to read or what not to read.
I also encourage you to watch that pilot that we were told this morning. That pilot is your government,
and you have to have the courage to tell them to pull that lever before it's too late, because you are the co-pilot
and the citizen who is willing and able to take your country to a better place and don't let anyone run amok your public finances,
your liberties and your life.
Thank you and have a good day.