Is Support for Capitalism Declining around the World? A Free-Market Mentality Index, 1990-2012.

• Author: Newland, Carlos
• Position: Report

Is a pro-capitalist mentality waning around the globe? This is not an inconsequential, trivial question because people's mindsets surely influence the laws and policies that are enacted and implemented. Therefore, in the medium and long term, a favorable or an anticapitalist popular culture will help to shape the legal framework that allows market forces to work efficiently, thus affecting economic growth and the well-being of the population. (1) Herbert Grubel finds that support for the free-market paradigm rose worldwide in the 1980s and 1990s (2015, 3). In particular, during that period pro-capitalist beliefs spread among the populations and governments of European countries that had abandoned communism at the end of the Cold War. But Grubel remarks that since 2000 these ideas have lost force. Even in the United States there seems to be a growing preference among voters for government intervention in the market, a trend represented by the elections of Barack Obama and perhaps Donald Trump. A poll conducted by the Pew Research Center in 2001 confirms that enthusiasm for a market economy has also diminished considerably in many former socialist countries over the past two decades (Pew Research Center 2001). In addition, in 2012 Pew found a decline in the public perceptions of the benefits of free-market economies in many other countries of the world (Pew Research Center 2012). Globescan (2013) offers more evidence; it conducted several polls for a group of G8 countries from 2002 to 2012, asking people about their belief in free markets. It found a diminishing trend also for the United States, Canada, France, Germany, and the United Kingdom.

Surprisingly, the growing global anticapitalist mentality has not been properly measured. Although some efforts have been made, as mentioned earlier, they cover only a limited number of countries and a short span of time or are based on surveys with differing questions. (2) In this paper, I build a Free-Market Mentality Index (FMMI) for many countries for a period of more than two decades, from 1990 to 2012. This consistent and comparable index will allow us to quantify the commitment by the populations of different nations to free-market ideas as well as to describe general trends in different regions of the world. I am conscious that the index constructed is less than perfect and somewhat simple due to the limited data on which it is based. However, it is a first step toward building a global index to capture current economic ideology. (3) Many studies have tried to relate measures of institutional quality with economic performance, (4) but they leave aside the economic views that can be one of the major determinants of the legislation adopted and public policies applied in each country. Other studies have analyzed the relationship between personal attitudes, such as "trust in others," and actual prosperity and growth. (5) This is an interesting approach that follows in spirit of Max Weber's connection between Protestantism and capitalism. However, it is difficult to correlate personal attitudes or even values with a particular economic ideology. Trust, for instance, could be connected to the support of capitalism, but it can also favor a socialist model in which solidary behavior is expected to predominate in society. Individualism can tend either to support free markets or to foment rent-seeking behavior.

The Capitalist Mentality and Economic Growth

For a country to be successful in terms of economic progress, a number of factors seem to be necessary, such as an abundance of capital per worker, resources for investment, and capacity for innovation and entrepreneurship. Accompanying these factors, an institutional framework that promotes economic freedom and internal and external competition, prevents corruption, and protects property rights is required. These factors have been investigated in innumerable studies, and an effort has been made to quantify them. These quantifications are the main input for the construction of global rankings of nations such as the Economic Freedom of the World Index, sponsored by the Fraser Institute (2014, 2016), which measures the degree to which the policies and institutions of countries are supportive of economic freedom. (6) In addition, the Heritage Foundation's (2017) Index of Economic Freedom covers issues from property rights to entrepreneurship. Similarly, in a chapter on goods and "market efficiency," the World Economic Forum's Global Competitiveness Report (Schwab 2016) focuses on the conditions that facilitate the creation of new enterprises, access to the international market, and legal frameworks that favor competition. Another example is the Ease of Doing Business Index prepared by the World Bank, which attempts to quantify the business-friendliness of a country's regulations. In Argentina, Fundacion Libertad y Progreso elaborates the International Institutional Quality Index, which aims to capture differences in institutions around the world. On the other end of the spectrum, the Crony Capitalism Index, published by the Economist, and the Corruption Perceptions Index, prepared by Transparency International, measure the absence of institutional frameworks and practices that favor a market economy. All of these reports tend to show that a country's prosperity is correlated with a market-friendly institutional framework and an absence of generalized corruption.

What is the basis on which institutional frameworks favorable to abundance or growth are built? For Michael Porter (2000), that basis is the economic culture or mentality of the population. Porter argues that to achieve sustainable growth a society must have an archetype of productivity, including a comprehension of the factors that influence the efficiency of the economy. These factors include an appreciation of competition, openness to globalization and international trade, an understanding that free markets benefit a majority of the society, and an awareness of the pernicious effects of government favoritism. Porter argues that without this paradigm it is probable that an alternate view may take root in a society, one that is more favorable to the existence of noncompetitive rents, such as those granted by protectionist economic policies. The optimal paradigm, Porter points out, should not be confined to the upper echelons of a society but instead should permeate its entirety, including the working class. If this diffusion is absent, reforms favorable to higher productivity will probably face political opposition.

Evaluating and measuring the predominant economic ideology in a population are, however, difficult. One possible approach is to analyze what types of political parties and what sort of political programs are chosen by a population. This approach, however, may not be very fruitful because many political parties frequently present ideological ambiguity so as not to alienate any particular group of voters. In practice, it is not rare for the same political party to pragmatically change its policies or attitudes with respect to how it views the functioning of the market. In addition, this avenue is not possible in states that do not have authentic democratic systems.

In this paper, I approach this question of approximating the evolution of the economic ideology across countries by using items included in the World Values Survey (WVS), an ongoing international poll conducted from 1981 to 2014 (when the most recent survey was published; a current one is not yet available). The WVS is a global collaborative effort aimed at learning the opinions of...