In a world of plenty, want abounds. To blame are big corporations, international trade and open markets, according to demonstrators who have been attacking the World Trade Organization.
They couldn’t be more wrong. Economic liberty offers the world’s poor the best hope for a better future.
For decades, Third World nations shared the protesters’ aversion to free markets. Countries chose state-run development strategies in an attempt to accelerate economic growth. The result was disaster. Economies collapsed. Societies dissolved. Countries imploded. Small, wealthy elites prospered at the expense of the impoverished masses.
So foreign aid became the mantra. The United States alone contributed more than $1 trillion (in current dollars) to a variety of assistance programs.
But that turned out to be another dead end. In 1996, the United Nations declared that 70 countries were poorer than they had been in 1980; an astounding 43 were worse off than they had been in 1970. All were on the international dole. The biggest recipients of assistance — India, Sudan, Tanzania — were among the worst performers. Nor do resource endowments or population densities correlate with overall growth levels. But economic freedom does.
According to the latest volume of “Economic Freedom of the World,” written by James Gwartney, Robert Lawson and Dexter Samida, the average income of people in the top fifth of economically free countries is nine times as high as that of those in the bottom fifth.
The nations with greater economic liberty grew an average 2.27 percent annually during last decade; those with the least economic freedom shrank by 1.32 percent a year.
The importance of economic liberty is particularly evident in the Asia-Pacific, which hosts the top three nations. Hong Kong and Singapore tie as the most liberal economic systems. Both are particularly impressive. Neither possesses natural resources. Both are crowded urban areas. Neither collected foreign aid. Instead, both opened their economies.
Hong Kong has consistently topped the economic-freedom list. Its government is small, its economy is relatively unregulated and its currency and financial markets are free. Where Hong Kong lags — and has fallen significantly since 1995 — is in the rule of law and enforcement of contracts.
Singapore bests Hong Kong in the rule of law and matches it in open currency and financial markets. However, Singapore’s government is bigger and its regulations are more intrusive. No. 2 behind Hong Kong throughout the 1990s, Singapore gained a share of the No. 1 spot by holding its rating steady while Hong Kong slipped.
New Zealand, ranked No. 32 in 1985, zoomed to No. 3 a decade later and continues to maintain that position. It has reduced government spending, deregulated its economy and freed its currency and financial markets.
The U.S. comes in at No. 4. It does well with its free currency and financial markets. U.S. performance on economic regulation is anemic, however, and the government is a fiscal wastrel.
The reason many European countries are suffering economically is evident from their rankings. Germany falls among spots 22-24. Austria, France and Sweden follow at 25-30. Italy and Greece lag even further behind.
As for the rest of Asia, although Australia scores 7-8 and Japan and Thailand earn passable scores, landing in the top 21, others did not do so well. South Korea ranks 47-48, China comes in at 75-77, and the three leading powers in South Asia, Bangladesh, India and Pakistan are abysmal, ranging between 86 and 96.
“Economic Freedom of the World” offers an important lesson for poor nations: They hold their destinies in their hands. The path to prosperity is simple — liberty. If they free their people to be productive and entrepreneurial, their societies will grow prosperous and healthy.
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