Prosperity follows freedom

The National Summit on Africa recently met in Washington, D.C., to discuss economic growth programs for the continent's miserably impoverished nations. I'm betting they ignored the ticket out of poverty amply demonstrated in the Washington-based Heritage Foundation's 2000 Index of Economic Freedom, authored by Gerald P. O'Driscoll, Kim P. Holmes and Melanie Kirkpatrick. The index is an economic-freedom ranking of the world's nations. The measurement factors include: trade policy, fiscal burden of government, government intervention in the economy, monetary policy, property rights, banking regulation, capital flows and foreign investment, and wages and price controls.

The rankings contain no surprises. Hong Kong has the greatest amount of economic freedom, followed closely by Singapore. New Zealand ranks third, and tied for fourth place are Bahrain, Luxembourg and the United States. Rounding out the list of nations the authors categorize as economically free are Ireland, Australia, Switzerland and the United Kingdom. The rest of the world's economies fit the categories of being: mostly free, mostly unfree or repressed. At the repressed end of the spectrum are North Korea, Iraq, Libya, Somalia, Cuba, Congo, Laos, Iran, Angola and 14 other countries.

It doesn't take rocket science to figure out which nations' citizens enjoy higher standards of living, per capita income, life expectancy and economic growth rate. It has nothing to do with natural resources. The United States is rich and also rich in natural resources. Hong Kong and England are rich but poor in natural resources. The two natural resources richest continents are Africa and South America. Yet South America and Africa are homes to some of the world's most miserably poor people.

Sometimes colonialism is used as an excuse for poverty. That's nonsense. The world's richest nations were former colonies-Hong Kong, Australia, New Zealand and the United States-while some of the most miserably poor nations, like Nepal and Ethiopia, were never colonies.

Without question what produces wealth and high living standards is economic freedom-not democracy-but economic freedom. After all India, politically, is a democracy but economically it is mostly unfree and poor. There are countries that do not have much of a history of democracy, such as Chile, Taiwan and Hong Kong, which are far wealthier than some of their more democratic counterparts because their economic systems are free or mostly free.

Say No To Bailouts

Look at areas of the world considered generally poor the so-called Third World nations of Africa, Southeast Asia and South America. In the case of south-of-the-Sahara Africa, we find that Mah, Benin, Zambia, Mauritius, Namibia, Botswana and South Africa are better off than their impoverished neighbors. In Asia and the Pacific, we find that Thailand, South Korea, Taiwan and Japan are richer than their impoverished neighbors. For the most part, it's the same story in South America, where we find nations like Chile and Argentina richer than their neighbors. What's common to these richer nations is their citizens have a greater measure of economic freedom.

The lesson is clear: Have economic freedom and grow rich, or have extensive government control and interference, and stagnate and be poor. A country's institutional infrastructure is critical to the well-being of its citizens. The most critical are protection of private property, enforcement of contracts and rule of law-not International Monetary Fund bailouts, foreign aid and other handouts.

To help our fellow man around the world, we have to convince him to create the institutional infrastructure for wealth creation and ignore the "expert" advice from our State Department and academics. Abundant evidence shows that if a nation does not have a measure of economic freedom, no amount of handouts will make it rich. To the contrary, handouts make political survival possible for the elite, whose policies keep a nation poor.

Dr. Mills, a nationally syndicated columnist, is John M. Olin distinguished professor of economics at George Mason University.

Copyright Human Events Publishing, Inc. Jul 7, 2000
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