Friday, January 20, 2006

The 2006 Index of Economic Freedom

From the WSJ and the Heritage Foundation.
Wealth comes from the actions of people, not the actions of government, and the freer people are to direct their efforts to where they are most productive, the greater the wealth created. Three of our chapters highlight the efforts of people around the world to overcome the barriers they face.
In Chapter 3, Barun Mitra writes of the entrepreneurs in India who have managed to circumvent pervasive restrictions and create markets where there might have been none. Are cheap cars unavailable because of high tariffs? Have one made by the local village mechanic.
Got this via this cool story from the Brussels Journal [Who're even more preachy and smug than the Economist. But they're right. ::sigh::. Well, it's probably not quite a clear cut either/or ... ].
Suppose you were appointed global economic czar, and your task was to bring the world’s per capita income up to the level of Ireland’s (almost that of the U.S.). Would you:
(A) Insist the world’s rich nations transfer substantial wealth though massive foreign aid to the poor nations?
(B) Insist all nations adopt policies that would make them as economically free as the top 10 freest economies today?

If you answered “B,” go to the head of the class. This shows you have a good understanding of both history and economic reality about what works and what doesn’t.

If you answered “A,” welcome to the Kofi Annan, Jacques Chirac, Gerhard Schroeder school of willful economic ignorance. Graduates of this school are well represented among international institutions, such as the World Bank, and the Organization for Economic Cooperation and Development; the political left; and the media elites in such places as the New York Times editorial pages, the BBC and National Public Radio.
In central Africa, we have the contrast between Botswana (No. 30) and Zimbabwe (No. 154). Botswana, a relatively free market democracy, has roughly tenfold the per capita income (without U.S. aid) of the repressive Zimbabwe, despite having started at about the same level of development.
The lesson is clear for all who will remove their ideological blinders that the road to prosperity is economic freedom, not development aid. International institutions and major donor countries should stop handouts and pressure laggard countries to make free market reforms. But then, of course, international aid bureaucrats would be jobless. What a pity.
Oh, if you're wondering the US is #9.

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