William Peterson, an adjunct scholar with the Heritage Foundation, is the Lundy Professor Emeritus of Business Philosophy at Campbell University in North Carolina.
In 1989-1991 the walls of Eurocommunism came tumbling down, including the most dramatic one of all, the Berlin Wall. Since then, like a fresh breeze blowing around the world, the watchword for investors and others has been freedom, a growing understanding that economic growth swings on economic freedom. Unfortunately, that understanding has been resisted in some nations, and there is even much hostility to it in our own. Witness, for instance, the antitrust assault on Microsoft.
The Index of Economic Freedom, now in its fourth year, recognizes this vital truth and furnishes a practical reference guide on the economies of 156 nations. It does so with a concise country-by-country analysis, with two pages per country. Each analysis includes up-to-date data on taxes, tariffs, government intervention, black markets, monetary policy, banking regulations, foreign investment codes, and the like. Maps in color abound.
By the lights of Heritage’s Johnson and Holmes and the Wall Street Journal‘s Kirkpatrick, the five unfreest countries are, in descending order, Bosnia, Iraq, Cuba, Laos, and, at the very bottom, North Korea. The five freest countries of the 1998 Index list are, in order, Hong Kong, Singapore, Bahrain, New Zealand, and, tied for fifth place, Switzerland and the United States.
To be sure, some question economic freedom in light of “the Asian Contagion;” a sudden economic letdown that has left the vaunted Asian tigers looking rather emaciated and wobbly. Nor has their look been enhanced by the International Monetary Fund’s pumping in some $150 billion in bailout credits.
But a check of the chief “beneficiaries” of the IMF bailout shows recipient countries were themselves remiss in embracing economic freedom. South Korea, for example, ranked 24th in the Index, Thailand 28th, and Indonesia 62nd. Moreover, these countries, like the oldest tiger of them all, Japan, have engaged in neomercantilism and “bubble banking”—by which banks used fractional reserves to inflate the value of mortgaged assets such as factories, hotels, shopping malls, and office buildings to bubbled heights. (Murray Rothbard, with your call for 100 percent bank reserves, thou should’st be living at this hour!) The “Asian Contagion” can be said to indict economic freedom by those who have but superficial understanding of these nations.
The real issue for the IMF is whether it should be in the bailout business at all: wouldn’t it be wiser to let perpetrators of crony capitalism and neomercantilism learn from their own errors?
A wealth of information is to be found in these pages. Argentina, for example, is hailed for its success with an anti-inflationary currency board. The question of Hong Kong’s remaining as No. I in the Index is raised in view of its political reversion to China. The Netherlands is downgraded for boosting government regulation and wage and price controls.
The United States is ranked as one of the world’s nine “free” nations. This is certainly true comparatively, but is there a drawback to pinning that label on a nation that taxes, regulates, nannies, bullies, and bothers its people as much as our government does? Calling the country “free” permits antimarket ideologues to say, “We’re prosperous and free because of our many wise and compassionate government programs.” That’s nonsense. Americans are, in many, many ways, not free and we suffer because of that. But, as Frederic Bastiat pointed out, the suffering from economic meddling is largely unseen.
Wall Street Journal editor Robert L. Bartley writes in the foreword: “Our editorial policy has always championed free people and free markets. Often over the past century, these ideas have been on the defensive, and it is remarkable to witness them reemerging and gaining the ascendancy as a new century approaches.” I believe Bartley is right, but we have a huge battle before us, even in our “free” nation, to say nothing of the majority of the world’s economies that isn’t even close.