The National Summit on Africa recently met in Washington, D.C., todiscuss economic growth programs for the continent's miserably impoverishednations. I'm betting they ignored the ticket out of poverty amplydemonstrated in the Washington-based Heritage Foundation's 2000 Index ofEconomic Freedom, authored by Gerald P. O'Driscoll, Kim P. Holmes andMelanie Kirkpatrick. The index is an economic freedom ranking of the world'snations. The measurement factors include: trade policy, fiscal burden ofgovernment, 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 ofeconomic 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 freeare: Ireland, Australia, Switzerland and the United Kingdom. The rest of theworld's economies fit the categories of being: mostly free, mostly unfree orrepressed. At the repressed end of the spectrum are: North Korea, Iraq,Libya, Somalia, Cuba, Congo, Laos, Iran, Angola and 14 other countries.
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It doesn't take rocket science to figure out which nations' citizensenjoy higher standards of living, per capita income, life expectancy andeconomic growth rate. It has nothing to do with natural resources. TheUnited States is rich and also rich in natural resources. Hong Kong and Englandare rich but poor in natural resources. The two natural resources richestcontinents are Africa and South America. Yet South America and Africa arehomes 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 poornations, like Nepal and Ethiopia, were never colonies.
Without question what produces wealth and high living standards iseconomic freedom -- not democracy. After all, India, politically, is ademocracy but economically it is mostly unfree and poor. There are countriesthat do not have much of a history of democracy, such as Chile, Taiwan andHong Kong, which are far wealthier than some of their more democraticcounterparts because their economic systems are free or mostly free.
Look at areas of the world considered generally poor, the so-called ThirdWorld nations of Africa, Southeast Asia and South America. In the case ofsouth-of-the-Sahara Africa, we find that Mali, Benin, Zambia, Mauritius,Namibia, Botswana and South Africa are better off than their impoverishedneighbors. In Asia and the Pacific, we find that Thailand, South Korea,Taiwan and Japan are richer than their impoverished neighbors. For the mostpart, it's the same story in South America, where we find nations like Chileand Argentina richer than their neighbors. What's common to these richernations is their citizens have a greater measure of economic freedom.
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The lesson is clear: have economic freedom and grow rich, or haveextensive government control and interference, and stagnate and be poor. Acountry's institutional infrastructure is critical to the well-being of itscitizens. The most critical are protection of private property, enforcementof contracts and rule of law -- not IMF bailouts, foreign aid and otherhandouts.
To help our fellow man around the world, we have to convince him tocreate the institutional infrastructure for wealth creation and ignore the"expert" advice from our State Department and academics. Abundant evidenceshows that if a nation does not have a measure of economic freedom, noamount of handouts will make it rich. To the contrary, handouts makepolitical survival possible for the elite, whose policies keep a nationpoor.