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International Issues

Heritage Freedom Index

Countries with the most economic freedom have higher rates of economic growth, higher living standards and are more prosperous than less free countries, say the authors of the new 1998 Index of Economic Freedom, published by the Wall Street Journal and Heritage Foundation.

To compile the annual index, economists scored countries using 50 independent economic variables which were then grouped into 10 categories, such as trade, tax, monetary and regulatory policies, and property rights.

Among the 156 countries rated:

Hong Kong's was rated the freest economy in the world, followed by Singapore, Bahrain and New Zealand.
Next, the United States tied with Switzerland -- followed closely by Luxembourg.
Tying for next rank were Taiwan and the United Kingdom.
And rounding out the freest countries were the Bahamas and Ireland, also in a tie.

Most of the world's economies remain economically unfree, say the authors:

Of the 156 countries graded, 73 are mostly free or free, up from 72 last year, while 83 are mostly unfree or repressed, up from 78 last year.
Of the 10 highest-ranking countries in last year's edition, two received worse scores this year, seven remained the same and only one improved its score.
Of the top 10 freest countries, four are in North America or Europe, four are in Asia, one is in the Middle East and one is in Latin America.

The least economically free countries are Cuba, Laos and North Korea, and as in past years, researchers found the least free countries have the lowest standard of living.

Source: Wall Street Journal/Heritage Foundation 1998 Index of Economic Freedom.

More on the Heritage Foundation's Economic Freedom Index

The 1997 Index of Economic Freedom published jointly by the Heritage Foundation and the Wall Street Journal -- reported here yesterday -- contains some eye-opening correlations between economic freedom and economic growth.

Between 1980 and 1993, annual real gross domestic product growth per capita in countries with the comparatively freest economies averaged 2.88 percent.
In countries judged "mostly free," the rate of growth was 0.97 percent.
Those countries ranked "mostly not free" were subjected to negative growth of 0.32 percent.
In economically repressed countries, there was an average 1.44 percent annual decrease in economic activity per capita.

Nearly half of countries rated as mostly unfree or repressed have received U.S. foreign aid for over 35 years. Of these, one-third are poorer than they were in 1965 and one-third are no better off.

Experts say much of the aid disappeared through fraud and corruption. And a substantial portion was wasted due to bad advice from Western development economists who told recipient countries to set up trade barriers, establish state-owned industries and erect wage and price controls.

Source: Perspective, "Growth and Liberty," Investor's Business Daily, December 17, 1996.

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