For the first time in the five years that the Heritage Foundation has been issuing its annual Index of Economic Freedom, more countries curtailed economic liberty this year than expanded it. The 1999 index, co-sponsored by the Wall Street Journal, observes that the reversal can be traced to the global financial crisis and the propensity of some governments, particularly in Asia, to lay the blame on economic freedom.

But the index also makes the resounding argument that the crisis resulted from a lack of freedom -- rather than too much. A retreat from liberalization will lead to less wealth and greater poverty for citizens of those countries whose leaders prescribe more statism.

In fact, countries which ranked highest on the index showed the smallest decrease in the values of their currencies.

• Hong Kong continued to hold its number one position -- but its premier position was threatened by the government's massive intervention in the local stock market last August (see figure).

• Hong Kong, Singapore and Taiwan -- all of which ranked among the top 10 -- weathered the financial crisis much better than their less free neighbors.

• Countries with the freest economies saw their currencies decline by less than 10 percent against the dollar from January 1997 through September 1998.

• Currencies fell just under 15 percent on average among countries deemed "mostly free"; between 15 and 20 percent for those rated "mostly unfree"; and nearly 25 percent among "repressed" countries.

When the index scores on economic freedom were compared with Freedom House's annual survey of countries' records on political rights and civil liberties, it was found that countries with a high degree of economic freedom almost invariably enjoyed political freedom.

Sources: Bryan T. Johnson and Kim R. Holmes (both of the Heritage Foundation), and Melanie Kirkpatrick (Wall Street Journal), "Freedom Is the Surest Path to Prosperity," Wall Street Journal, December 1, 1998.

For text http://www.heritage.org/index/