NCPA - National Center for Policy Analysis

Free Economies Better Than Foreign Aid

December 13, 1995

The Heritage Foundation has just published its second Index of Economic Freedom, which scores countries on 10 economic factors -- trade, tax policies, monetary policies, wage and price controls, banking, foreign investment, property rights, the size of the public sector, regulation and black market activity.

The scoring is designed to determine which countries are the freest in economic terms.

Some of the findings:

  • The world's freest economy is Hong Kong -- with rent controls being one of the few economic interferences.
  • Nor surprisingly, Hong Kong's per capita income has increased fivefold since 1965.
  • The U.S. ranked seventh on the Index -- its score reduced by high marginal tax rates.
  • More than 70 countries -- nearly half of which have gotten U.S. foreign aid for over 35 years -- were ranked as "mostly unfree" or "repressed."
  • Moreover, 14 of these unfree countries are actually poorer now than they were in 1965 and 26 are no better off now than they were then.
  • Nations showing the most improvement include Botswana, Indonesia, Israel, Panama and Portugal.

Experts warn that foreign aid is often economically counterproductive. And studies long ago established an undeniable link between economic freedom and civil liberty.

Source: Perspective, "Free Markets, Free People," Investor's Business Daily, December 13, 1995.


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