NCPA - National Center for Policy Analysis


January 29, 2007

Why are some countries rich and others poor?  For more than a decade, the Heritage Foundation and the Wall Street Journal have carefully examined the evidence.  Every year, for the Index of Economic Freedom, they sift through data on everything from inflation to imports, from tariffs to trade -- and they do it for every country.  And one big-picture message about poverty and wealth consistently shines through, year after year: Wealth and economic freedom go hand in hand, says Rebecca Hagelin, a vice president of the Heritage Foundation.

Favorable geography?  Tell that to the people of Asia, where some of the world's wealthiest countries can be found remarkably close to some of the poorest:

  • Here, you'll find Hong Kong, the top-ranked country in the 2007 Index -- a place with a $212 billion economy and a per capita income of $30,822.
  • But you'll also find poverty-stricken North Korea, which finished dead last in the Index; you'll find wealthy Singapore and dirt-poor Bangladesh, and so on.

Asia isn't the only region where such disparities exist.  Some nations in South America suffer from terrible poverty:

  • Venezuela, despite its huge oil reserves, is in pretty bad shape, with high unemployment and a per capita income of $6,043.
  • But in nearby Chile, a big importer of oil, the average income is 80 percent higher.
  • Chile is one of the most economically free nations in the world, ranked number 11 on the Index's overall list, it beats many European nations.

The list could go on, but the trend should be clear: Poverty and riches aren't dependent on chance or luck.  What really makes a difference is policy.  More specifically: How much economic freedom do people enjoy?  Time and again, the Index shows, the more economically free people are, the more wealth they generate, says Hagelin.

Source: Rebecca Hagelin, "Wealth and economic freedom go hand in hand," Heritage Foundation, January 26, 2007; based upon: "Index of Economic Freedom," Heritage Foundation/Wall Street Journal, January 16, 2007.

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