NCPA - National Center for Policy Analysis

More on the Heritage Foundation's Economic Freedom Index

December 17, 1996

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.


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