Rule of Law is Paramount, Friedman Now Says
July 9, 2002
Ten years ago, Nobel laureate Milton Friedman had just three words of advice for countries crawling out from under communism: Privatize, privatize, privatize. But now he says he was wrong -- that establishing the rule of law is probably more basic than privatization. In fact, in some countries, privatization without the rule of law is just stealing.
Friedman isn't alone in changing his mind to champion the role of law in societies.
- Robert Lawson, economics professor at Capital University in Columbus, Ohio, and an author of "Economic Freedom of the World," published annually by the Economic Freedom Network, has elevated the rule of law over the role of taxes as the key building block of successful economies.
- The report rates 123 of the world's economies and the best-off turn out to be those with trusted legal systems -- where people can own and transfer property with confidence.
- The two top countries in economic freedom are Hong Kong and Singapore, and while neither is very democratic or politically liberal, both once belonged to Britain and drew on British common law -- as did 8 of the top 10, including the U.S., which came out at number 3.
- Economic freedom was on the wane in the 1970s, but picked up speed in the 1980s, the report contends.
On a 10-point scale, average economic freedom worldwide rose from 5.1 in 1975 to 6.6 in 2000.
Lawson reports a general worldwide trend toward an expansion of the rule of law, holding the line on taxes, and promoting sounder monetary policies and freer trade. Also, governments are getting smaller and regulation is less onerous.
Source: Brian Mitchell, "Economic Freedom Depends on Rule of Law, Survey Says," Investor's Business Daily, July 9, 2002.
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