Imagine you and I dropped everything and went on a trip right now – a tour of economic freedom throughout the world. Where do you think we’d begin? The United States? Europe? No, we’d leave the Western world behind and start our journey in East Asia.
Surprised? You shouldn’t be. Hong Kong and Singapore have been the leaders in economic freedom for all twelve years that The Heritage Foundation and The Wall Street Journal have been publishing the annual Index of Economic Freedom. Though the recently-released 2006 version found that although the two Asian nations still top the list, it also shows that the world as a whole is economically freer than it was a year ago. And since economic freedom is directly related to prosperity, that’s good news for many.
What is economic freedom? The Index defines it as “the absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself.” For those who haven’t studied economics, this means that “people are free to work, produce, consume, and invest in the ways they feel are most productive.”
Every year, the Index grades each nation on the basis of 50 independent economic variables related to categories such as trade policy, fiscal burden of government, government intervention in the economy, wages and prices, property rights, and regulation. It then ranks nations based on the final outcomes.
And even though the grades are based on economic indicators, it didn’t surprise me that many of the nations with the worst economic freedom scores were also those with little political freedom. For instance, the three nations with the worst Index scores (North Korea, Iran, and Burma) also made PARADE magazine’s 2006 list of nation's with “The World’s Worst Dictators.” After all, the brutality and excessive control that makes these dictators infamous also tends to stifle their nation’s economies.
Nations with dictators and economic unhealthiness are usually not much fun for carefree tourism either, which is why I suggested an economic freedom trip, and not an excursion through economic misery. So let’s rejoin the tour.