The Asian Wall Street Journal
January 12, 2000

Twenty More Years

Every year this newspaper, in collaboration with the Heritage Foundation, publishes "The Index of Economic Freedom," and every year the findings are the same: that there is an undeniable correlation between economic freedom and economic well-being around the globe.

The Index is hardly the only source supporting this conclusion. For anyone for whom freedom alone just isn't good enough - predominantly, we would guess, those who have never been deprived of it - there is a wealth of evidence indicating that it provides lots of material goodies as well. So much so that you would have to struggle pretty hard to come up with something else to which to attribute the world's success stories.

Yet a significant number of politicians, academics and others around the world continue to insist that free markets are dangerous and not to be trusted; that it is markets, not governments, which need to be restrained; and that a high degree of government control of the economy somehow results in a more "humane" society than that produced by the ruthlessness of the marketplace.

So, for those for whom even material well-being is not enough, the Canadian-based Fraser Institute, the U.S.-based Cato Institute and the Hong Kong Centre for Economic Research have included "human and social development" indicators in their "Economic Freedom of the World: 2000 Annual Report," released yesterday.

Looking at such indicators as life expectancy, access to health care, and literacy, the report shows that those countries falling into the top 20% in terms of economic freedom dramatically and consistently outperform all others. Apart from producing per-capita incomes nearly ten times those of the least free economies, the countries ranked freest also produced adult illiteracy rates of only 10%, compared to over 45% for the least free; infant mortality rates an eighth of those in the least free countries; and access to health care for over 90% of the population, vs. only 60% in the least free economies. Life expectancy in the freest economies is more than 20 years higher than it is in the least free.

And, for anyone who insists that all of these advantages are of no benefit unless they are evenly distributed throughout society, the report (using World Bank data) shows that income inequality is no more prevalent in free economies than in less free economies. In fact, while distribution of income varies between the freer economies, income inequality is markedly higher in the least free economies. Using the ratio of the income of the top 10% of earners over the bottom 10% (the higher the ratio, the greater the income inequality), the freest 20% of countries score a ratio of 14.31, while the least free 20% score 32.49.

So much for the myth of the growing income gap between rich and poor in market economies. Indeed, as Jesper Koll points out nearby, the free market in countries such as the U.S. has facilitated a dramatic narrowing of this gap. Stock market participation, for example, now cuts across class lines.

It is getting harder and harder for statists to justify their position. They lost the argument long ago on purely economic grounds, and have more recently sought refuge in the "non-economic" realm, styling themselves as more humanitarian than those who simply believe that prosperity is a good thing.

The "Economic Freedom of the World: 2000 Annual Report" is going to make the interventionist position even harder to defend. If improving such indicators as infant mortality, access to health care, and adult literacy rates, and adding 20 years to the life of each resident - on top of giving its citizens greater material wealth - does not make a system worth supporting, we have to wonder what on earth does.

Copyright Dow Jones & Co. 2000