Economic Freedom, not Ideology, is the Key
to Asian Wealth
By Ronald Meinardus
More than a decade ago, the global confrontation between the West
and the East ended with a convincing victory of the liberal paradigm.
That ideological triumph of the Western political and economic
concept was so pervasive then that some argued mankind had reached
the "end of history."
By now, we know this was a rash assumption, as new clashes have
replaced the old lines of conflict. Here, I am not referring to
the "clash of civilizations" and the US-inspired confrontation
between the coalition of the willing and the various rogues assembled
in the "axis of evil," but the widening row between
the foes and supporters of globalization.
While technological and economic developments make it appear unlikely
that globalization could be halted altogether, political intervention
by governments and other actors may well curtail the speed and
the extent to which the economies of the world merge. How and
when this will happen has basically become a political question,
and in recent years has also increasingly become ideological.
Listening to debates between supporters and opponents of globalization,
one notices a clear dividing line. The pro-side says that the
market and free trade are beneficial for all and the key to the
solution of many problems besetting the world. Contrary to this
optimism, the anti-globalization camp sees the market as the cause
of many problems besetting the world and the source of much injustice.
Interestingly, the anti-globalization activists have won the contest
for the minds and hearts of many people in most countries.
Ironically, their global publicity and networking campaigns rely
on communication tools that are a by-product of the very world-order
they are trying to get rid of.
In spite of public perceptions, a growing body of empirical data
indicates that the basic assumptions of the anti-globalization
camp are false. The numbers are published in the Economic Freedom
Index, an annual compilation of statistics representing factors
which make a country economically free.
The report ranks 123 nations representing 91 percent of the world
population and clearly supports the assertion that there exists
a correlation between the degree of economic freedom and development.
"The more economic freedom a country has, the more economic
growth is recorded," says Michael Walker of the Canada-based
Fraser Institute, who developed the Index together with other
liberal economists, among them Nobel laureate Milton Friedman.
The index measures the degree of economic freedom in five distinct
areas: size of government, legal structure and property rights,
access to sound money, freedom of exchange with foreigners and
lastly regulation of credit, labor and business.
The countries at the top of the index are also the richest nations,
while the poorest countries in the world find themselves listed
at the bottom of the ratings. In this year's report, two East
Asian economies once more topped the list, Hong Kong and Singapore
-- followed by the US, the UK, New Zealand, Switzerland and Ireland.
The rankings of other Asian countries are as follows: Japan, South
Korea and Taiwan jointly ranked 26th, Thailand (ranked 44), the
Philippines (51), Malaysia (60), Sri Lanka (64), India (73), Bangladesh
and Indonesia (91), China (100) and Myanmar ranked 123, the last
place in the table.
According to the authors of the report, North Korea would take
up the lowest rating in the Index. But as there are hardly any
reliable economic data from Pyongyang, the North Koreans are left
out of the ranking.
Recently, economists and free-market advocates from over a dozen
Asian countries assembled in Jaipur, India, for the Fifth Workshop
of the Economic Freedom Network Asia. At the conference, delegates
discussed the methodology, the application and also the political
relevance of the Economic Freedom Index in the Asian context.
One discussion centered on the fundamental issue of the definition
of economic freedom.
Not all economists agreed with the notion that the smaller the
role of the state in the economy the freer the economy is.
"We are talking about the freedom to have the means to lead
a decent life," said Ernest Leung, president of the Philippine
Stock Exchange and representative of the Foundation for Economic
Freedom in Manila.
Leung added that "we are not interested in the freedom to
A delegate from India supported the idea of an active role for
government in promoting economic development in underdeveloped
nations, arguing that "it might be good to have the freedom
to purchase a refrigerator. But if I don't have electricity, that
freedom means nothing."
Confronted with the argument that their program is unreceptive
to the problems of the poor and marginalized sectors of society,
the authors of the Index argue that their data provides ample
empirical evidence that economic liberalization is the best social
policy. As economic freedom generates growth, it creates the basis
"When the income of a country grows, so do the incomes of
the poor," argues Walker, referring to statistics that show
that an increase in economic freedom sooner or later also leads
to an increase in life expectancy, a reduction in poverty, infant
mortality, child malnutrition and child labor.
According to Walker, economic liberalization is also a very potent
weapon in the battle against graft and corruption.
"If you get rid of state regulations, you also get rid of
those in power asking for kick-backs," he pointed out.
While free-market supporters maintain that liberalization and
the reduction of the state's role in the economy is ultimately
the best strategy against poverty, they do not advocate a total
withdrawal of government from all sectors of the economy.
"We are not trying to promote a world where there is no government,"
Walker says, "Our dream is a world in which the government
guarantees a system of laws that protect the economic freedoms
of all members of society."
Taipei Times: Oct. 22, 2003
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Dr. Ronald Meinardus was the former Resident Representative
of the Friedrich Naumann Foundation in the Philippines and will
leave Manila late September for a new posting in the Middle East.
He writes a blog at www.myliberaltimes.com