- The Washington Times - Saturday, February 17, 2007

2007 INDEX OF ECONOMIC FREEDOM: THE LINK BETWEEN ECONOMIC OPPORTUNITY AND PROSPERITY

Edited by Tim Kane, Kim R. Holmes, and Mary Anastasia O’Grady

Heritage Foundation, Wall Street Journal, $24.95, 408 pages

REVIEWED BY WILLIAM H. PETERSON

World peace through world trade — the brainstorm of Thomas J. Watson, the founder, thinker and head of IBM who promoted it vigorously until Pearl Harbor served in effect to foreclose it (if, I hold, but temporarily) — bears on our War on Iraq, the War on Terrorism, and today’s solid book. I will get back to the Watson brainstorm …

As I welcome a new edition of what has become an annual classic on the condition of trade, production and crucial government regulations (some of them strangulations) across the globe, nation by nation.

The “2007 Index” measures each nation, 157 in all, with two pages for each country, each with its own map and ranking, and scored by 10 key updated and carefully weighted freedoms, each playing up the key link between economic opportunity and prosperity. The 10 freedoms are: Property Rights, Labor Freedom, Trade Freedom, Freedom from Government, Monetary Freedom, Financial Freedom, Fiscal Freedom, Business Freedom, Investment Freedom and Freedom from Corruption.

Economic freedom and impliedly how to achieve it is then what this book is all about, and on that score the United States looks good with its No. 4 rank and a grade of 82.0 out of the editors’ standard of perfection at 100.

The five freest nations are in order Hong Kong (89.3), Singapore, Australia, United States, and New Zealand.(All five are ex-British colonies.) The five unfreest are Burma, Zimbabwe, Libya, Cuba and, at the bottom, North Korea, with a grade of 3.0.

New in this edition are regional standings. Hottest growth country in Europe, for example, is not Switzerland (per capita GDP at $33,040) but Ireland (per capita GDP $38,827).

Indeed, Ireland boasts it is now the world’s largest exporter per capita as it lowers and relowers its corporate income tax rate down to 12.5 percent, the lowest in the EU as investment capital swarms in from across the world, especially from the United States, with its prevailing corporate tax rate at a heavy 35 percent.

So the United States does well with its cool No. 4 world rank if with its uncool corporate income tax rate. The editors note how America benefits from its massive scale and its intrastate competition. Trade barriers among the 50 states are constitutionally taboo, allowing for free movement of capital, goods, and labor.

The editors, however, are concerned by the Supreme Court’s ruling in Kelo v. City of New London which sapped property rights, by the Sarbanes-Oxley law which imposes massive accounting regulations, and by Congressional unwillingness to curb growing public spending, especially welfare.

I like the worldly view of Edwin Feulner, head of the Heritage Foundation, in the Preface that freedom, economic and otherwise, is “a moral and liberating force for all peoples” and serves as the foundations of “true democracy” in such matters as property, trade, entrepreneurship, work, and investment — matters currently revolutionizing and integrating the world. Witness the growth engines of China and India.

I think that Mr. Feulner is worthily saying that his idea of democracy lies at the heart of the West’s vast marketplace. I say people there vote not but every other year, as per our federal elections, but daily, busily, voluntarily in a 24/7 endless plebiscite.

This then is the West’s daily exercise in consumer sovereignty, social cooperation, economic growth, and individual aspiration. So bully for Mr. Feulner.

Similarly I find valuable the somber note of Paul Gigot, editorial page editor of the Wall Street Journal, in the foreword here, that last November’s election moved Congress to the left economically, with strong new voices rejecting the invaluable free trade consensus of the past 50 years. He adds that political gridlock is likely the best we can hope for until the presidential election of 2008 sorts things out. The question of the hour, as a knot of presidential hopefuls scramble, is, How?

Meanwhile, Mr. Gigot hopes the world’s policymakers soon complete the Doha Round of global trade talks. He worries that French-led Europe will continue to refuse to cut farm subsidies and thereby block “the dynamic forces of globalization,” a worry that helps explain why there were riots in Paris last year as France suffers from low labor freedom and high unemployment, a worry that extends to big farm subsidies in the United States that not only escalate the cost of Big Government here but set back economic development in places like Africa if not Vermont.

So the message of the “2007 Index” is: Trade not aid. Please bear that homily in mind, Dear Policymakers, as welcome globalization goes on to envelop and transform the world economy — for the better.

Globalization segues back to the Watson idea of World peace through world trade. For, yes, the “2007 Index” shows decisively how trade is a positive-sum win-win game while state income redistribution is a costly zero win-lose (if not ultimately a negative-sum) game.

Thus I ask: Doesn’t global trade peacefully unite the world, fight poverty, raise living standards and more and more recast the globe into what Wendell Willkie, FDR’s opponent in the 1940 presidential election, presciently called One World?

The further question is: One World at Peace — or One World at War (which has characterized the last 100 years or more), especially for America. My point is that trade unites peoples, war divides them. Indeed, with weapons of mass destruction (WMD) around, the possibility exists that man can now destroy civilization if not himself.

Heads of state, generals and admirals of armed forces, rulers of faiths, and peoples over our globalized world should realize that bombing and shooting “enemies” means bombing and shooting actual or potential customers, investors and suppliers.

Bravo, Mr. Watson. Your idea of world peace through world trade frowns on tariffs, import quotas, currency devaluations and other dubious forms of so-called protectionism, as this sweeping book decisively points out. Protectionism spells trouble, international friction and, ultimately, war, such as the War on Terror.Free trade — and the freer the better, including unilateral free trade — spells, in a word, peace.

Peace. That big goal lies in the background of this sharp ‘2007 Index of Economic Freedom. ”

William H. Peterson is an adjunct scholar at the Heritage Foundation in Washington, DC, and the Ludwig von Mises Institute in Auburn, Ala.

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