- The Washington Times - Sunday, December 26, 1999

During the last year of the millennium, a greater number of governments around the world gave the "invisible hand" of the market a vote of confidence. According to an index that tracks the economic freedom of countries around the world, the year was marked by a heartening trend. Compiled by the Heritage Foundation and The Wall Street Journal, the index reported that 57 countries enjoyed greater market liberty compared to a year earlier, while 34 declined.

This year's trend was especially noteworthy given the dark economic backdrop around the globe. In the past three years, world markets have been hit by a succession of financial crises that threatened the global economy. After the Asian crisis in 1997, the Russian government defaulted on loans and the currency collapsed last year. The mayhem in Russia then caused investors to become jittery about emerging markets in general, and Latin America began losing capital at an alarming rate during the end of last year and the beginning of this one.

As a result of the market turbulence, many policy-makers made the mistake of calling for a new economic restraints to slow the dizzying pace of capital flows from country to country and market to market. Worse still, some world leaders sought to vilify market forces. In September 1997, for example, as his country's currency plunged to a 26-year low, Malaysia's Prime Minister Mahathir Mohammed said traders who pulled out of Asian currencies were "immoral."

In spite of this backlash, which continued less dramatically this year, more countries decided to dismantle, rather than erect, government controls on the economy. More sobering, however, was the index's finding that of the 161 countries analyzed, 73 are either free or mostly free while 88 are mostly unfree or repressed. The 2000 Index of Economic Freedom takes into account 10 major categories, which are trade, fiscal and monetary policies, as well as overall government intervention and regulation of the economy, the banking industry, black-market activity, wages and prices, property rights, capital flows and foreign investment. The study concluded "countries that have the most economic freedom also have higher rates of long-term economic growth and are more prosperous than those that have less economic freedom."

These economically free countries are also best equipped to ride out global financial storms. Latin America, which made the greatest overall progress toward economic freedom this year, never fell into a full-blown crisis although the region, and the rest of the world, has much more liberalization to undergo. It is clear, however, that when the invisible hand is given free rein in a country's economy, it arranges things quite well, far better than government's all-too-visible hand.

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