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Thursday, July 15, 2004

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  There was a massive pro-democracy demonstration in Hong Kong on July 1, and many analysts predict the territory will be locked in an uncomfortable political standoff with China for the foreseeable future.

The United States tied for third place in the survey with New Zealand, Switzerland and Britain. Other nations in the top 10 are Australia, Canada, Ireland and Luxembourg.

The annual report, produced in conjunction with the Fraser Institute of Canada, and more than 50 other public policy research institutes around the world, ranked 123 nations for 2002, the most recent year for which data are available.

"Many economists have long aruged that economic growth and poverty reduction require an economic policy that encourages economic freedom," said John B. Taylor, Treasury undersecretary for international affairs at a news conference at which the survey was released. "This report provides plenty of empirical evidence of that."

He said countries with the lowest levels of economic freedom had negative growth, "a shocking statistic during a period in world history of relative calm and prosperity."

Venezuela's 'Astounding' Plunge

Most of the lowest-ranking nations were in Africa or Latin America. The bottom five ranked nations were Venezuela, the Central African Republic, Congo, Zimbabwe and Myanmar.

"Astoundingly, Venezuela's rating in the chain-linked index has declined by over two full points since 1980," the report said.

The survey does not rank all nations because sufficient data is not available, meaning countries such as Cuba and North Korea are left out.

Botswana's ranking at 18th is the best among sub-Saharan African nations. Chile, with the best record in Latin America, was tied with four other nations, including Germany, at 22nd.

The rankings of other large economies are: Japan and Italy 36th, France 44th, Mexico 58th, India 68th, Brazil 74th, China 90th and Russia 114th.

The survey says the key ingredients of economic freedom are personal choice, voluntary exchange, freedom to compete and protection of person and property.

"Institutions and policies are consistent with economic freedom when they provide an infrastructure for voluntary exchange and protect individuals and their property from aggressors seeking to use violence and coercion and fraud to seize things that do not belong to them," the report said.

It said governments play an important role in economic freedom when they facilitate access to sound money, "but economic freedom requires government to refrain from many activities," such as interfering with freedom to enter and compete in labor and product markets.

Nations in the top fifth of economic freedom have an average per-capita income of $26,100, compared to $2,800 for nations in the bottom fifth, the survey said.

New research in the report finds that economically free nations attract nearly $11,000 of investment per worker, 12 times more than the $845 investment per worker in restricted economies.

"Moreover, the productivity of investment is 70 percent greater in economically free nations than in unfree nations," said the authors of the report, James Gwartney, professor of economics at Florida State University and Robert Lawson, professor of economics at Capital University, Ohio.

© 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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