Posted on 05/30/2003 1:17:18 PM PDT by Pyro7480
One of the most fascinating topics in economic and social research is the issue of development. What allows some countries to "quantum leap" to higher levels of income per capita, and how do they remain at those high levels?
The literature on economic growth, development, and prosperity mostly agrees that the key to prosperity is open markets, sound institutions, and particularly a strong rule of law. The reason is simple. Open markets allow for competition, which is the only method, as F. A. Hayek wrote in the Road to Serfdom, "by which our activities can be adjusted to each other without coercive or arbitrary intervention of authority." Competition, at the same time, requires the organization of institutions, such as stable money, minimal and transparent regulation, minimal participation of the state in economic activity, and a strong enforcement of property rights and regulations.
The annual Heritage Foundation/Wall Street Journal Index of Economic Freedom provides a framework for understanding how open countries are to competition; the degree of state intervention in the economy (whether through taxation, spending, or overregulation); and the strength and independence of a country's judiciary in enforcing rules and protecting private property.
The 10 factors of the Index show the degree of economic freedom in a given country. Some countries may have a substantial degree of freedom in all factors; others may have a degree of freedom in just a few. One of the most important findings of the Index is that, as Hayek foresaw more than 60 years ago, economic freedom is required in all aspects of economic life--that is, in all of the 10 factors--in order for countries to improve their economic efficiency and, consequently, the living standards of their people.
Chile illustrates Hayek's idea. For more than 30 years, the country has persisted in opening its markets, allowing more and more competition, and fostering a strong rule of law, and these efforts have paid off in many ways. Chile today has one of the highest per capita gross domestic products (GDPs) in Latin America, has experienced high levels of economic growth, and conveys an institutional trust that has attracted local and foreign investment. Most important, it has severed itself from reliance on international aid, on which most Latin American countries depend. By following the 10 steps to economic freedom, Chile has become more prosperous. Continuing on this road will transform Chile into a developed economy for future generations.
Chile has set the example of how a country can escape from the cycle of aid and dependence to the cycle of self-generated growth. Other Latin American countries and the rest of the developing world should be encouraged to follow the Chilean example. Many developing countries have slipped back from reforms into aid and bailout dependency, while others have never exited aid dependence at all.
The United States should do all it can to support the Chilean effort and publicize the great triumph of prosperity through free and open markets. Success breeds imitation. As more and more countries begin to imitate the "Chilean model," the world will experience more growth, development, stability, and peace.
(Excerpt) Read more at heritage.org ...
Good article. Maybe the US could learn something from Chile about their equivalent of the Social Security system.
The 'US' will never learn from Chile's Social Security system. President Bush has been trying unsuccessfully to begin the process of privatization. He's mentioned the Chilean model several times in public.
Then the Democrats jump in and spout stories of dire consequenses of such fiscal irresponsiblity in order to scare seniors into continuing to vote Democrat if they don't want to starve to death. Al Gore runs around promising to stick S.S. funds into his 'lockbox'. Congressional Democrats weasel, threaten filibusters and run slam ad campaigns. Special interest groups run rampant in the streets....
And as a result, nothing's gonna get changed before his second term.
Bump!
I mean, we all know that Allende would never have been overthrown without the evil machinations of the CIA. I just can't imagine that the Chilean people would have turned against the "democratically elected" Marxist/Lenninist Salvadore Allende just because of soaring joblessness, triple digit inflation, massive capital flight, government seizure of their assests, the creation by Allende of a private army, and all that minor stuff.
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