In the late 1980s, the Heritage Foundation, a Washington-based public policy institute, first envisaged a user-friendly tool for policymakers and investors that would give an empirical snapshot of a country's relative economic freedom. As Vice President of the Heritage Foundation, I have seen our original goal to create a valuable tool for policymakers and investors develop into the yearly publication of the Index of Economic Freedom, published by the Heritage Foundation and The Wall Street Journal.
This comprehensive study measures economic freedom in 160 countries worldwide. The index is compiled from measurements of tax and tariff rates, monetary policy, regulation, and the degree of government intervention in the economy. In 1998, the Heritage Foundation, through the Index of Economic Freedom, endeavored to prove the popularly held assumption that there is indeed a correlation between economic freedom and democracy. We put this assumption to the test by comparing the economic freedom scores with those from Freedom House's Comparative Survey of Freedom 1995-1996, which measures a country's political freedom. We discovered that the freer an economy is, the more likely it is that the country will be democratic and will enjoy the fruits of civil and political liberties.
Our conclusion that there is a link between democracy and economic freedom does not mean that all economically free countries are democracies. Clearly, Hong Kong, Singapore, and Bahrain are not. Rather, it means that in the long run, countries with open economies and markets have a better chance of developing democratic and free institutions.
Our conclusion that there is a link between democracy and economic freedom does not mean that all economically free countries are democracies. Clearly, Hong Kong, Singapore, and Bahrain are not. Rather, it means that in the long run, countries with open economies and markets have a better chance of developing democratic and free institutions.
Through the study, the Heritage Foundation uncovered several points of interest to those who have followed the nearly decade-long spread of democracy and the recent financial crisis in Asia.
Growth of either economic or political freedom aids the development of the other. Countries that choose to restrict economic freedom can also see a decline in their political freedom, as events in 1998 demonstrated in Malaysia and Indonesia. When authoritarian rulers feel free to crack down on economic activity, free political expression can also suffer. Problems in Russia can be linked back to its lack of a free, transparent market and its weak democratic process. Some economic reforms were successfully made, but serious restructuring of the Russian economy never occurred. Consequently, Russia is in the throes of continued economic and political turmoil.
A variety of think tanks and public policy institutes throughout the
world are working to encourage markets and democracy. Both Heritage and CIPE
are proud to work with these outstanding institutions and to support their
efforts.
Dr. Kim Holmes
Vice President, Heritage Foundation