Proof that capitalism is a triumphant force

Article by John Blundell in The Business

A book I regard as heroic will be published in London on Monday. The
2005 Index of Economic Freedom is a forensic examination of the economies of every country on the planet. It manages to be a fine reference book and a guide on how to impoverish a nation - or equally how to enrich it.

Here is a recipe book to liberate and enrich everyone. How many officials of the European Union will read this book? It may be too painful for them. Economies that used to dazzle like Germany and Japan stutter. Others start to surge. This book lifts the secrets. The details may be complex but here is the simple formula for wealth and health: low, simple taxes, light regulation, secure property, rule of law and free trade. Press those buttons and nations flourish.

I would like to see this extraordinary study on the reading list of every business school and read by everyone remotely near policymaking.

We all have a fair idea of what is going on in China, Brazil or India, but there are scores of nations about which we barely hear anything. The team that compiled this arresting book takes 50 different measures of each state, from the fiscal burdens, government regulation, monetary policy, wages and prices and property rights. This amazing inventory of data broadly confirms what we all perhaps know by instinct: in the liberal market economies homo sapiens flourishes. In the "kleptocratic" nations all but the elite starve or are brutalised.

Yet there is no shortage of surprises. The US is ranked only 12th by the capitalist virtues. America may have the most colossal economy, but it is losing its free market credentials as federal expenditures rise and protectionism tempts the policymakers.

At the top of this bold attempt to calibrate economic liberty come those two anomalous city states Hong Kong and Singapore. The sweat and dexterity that make these Asian tigers surge may be Chinese, but the mystery that lifts them above the rest of us may be claimed to be British - free trade and the rule of law.

Third is Luxembourg, but it is so tiny it is perhaps no more that a curio. Estonia comes fourth. The former Soviet republic has relished its freedom and restored its liberal economy to rather better shape than the day the Red Army tanks trundled in. The present hazard for the small Baltic nation seems to be its accession to the EU. It is having to add EU taxes and regulations. Like all EU members Estonians have to comply with the ab