September 26, 2008
By Kim R. Holmes, Ph.D.
The American stock market falls 500 points. The next day,
markets in Europe and Asia follow suit. No surprise. The world
economy is, well, a "world" affair - a financial sneeze here leads
to a cold there, and the next thing you know, the whole globe has
got the flu.
But few people realize how seldom the world's political and
business leaders talk seriously about broad international economic
Yes, there are trade and finance negotiations galore in the
World Trade Organization (WTO), the International Monetary Fund
(IMF) and the World Bank. Yet there is little serious discussion
about what really makes economies grow and prosper: economic
Think it happens at the annual Group of Eight summit of the
world's top industrialized democracies and Russia? Think again. If
you have a climate-change plan, bring it to the G-8. If you've got
a Mideast peace plan, by all means get it in the G-8 communique.
But don't expect much discussion of the benefits of lower taxation,
property rights and limited government spending.
Perhaps they have that discussion at the World Economic Forum in
Davos, Switzerland? Not much luck there either. On stage, you'll
see Bono chatting with Al Gore about climate change. Or Tony Blair
talking up something called "the power of collaborative
But what these forums and institutions - indeed, the world - are
missing is a serious discussion of what makes economies work and
what does not work. We need markets that generate jobs and
investment, and connect buyers to sellers at low costs. Markets
cannot do that when they are burdened by excessive taxation and
As the Heritage Foundation/Wall Street Journal 2008 Index of
Economic Freedom shows, what governments and global talk shops are
missing is a full understanding of the power of economic freedom in
creating global prosperity.
The index reveals that low taxes, openness to trade and
investment, sound financial policy, and other measures of economic
freedom are among the most reliable sources of long-term economic
You might think all of this is obvious. But free trade and
economic freedom are under attack in Washington and in capitals
throughout Europe, Latin America and Asia. Politicians and leaders
disparage free markets and push policies that are counterproductive
or, worse, protectionist.
Today's financial mess only makes matters worse. It has
unleashed a backlash against free markets, prompting some
politicians to denounce them as representing a "failed economic
International forums created to foster trade and open markets
are struggling to advance free-market principles. The WTO is
deadlocked, with many members reluctant to give up their tariffs,
quotas or other measures restricting the free flow of goods and
Efforts at the World Bank and the IMF to encourage economic
freedom are erratic. The United Nations remains ideologically
sympathetic toward socialism and aspires to strengthen its role as
a regulator, judicial authority and vehicle for redistributing
What's the answer? A new association of free economies that
promotes greater economic freedom and sound economic policies.
America should take the lead in establishing a Global Economic
Freedom Forum (GEFF) with the heads of state from 20 to 25 of those
nations. Each year, they could hold a summit to come up with common
solutions to such problems as international debt, weak financial
institutions and poverty in developing nations.
To succeed, a GEFF would need geographical diversity. The United
States, Australia and Ireland need a place to sit down with Chile,
Botswana and Mauritius to discuss how to improve free trade, reduce
agricultural subsidies and reform foreign aid. Ireland, the United
Kingdom and Luxembourg need a place to discuss ways to liberalize
the European Union.
A common economic-policy front from a group as successful and
diverse as the GEFF would have real political value. The world
would take notice of a summit photograph in which heads of state
from Bahrain, Japan, the U.K., Chile, Estonia, the U.S. and
Mauritius stand side by side in consensus on the global
It also could help break up logjams at the WTO and other
international economic and financial institutions. While a GEFF
would not replace the WTO, it could act as a caucus there, helping
to better coordinate its members' trade policies. Its members could
do the same at the U.N., challenging the global-governance
philosophy so prevalent in Turtle Bay.
But the most important benefit would be the message: Finally,
there would be a world stage from which to shout that economic
freedom brings the greatest prosperity for the largest number of
What a sweet sound to hear above the din of Davos.
is vice president for foreign policy at the Heritage Foundation
(Heritage.org) and author of "Liberty's Best Hope: American
Leadership for the 21st Century" (2008).
First Appeared in the Washington Times
The American stock market falls 500 points. The next day, markets in Europe and Asia follow suit. No surprise. The world economy is, well, a "world" affair - a financial sneeze here leads to a cold there, and the next thing you know, the whole globe has got the flu.
Kim R. Holmes, Ph.D.
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