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 affairs.

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 freedom.

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 innovation."

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 regulation.

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 growth.

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 philosophy."

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 services.

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 income.

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 economy.

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 people.

What a sweet sound to hear above the din of Davos.

Kim Holmes 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).