Economic Freedom: Modern Impact (1970s-2010s)

Figure 1.-- The people of the Third World came to associate poverty and underdevelopment with colonial rule. After Word War II decolonization brought independence to most of the European empires. It was widely assumed that indeoendence and socialism implement through state plnning would rapidly and dramatically transform economie. Not only did that not prove to be the case, but living standards actually declined in many of the newly independent states. Photographer: T.S. Satyan.

There are many examples in history of the success of economic freedom. Althoughh not widely reported, we are living in the most stunning periods of economic expansion generated by economic freedom. As a result of World War II (1939-45), the Coummunist victory in China (1949), and Decolonization (1960s), the world was split into three destinct sectors which have reported varied economic experiences. The First World was North America and Western Europe soon to bejoined by Japan. These were the industrialized countries of the world which capitlism and democrcy had turned into highly productive powehouses. And thanks to America power, both Germany and Japan were converted to model democracies. The Second World was the Communist countries, the Soviet Union, the Eastern European satellite countries (essentially the Soviet Empire), China, North Korea, Vietnam, and finally Cuba. The Third World was the newly independent countries that emerged from European colonial empires. The first such country was India (1949), but most of these countries were granted independence a decade later (1960s). Also included were the Latin American countries which had achieved independence from Spain and Portugal after the Napoleonic Wars (1810s-20s). Except for the Southern Come, these countries had achieved very limited economic success. Developments in each of these areas contrasted sharply after the War. The First World achieved unprecedented economic sussess. A major actor here was European economic integration. In sharp contrast to what the Communists expected, the loss of colinial empires dis not bring economic decline in Euriope, but rather the mixture of capitalism and democracy brought unprecedented ecomonic success and prosperity. America and Europe also established the Breton Woods system that opened up the benefits of interntional trde to every country. The Second World or Communists expeienced economic decline, but such was the effectiveness of their propaganda and the appeal of Socilist theory that this was not immediately apparent. In stark contrast to the stunning success of the First World, the Second World or Communist countries experienced stunning economic failure. Here we are talking about planned rather than market ecinomies as well as totalitarian political organization. In addition, Communist countries sought national autarky rather than international trade and the benefits of evonomic specialization. The divided countries (China, Germany, and Korea) showed the most stark contrast, but so did the contrast between America and the Soviet Union. Communist leaders were shocked with First World success after World War II. Thus rather than compete economically, the Communists souught to compete expand through military means. The Cold War was esstentially a struggle to preserve freedom, both economic and political freedom. And the economic freedom denined people in Communist countries have resulted in the collapse of those regimes (Soviet Union and Eastern Europe) or massive market reforms (China). The Third World also experienced a high rate of economic failure in the first decades of Decolonization. Many of the new Third World leaders with only limited eductions and lottle business experience were impressed with Socialist thought. The appeal of Socialist theory as well as the popularity of socialism among European acacamic institutions were important factors. The apparent success of the Soviet Union impressed others. The Second World rejected the Breton Woods international system. The result was predictable, wide spread economic failure. The new leaders assumed that throwing off colonial bonds would result in immedite economomic success. This simply did not occur. In fact, living stndards actully declined in many newly independent states. The newly indepebdent states committed virtaly ecery mistake possible, in addition to Socialism and state econimic planning. many of these states also adopted autarkic policies and regimes pinishing savers and investors and disregard for the rule of law. This did not begin to change until the Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan) began to show case the potential dynamic economic forces that could be unleased by market capitalism. More of the newly indepebdent counties began to participate successfuly in the Breton Woods economic system establisghed by America and Europe. Many other Third World countries noteing the success of the Tigers have begun adopting market reforms. Eventually even Chinese Communists saw what could be achieved with market forces. The result has been spectcular. The result is that something like a billion people have escaped poverty and entered the middle-class since the rise of the Asian Tigers--a little more than a generation. That is more people than have escaped poverty in all of previous human history. Not only is this a stunning development, but shockingly it is a devlopment that left-wing politicans, journalists, and acadamicans seek to ignore.


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Created: 3:51 AM 11/22/2015
Last updated: 3:51 AM 11/22/2015