“In general, if any branch of trade, or any division of labour, be advantageous to the public,” wrote economist Adam Smith in 1776, “the freer and more general the competition, it will always be the more so.”
As Smith noticed, the promotion of free enterprise unleashes productivity. When entrepreneurs, workers, and businesses are permitted to operate with minimal interference from regulators, high degrees of innovation tend to follow.
The nations that take this principle to heart maintain highly developed and rapidly growing economies. Indeed, many countries have been transformed from impoverishment to prosperity by embracing and protecting free enterprise.
Here are five examples.
South Korea
According to the Heritage Foundation’s 2021 Index of Economic Freedom — which compares nations with respect to their encouragement of competitive markets — South Korea boasts 24th place, establishing it in the 7th slot among 39 other nations in Asia.
The Heritage Foundation attributed South Korea’s high position to “a well-educated labor force,” a “sound legal framework,” and “high capacity for innovation,” which have “helped companies to capitalize on the country’s participation in the global trading system.”
Following a century marked by devastation from Japanese occupation, World War II, and the Korean War, most citizens lived in dire poverty. Writing for the Brookings Institution, Kongdan Oh — who grew up in Korea — recounted that “per-capita income was less than $100” in the 1950s and 1960s.
“Food was sometimes scarce in the 1950s,” he explained. “In the springtime, after the autumn harvest had been eaten and before new crops could be gathered, poor people would scour the hills for edible herbs and plants – just as they do in North Korea today. Schoolrooms lacked desks and chairs and had little heat in the winter.”
Though the nation depended on foreign aid in the 1950s, Oh credited Peace Corps volunteers from the United States with promoting values such as “the importance of individual human rights, democracy, and transparent governance.”
Likewise, Harvard University professor Carter Eckert explains that “Korean entrepreneurs have, in fact, been an important and constitutive part of the country’s modern history, skillfully availing themselves of every major economic opportunity.”
Eckert notes that the only ingredient for economic success that South Korea neglected in the nineteenth century was “a state structure committed to and capable of galvanizing all its valuable international and social resources toward economic growth” — a problem that was solved by President Park Chung-hee who, though a dictator, sought to encourage economic growth throughout the 1950s and 1960s.
Today, South Korea’s economic explosion is often called the “Miracle on the Han River.” Thanks to its embrace of free markets, South Korea is positioned far better than North Korea, which ranks 178th in the Index of Economic Freedom.
Uruguay
The Index of Economic Freedom gives Uruguay 44th place — the second-highest ranking in South America.
The World Bank attributes Uruguay’s economic success to “a solid social contract and economic openness,” which “paved the way to poverty reduction and the promotion of shared prosperity that Uruguay successfully followed in the last decade.”
From 2006 to 2018, moderate poverty as a percentage of the population dropped from 32.5% to 8.1%. Meanwhile, extreme poverty “has practically disappeared” — only 0.1% of the population lives in such conditions.
From 1973 to 1985, however, Uruguay was controlled by a military dictatorship. As Encyclopedia Britannica notes, the nation’s leadership limited economic growth by amassing foreign debt.
Following the end of the regime, President Luis Alberto Lacalle sought economic reforms. In 1991, Lacalle brought Uruguay into Mercosur — a South American trade bloc. The new government also prioritized reforms in the justice system, purging the courts of officials installed by the military — a move that returned the rule of law and fostered the “solid social contract” which sets Uruguay apart from its neighbors.
Singapore
Singapore — a small island city-state in Asia — ranks 1st in the world for economic freedom.
Heritage lauds the nation’s “business-friendly regulatory environment and a very low unemployment rate,” as well as its ruling party that has consistently “championed economic liberalization and international trade.”
According to the World Bank, Singapore rapidly developed “from a low-income country to a high-income country.” Since its separation from Malaysia in 1965, Singapore has maintained an average GDP growth rate of 7.7%. At its moment of independence, Singapore’s GDP per capita was $500; today, it is over $65,000.
Anthony Kim — the Research Manager for the Index of Economic Freedom — explained in The National Interest that Singapore “forged its free-market path to prosperity at a time when many of the world’s most prominent intellectuals and political leaders were touting many different models.”
“The foundations of Singapore’s economic resilience and competitiveness include strong protection of property rights and effective enforcement of anti-corruption laws,” continued Kim. “The efficient government provides good public services with low tax rates. The regulatory environment is flexible and transparent, encouraging vibrant commercial activity. A strong tradition of openness to global trade and investment has long boosted productivity while facilitating the emergence of a more dynamic and competitive financial sector.”
United Arab Emirates
The United Arab Emirates maintains a rank of 14th in the Index of Economic Freedom; in the Middle East, it surpasses all of its neighbors — including Israel — in its devotion to free markets.
Notably, the United Arab Emirates has the best possible tax burden index position — a reality driven by its lack of an income tax and federal-level corporate tax. Though the nation’s tax burden amounts to only 0.1% of total domestic income, its public debt only accounts for 26.6% of GDP.
Since its formation in 1971, the size of the United Arab Emirates’ economy has multiplied by a factor of 36. On average, it carried annual GDP growth rates of 13.2%.
Although its growth began with the discovery of massive oil reserves, the United Arab Emirates’ liberal tax and investment climates lead multinational corporations to establish regional headquarters in its cities. As a result, the economy has diversified significantly; as of 2019, sectors such as manufacturing, commerce and hotels, real estate, construction, transportation, and finance compose a collective 55% of the nation’s economic output.
The United Arab Emirates’ free-market philosophy differentiates it from other resource-rich countries. The socialist nation of Venezuela — which also has abundant natural resources — ranks 177th in the Index of Economic Freedom.
Ireland
Ireland ranks 5th in the world and 2nd in Europe for free enterprise.
Heritage explains that “property rights are well protected, and secured interests in property, both chattel and real estate, are recognized and enforced.” Ireland also benefits from an independent legal system and relative freedom from public corruption.
Although most nations in Europe are experiencing economic stagnation, Ireland’s markets continue to grow. In 2019, Ireland saw GDP growth of 5.5%; meanwhile, the United Kingdom, Germany, and Italy saw GDP growth of 1.5%, 0.6%, and 0.3%, respectively.
Often called the “Celtic Tiger,” Ireland began matching other European powers’ economic development in the 1990s.
Explaining his nation’s prosperity in The Irish Times, Garret FitzGerald states that Ireland’s technology and manufacturing boom was aided by “an unprecedented increase of almost one-half in our workforce, a process that involved bringing into paid employment very many people who had previously been outside the labour force, viz. unemployed people, students, or women who had been working in the home.”
These individuals “had until then been dependants, either supported by bread-winning parents or spouses, or, in the case of the unemployed, by the State through social payments.”
University College Dublin economist Brendan Walsh confirmed that “a stricter approach to unemployment benefit claimants,” “declining union power,” and “a reduction in the tax wedge on earnings” made Ireland’s economic miracle “relatively understandable.”
The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.