Saratoga High School
Saratoga, California
Teacher: none (individual entry)

Historical References: A Look
By Kathleen Yip
12th grade

On a section of the Berlin Wall was a quote written in red graffiti: ““Irgendwann fällt jede Mauer,” or “Every wall falls some time.” That, of course, came true in 1989, when the hated Berlin Wall was torn down. But what also came down that day were more than some concrete blocks—it was a symbolic destruction of the former economic oppression under the Communist governments. As more time passes by, more countries are opening up to free trade, but it is those with a long history of economic freedom that can maintain and lead the way for others. History can be used to show why a country’s economic freedom ranking is the way it is and in particular, Singapore, Poland, Yemen and North Korea, which all fall into different categories of the Index of Economic Freedom, published by the Wall Street Journal and the Heritage Foundation.

Singapore, ranked number two on the Index, has had a history of extensive government support and is blessed with a prime geographical location. The country sits at a junction that separates Indonesia from India, at the southernmost tip of Malaysia, making it culturally and historically an important trading spot. When Singapore achieved independence in 1965, the government took a pro-business and pro-foreign investment stance while minimalizing government intervention, allowing for a free market economy. The country’s first Prime Minister, Lee Yuan-Kew, improved security, created jobs, lowered unemployment and eliminated government corruption. By removing barriers to economic freedom, the people of Singapore can utilize the government’s policies to maximize their earnings. As a result, Singapore boasts one of the highest GDP per capita in the world. Further, Singapore also has a highly skilled workforce that is able to contribute to the needs of its society as well as others. The United States frequently buys products such as chemicals and electronics from Singapore. Its geographical location is also a barrier to economic development. Because it is an island nation, its natural resources are limited and it must rely on imports, which may or may not be stable, for their way of life. Singapore has a very free economic system, though there are some disadvantages to its location.

As one of the most well known countries of the former Soviet bloc and formerly Communist, Poland has lived up to its name of independence and freedom. More than twenty years after Solidarity leader Lech Walesa led the Gdansk shipyard workers in a massive protest against Communist policies, Poland has liberalized its economic policies. By removing price controls and opening markets, Poland has become a country to be reckoned with. Some weaknesses still stand. While Poland has been able to stand tall from its past, it has also struggled to fully privatize its industries and farms. The economic strength strength, from Walesa’s campaign, has helped Poland to become one of the greatest success stories from the former Soviet bloc. Though restructuring its economy has been difficult, Poland has stood above it all, allowing it to stand higher than many other countries on the Index.

While recovering from reunification, Yemen’s economy has become one of the less-free ones. During the 1950s, an abundance of aid flowing from the Soviet Union and the People’s Republic of China kept Yemen’s Communist-based economy afloat. The collapse of the Soviet Union also signaled for a collapse of Yemen’s no-incentive-based economy. Years of imperialism and outsider influence have left Yemen unprepared to rule its own economy; thirty-five percent of all workers are unemployed. Those who have ruled Yemen have adopted a strict economic policy that does not allow for liberalization. Yemen has stood behind many other countries through this policy and has become one of the less-free countries economically.

North Korea, on the other hand, currently stands at the bottom of the Index. Soviet and Chinese influence from decades ago still linger, as North Korea’s leader, Kim Jong-il, and leaders before him, have continued to shut the country up economically through strict belief in Communist ideology. North Korea has avoided making basic economic reforms and consequently, many citizens suffer because the government cannot even make the most basic of needs available to its citizens. The United States has provided North Korea with foodstuffs to keep North Korea’s citizens from starving. Its citizens, kept unfree, have no motivation to work. This may all soon change, however, as North Korea and South Korea in recent years have opened up trade amongst themselves and have made plans to build connective highways between the two countries. Until North Korea adopts a more liberal economic policy, North Korea will remain on the Index as the least-free nation economically.

While countries like Singapore have had a long successful history of free trade and capitalism, others such as Poland are building up. Other countries, still apprehensive, are still tied to Communist influence and have had trouble in building a strong economy that will allow them to rise on the Index of Economic Freedom. Political stability will have to come before economic stability. And until such countries’ leaders advocate for free trade and economic policies modeling other successful countries, they will be left in the dust and their citizens will suffer. But there is hope for the future, as every wall falls some time.

Answers To Questions Prompted By The Required Reading

The Benefits of Free Trade
Q1- Be the Devil's Advocate and counter Benjamin Franklin's statement that "No nation was ever ruined by trade."

Trade has ruined a number of nations. The first one that comes to mind is an entire region—West Africa. Rum, coffee, molasses, sugar and tobacco from the West Indies were traded to Europe, which then traded guns and alcohol to West Africa for slaves. As more and more human capital left the region, less able-bodied workers were around to do basic societal jobs, such as farming. Finally, as Europeans, noticing their enormous profit margins, protected their interests and continued to exploit the African nations, eventually taking over them—imperialism. Today, years since imperialism ended, African countries overall have had a big problem in trying to gain economic and political stability.

Q2- Name five countries whose ranking surprised you.
 Bahrain, Israel, Japan, Estonia, Germany

Q3- Write one sentence each to explain why you chose the countries you did in Q2.

Bahrain — I knew that Middle Eastern countries are fairly oppressed, so I was surprised to find that Bahrain was nearly at the top of the “Mostly free” list.

Israel — Because of the large amounts of aid the United States provides for Israel, I would have expected Israel to be in the same category as the U.S. instead of on the bottom of the “Mostly free” list.

Japan — Today, we group the biggest economic powers to be the U.S., Japan, China and India, so since recent history has not suggested any violence outside of World War II, I would have expected Japan to be a “Free” country.

Estonia — Estonia, in the Baltic region, would be within the “Soviet sphere of influence,” so I would have thought that it would have traces of Soviet influence left over from the Lenin-Stalin days.

Germany — Because of having to integrate its former eastern Communist section, it would be easy to think that Germany has taken a step back to go down with the needs of Eastern Germany, but that is apparently not true.

Q4- The USA was not ranked first in any of the years exhibited online in the Annual Report nor in the 2005 Index. List the twelve countries that ranked higher on the Index and the countries that out ranked the USA in the eight Annual Reports.
 

Hong Kong, Singapore, Luxembourg, Estonia, Ireland, New Zealand, United Kingdom, Denmark, Iceland, Australia, Chile, Switzerland

Q5- The Index uses 50 variables in 10 categories. The Report shows 21 variables in 5 categories and lists 24 sub-variables in its online charts.

Take the 10 categories of the Index and place all 45 variables found in the Annual Report charts under one of the Index categories. The Trade Policy category is already done as an example. Many variables might well go under more than one category. Do the best you can using each variable only once until all are categorized. We will be able to tell if thought is put into this exercise.

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