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Economic Freedom: Key to Post-Conflict Recovery

Anthony B. Kim
The Foundry, The Heritage Foundation
April 27, 2010

In his latest article in Foreign Affairs, Carl J. Schramm, president and CEO of the Ewing Marion Kauffman Foundation, calls for “expeditionary economics” a new strategy for reconstructing economies of post-conflict countries. Pointing out that the current U.S. Army Stability Operations field manual “epitomizes the central-planning mindset that prevails in the international development community,” Mr. Schramm argues that a more strategic attention should be paid to a bottom up approach based on encouraging entrepreneurship that will greatly enhance reconstruction progress.

According to Mr. Schramm, “Entrepreneurial capitalism is messy, since it is highly organic rather than centrally planned or centrally managed. Many different people and entities bring the elements–from new firms to university research to federally funded research–into place, and activity flourishes from letting them all evolve and interact in the marketplace. It is nearly impossible to predict what outcomes these activities will bring beyond a broad trend toward higher productivity, rising standards of living, and continued economic growth.”

Although there is no distinct formula through which to guarantee this “organic” but constructive process, a good way to start is to focus on economic freedom. According to the Index of Economic Freedom, countries with higher levels of economic freedom are more prosperous, grow faster, and do a better job of reducing poverty. Economic freedom allows individuals to maximize their creativity and productivity, fostering innovation. That is the essence of entrepreneurship.

Of course, America won’t have much credibility in promoting freedom elsewhere if it is contracting at home. As Mr. Schramm articulates:

Helping other countries’ economies grow may be the United States’ most potent way of projecting soft power. But such power will be effective only if what Americans have accomplished for themselves appeals to others.If the United States lets its economic performance slip or if it drifts away from the principles of entrepreneurial capitalism, it will endanger the standard that others view so highly and create the conditions for less America-friendly views to prevail in the world.

Regrettably, the ongoing retreat in America’s economic freedom is well documented, and an increasing “culture of dependence” at home can hardly inspire others to greater self-reliance.

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