Growth accelerated with tentative reforms in 1980, and shot up to 9% after reforms deepened in the current decade. How much lower would infant mortality, illiteracy and poverty have been had India commenced reform a decade earlier, and enjoyed correspondingly faster growth and human development? I have published estimates in a paper for the Cato Institute (see http://www.cato.org/pubs/dbp/dbp4.pdf). This shows that the delay in reforms led to an additional 14.5 million infant deaths, an additional 261 million illiterates, and an additional 109 million poor people. Indian socialism delivered a monumental tragedy, lacking both growth and social justice.

Economists frequently estimate what would have happened had policies been different. The assumptions on which such estimates are based can always be questioned.

For instance, Nobel Laureate Amartya Sen has popularized the notion of 100 million missing women on account of gender discrimination in China, South Asia, West Asia and North Africa. These regions have 94 females per 100 males, against 105 females per 100 males in other countries with equal gender treatment. Sen assumed that without gender discrimination, the female:male ratio in the four developing regions would also have been 105:100. On this basis, he estimated that gender discrimination had caused a shortfall of over 100 million females — what he called "missing women".

Sen's model was so simplistic that he did not send his paper to an economic journal: he published these estimates in the New York Review of Books. Various economists complained that he had neglected other causes of gender differences, and some came out with alternative estimates.

Despite these objections, Sen's estimate of 100 million became world famous, and his phrase, "missing women", became standard lexicon in gender debates. What mattered was not the precision of his estimates, but the magnitude of the social disaster he was able to highlight.

In the same spirit (but without implicating Sen), i have sought to estimate the number of missing children, missing literates, and missing non-poor arising from the delay in economic reforms. Had reforms started in 1970 rather than 1980, India would have grown faster. In this fast-growth scenario, i assume that per capita income growth in the 1970s would have been what was actually achieved in the 1980s: growth in the 1980s would have been what was actually achieved in the 1990s: and growth in the 1990s would have been what was achieved in 2001-08.

I calculate the rate of change of infant mortality, literacy and poverty with GDP since 1971. I then apply this rate of change to the fast-growth scenario. This reveals what infant mortality, literacy and poverty would have been with faster growth.

In a fast-growth scenario, infant mortality would have been less every year, and in 2008 would have been 27 deaths per thousand births, against the actual 54 per thousand. The cumulative number of "missing children" turns out to be a massive 14.5 million. This is two-and-a-half times the number of Jews killed by Hitler.

I use trends from the latest surveys to calculate actual literacy and poverty levels in 2008, and compare these with literacy and poverty levels in a fast-growth scenario. With faster growth, literacy would have been virtually 100% by 2008, and 261 million more people would have been literate. Again, faster growth would have reduced the number of poor people in 2008 from 282 million to 174 million. This means we have 109 million "missing non-poor" on account of delayed reform.

Doubtless critics will object, as they did after Sen's exercise, that i have used a simple model that neglects other factors affecting infant mortality, literacy and poverty. Demographer Ansley Coale reworked Sen's calculations to show that the number of missing women was probably 60 million, not 100 million. That did not dent public horror at the social tragedy that Sen unveiled.

I invite critics to produce more sophisticated models on the impact of delayed reform, as Coale did in the case of missing women. If these more sophisticated models conclude that Indian socialism killed only 10 million children and not 14.5 million, i will shrug. My point about the magnitude of the social tragedy will stand.

So dramatic was the ensuing revolution that it is easy today to forget that communism ever existed -- or at least what it really meant. Decades of totalitarian oppression were swept away in an instant.

What may be the most important liberating moment in human history should give us hope even if we are tempted to despair about the future of our own nation and of Western civilization.

Communism was unmatched in its endless slaughter, killing more than 100 million. It impoverished spiritually as well as economically.

Yet what seems inevitable today was not obviously so in 1989. Liberty had always ended up stillborn in the Soviet empire.

But 1989 proved to be different.

In Poland the communist leadership organized free elections -- which it promptly lost. Hungary tore down its wall with Austria, allowing East Germans to escape their country through Hungary and on to the West. Demonstrations engulfed the so-called German Democratic Republic, forcing the Communist Party to retreat.

On Nov. 9 the regime opened the Wall, never to be closed again. Within a year a regime distinguished mainly by its willingness to shoot desperate people seeking freedom disappeared.

Revolution erupted even in Romania, unseating the monstrous Ceausescus. Eventually even the Soviet Union disappeared.

The collapse of communism remains a fantastic triumph of the human spirit. With minimal bloodshed, average people overthrew a gaggle of tyrannies; the desire for liberty trounced the lust for power.

There were heroes in all of the communist countries. Average people willing to speak out, demonstrate, and demand their rights as human beings.

Some heroes stand out. Alexandr Solzhenitsyn, the Soviet novelist who chronicled the horrors of the gulag. Lech Walesa, the electrician who climbed atop a shipyard wall in Gdansk, Poland, to declare that the time of repression was over. Pope John Paul II, who told his Polish countrymen to fear not.

The playwright Vaclav Havel, who called the Czech regime to account for its crimes. Imre Pozsgay, who broke with his Hungarian Poliburo colleagues to call the 1956 uprising a "popular revolt."

Even more important was Mikhail Gorbachev. He was a reform communist, but he kept the Soviet troops in their barracks, leaving Eastern European apparatchiks to stand alone.

Finally, there was Ronald Reagan. He understood the real nature of communism, that it truly was an "Evil Empire." He also believed that communism could be defeated and tossed into the dustbin of history.

On June 12, 1987, he stood in front of the Brandenburg Gate and said: "Mr. Gorbachev, tear down this wall!" Another 29 months would pass, and Ronald Reagan would leave office, but the Brandenburg Gate did open.

Today it is almost as if the Wall never existed. Only a few small sections remain. The structure continually grew more deadly, yet several thousand people made it over, under, or around the Wall and the border fortifications lining the rest of the border between the two Germanys.

Alas, tens of thousands of East Germans were caught and imprisoned for "Republikflucht" -- attempting to flee the workers paradise. Worse, roughly 1,000 people were murdered attempting to escape their national prison.

The first person to die was 58-year-old Ida Siekmann, who jumped from her building to the bordering road in West Berlin on Aug. 22, 1961. Two days later a 24-year-old tailor, Guenter Litfin, became the first to be shot and killed -- while attempting to swim the River Spree.

On Feb. 6, 1989, 20-year-old Chris Gueffroy was the last East German to be murdered while seeking liberty. He was shot 10 times. On March 8, 32-year-old Winfried Freudenberg, an electrical engineer, became the last person to die in an escape attempt, when his home-made balloon crashed.

The fall of the Wall, and the evil system behind it, deserves to be celebrated. Not just on Nov. 9. But every day.

Two decades later much remains to be done by those who love liberty. Abroad tyranny remains. At home liberty also is threatened, though not as dramatically. The expansive welfare rather than the brutal authoritarian state is on the march.

Yet hope remains. Two decades ago what had only seemed to be a faint dream became a reality. The Berlin Wall fell. Communism disappeared. Hundreds of millions of people became free.

The spirit of liberty remains. Sometimes deeply buried. But the spirit of liberty remains.

In spite of its monumental failure to bring social peace and material abundance, socialism is enjoying something of a renaissance. From Venezuela to Bolivia to South Africa, government ministers espouse the supposed virtues of socialism. Even in the West, some policies are taking government intervention in the economy to levels unseen in decades. Given the renewed interest in alternatives to capitalism, it is perhaps appropriate to recall the last time that socialism was tried with real gusto.

Of course, shops can be filled with goods, roads can be rebuilt, and houses renovated. The psychological scars of communism take much longer to heal. As one traveler to Russia wrote in 1982:

If it is hard to describe the economic wasteland of Russia to someone who hasn't been there, it is even harder to describe what their totalitarian system has done to the human spirit ... It isn't just the drabness and grayness one sees everywhere. Or the rudeness and surliness one encounters so often. It's that you virtually never see people laughing, smiling, or just seeming to enjoy themselves. People seem to walk slightly bent over, their eyes always averting a stranger. There is an overwhelming sense of oppression and depression.

As the Austrian philosopher Friedrich von Hayek explained in his 1944 classic, The Road to Serfdom, central planning leads to massive inefficiencies and long queues outside empty shops. A state of perpetual economic crisis then leads to calls for more planning. But economic planning is inimical to freedom. As there can be no agreement on a single plan in a free society, the centralization of economic decision-making has to be accompanied by centralization of political power in the hands of a small elite. When, in the end, the failure of central planning becomes undeniable, totalitarian regimes tend to silence the dissenters—sometimes through mass murder.

Some 100 million people have died in the pursuit of a communist utopia. Eliminating profit and private property was meant to end social ills, such as inequality, racism, and sexism. But the closer a society got to Marxism—whether it was half-hearted attempt as in Hungary or a whole-hearted attempt as in Cambodia—the bloodier the result. Survival in a communist society necessitated lies, theft, and betrayal. Thus, as the former Czech President Vaclav Havel wrote, most people in the former Soviet bloc grew up without a moral compass. These morally compromised survivors of communism find it difficult to reflect on the past and to come to terms with it.

Unlike the Germans after the World War II, the people in ex-communist countries were never forced to face their demons. As a consequence, communist rule has not acquired the moral opprobrium of Nazism. As long as that remains the case, socialist economics will continue to enjoy an aura of plausibility.

Che Guevara, the Argentinean communist who fermented revolutions in Cuba and the Congo, was finally dispatched by the Bolivian forces in 1967. Some 42 years later — long after the specter of revolutionary communism ceased to hound most of mankind — Che appears to be having the last laugh. His image is ubiquitous in the West — adorning the shirts and bags of an affluent but historically illiterate generation. Prince Harry, third in line to the British throne, was spotted wearing a Che t-shirt few years ago. This year's "Icons" collection by Belstaff (an Italian clothing company) contains a "Che Guevara replica jacket."

Che Guevara, as Alvaro Vargas Llosa shows in The Che Guevara Myth and the Future of Liberty, was a megalomaniac and a murderer. Embarrassingly for the young idealists sporting his image, he was also a racist, a homophobe and an anti-Semite. "The Negro is indolent and lazy," Che opined about his Congolese comrades, "and spends his money on frivolities, whereas the European is forward-looking, organized and intelligent." Ignorance about the real Che is universal. Thus, Angola's capital of Luanda boasts a Che Guevara Street and the South African capital of Pretoria may soon be graced by a street of the same name.

The continued — albeit limited — attractiveness of communist ideals and some of its protagonists, such as Karl Marx (anti-Semite), Vladimir Lenin (founding father of the Gulag), Fidel Castro (visit Cuba and see for yourself), and Che Guevara, suggests that mankind is yet to come to terms with the legacy of communism. Nazi victims are rightfully remembered in countless books and films. Their relatives can visit well-funded museums in Berlin and Washington, D.C. Except for a few discredited characters, President Mahmoud Ahmadinejad of Iran among them, people around the world know about the nature and extent of the Holocaust. The crimes of communism, in contrast, remain, by and large, shrouded in veils of ignorance and denial.

Communism has so far escaped an appropriate degree of moral opprobrium for several reasons. As the historian Paul Hollander argues, most victims of communism died due to appalling living conditions in the Gulag and laogai (the Soviet and Chinese forced labor camps respectively). They were not killed in a determined way — as symbolized by the gas chambers of Auschwitz. Moreover, the evidence of communist crimes is often difficult to collect. The Russian archives, for example, have been shut by a government determined to whitewash Russia's communist past including its most notorious protagonist — Joseph Stalin.

The complicity of the current governing and intellectual elites in most of Central and Eastern Europe in the perpetuation of communism is another reason. Some, like the Russian Prime Minister Vladimir Putin, were Soviet spies. Others, like the Slovak Prime Minister Robert Fico, were ordinary communist party members. While the degree of their complicity with communism varies, these men (and women) have been morally compromised. Absolute condemnation of communism, in other words, would amount to condemnation of their past behavior.

Few people have the courage publicly to admit their mistakes. Most prefer to justify their actions or to forget them. Unfortunately, many of the Western intellectuals who promoted communist ideas and minimized communist crimes have never recanted. Driven by naïve idealism and loathing of Western imperfections, they embraced a utopian vision of a society free of inequities between classes, races and genders; a society free of profit, greed and war. The more Western democracies tried to overcome their shortcomings, the more did the Western idealists trust the empty rhetoric of communism.

In the end, the only equality that communism achieved was that of a breadline and that of a mass grave. Che Guevara symbolizes communism like no other. His image, like his beliefs, belongs in the dustbin of history.

So dramatic was the ensuing revolution that it is easy today to forget that communism ever existed — or at least what it really meant. Decades of totalitarianism impoverished people spiritually as well as economically. Those decades of oppression were swept away in an instant. What may be the most important liberating moment in human history should give us hope even as we despair about the future of our own nation and of Western civilization.

Communism's body count dwarfs that of fascism and Nazism. The latter was uniquely monstrous in its attempt to eradicate an entire people. But communism was unmatched in its endless slaughter. The Black Book of Communism, written by several European intellectuals — attacked for their effrontery in criticizing Joseph Stalin, Mao Zedong, and other well-meaning mass murderers — estimated the death toll at more than 100 million. And the killings continue in such communist hell-holes as North Korea.

Today the former communist states range from robustly democratic to unpleasantly authoritarian. However, all have moved light years beyond what President Ronald Reagan so accurately termed the Evil Empire. Freedom now is widely viewed as the normal human condition.

What seems inevitable today was not obviously so in 1989, however. As the year dawned, the Soviet bloc was stirring. In Russia Mikhail Gorbachev had unleashed perestroika and glasnost; several satellite regimes were trembling.

Still, liberty had always seemed to end up stillborn in the Soviet empire. Somewhat less thuggish apparatchiks, not cosmopolitan liberals, replaced brutal murderers in the USSR. The 1953 East German demonstrations, the 1956 Hungarian Revolution, and the 1968 Prague Spring were all summarily crushed. Poland's Solidarity movement was suppressed in the dead of cold night in December 1981.

But 1989 was different.

Hungary led the way. The man who betrayed his colleagues in 1956, Janos Kadar, had been deposed the previous year. The murdered revolutionary leaders, most notably Imre Nagy, were reburied. Plans for multiparty elections were announced. The Communist Party was dissolved.

In Poland the Solidarity union stirred anew and the communist leadership retreated. The regime was foolish enough to hold free elections — which it lost, dramatically.

Hungary tore down its wall with Austria. It didn't matter so much to Hungarians, who already had been allowed to travel. But Budapest's action freed everyone else in Eastern Europe, who had been allowed to vacation within the Soviet bloc. In particular, East Germans began streaming out of their country and then through Hungary. Others fled to the West German embassy in Prague, Czechoslovakia. The human flood destabilized East Germany, the formerly bedrock Soviet satellite that trailed only Nicolae Ceausescu's Romania as Eastern Europe's most rigid and authoritarian regime.

Demonstrations first occurred in the so-called German Democratic Republic during the spring over yet another predictably fraudulent election. By the fall there were weekly marches in Leipzig: The GDR leadership temporized, causing the number of protesters to multiply. Communist Party boss Erich Honecker wanted to shoot them; rather than commit mass murder, the Politburo dumped Honecker. On November 4 a million people gathered in Alexanderplatz in East Berlin to demand the end of communism.

On November 9 the regime opened the Wall. In fact, the desperate communist leadership had decided only to relax travel restrictions, but Politburo member and spokesman Guenter Schabowski misunderstood his colleagues' decision and announced at a press conference that the border was opening at that moment. Tens of thousands of people gathered at still closed checkpoints, causing befuddled border guards to stand aside. The Berlin Wall was open, never to be closed again. Within a year the ugly, brutish regime, which had distinguished itself by shooting desperate people seeking to escape to freedom, disappeared.

The other European communist autocracies fell as well. Bulgaria dumped its ruler of 35 years, Todor Zhivkov. The tottering Czech regime yielded power in the so-called "Velvet Revolution." A mixture of popular demonstrations and military revolt unseated the monstrous Ceausescus in Romania. As revolution erupted they fled by helicopter. Their pilot observed: "They look as if they were fainting. They were white with terror." On Christmas Eve they were executed after a drumhead court martial.

The newly free countries have been bedeviled by problems. Of most concern is Russia's retreat towards authoritarianism. Nevertheless, the collapse of communism remains a fantastic triumph of the human spirit. With minimal bloodshed, average people overthrew a gaggle of tyrannies. What some thought to be impossible became real, as the desire for liberty trounced the desire for power.

There were heroes in all of the communist countries. Average people willing to speak out, demonstrate, and demand their rights as human beings. Average people willing to say no to the apparatchiks who had so long lived off the workers they were supposed to represent.

Some stand out. Aleksandr Solzhenitsyn, the Soviet novelist who chronicled the horrors of the gulag and stripped the Soviet regime of any claim to legitimacy. Dissidents like Andrei Sakharov, who was banished internally after protesting Soviet man's inhumanity to man.

Lech Walesa, the electrician who nearly a decade before the Wall's collapse famously hopped over a shipyard fence in Gdansk, Poland, to declare that the time of repression was over. The forces of reaction reasserted themselves martial law in late 1981, but nine years later Walesa was elected president of Poland.

In Czechoslovakia there was Alexander Dubcek, who attempted to give communism a human face. The playwright, and first president, Vaclav Havel, called the regime to account for its crimes. Current President Vaclav Klaus engineered his nation's adoption of market economics as well as peaceful split between the Czech Republic and Slovakia.

More than four decades ago Imre Nagy, Pal Maleter, and thousands of Hungarian revolutionaries demanded freedom and were murdered by the Soviets and their Hungarian stooges. In 1989 Imre Pozsgay broke with his Poliburo colleagues, calling the earlier uprising a "popular revolt." He also pushed to tear down Hungary's wall with Austria.

Even more important was Mikhail Gorbachev. He was, of course, a reform communist, not a Western-style democrat. His crackdown in the Baltic states left blood on his hands.

Nevertheless, he was the necessary transition from communist totalitarianism to everything else. His decision to loosen the repressive bonds in the Soviet Union was heroic: events spun out of his control, but he was willing to pay that price in order to humanize the most murderous political regime in human history.

Equally important was his decision to keep the Soviet troops in their barracks throughout Eastern Europe. Moscow had ruthlessly crushed all previous attempts by subject peoples to lessen, let alone eliminate, communist repression. In 1989, however, Gorbachev let Eastern European communist leaders stand alone. They could not count on the loyalty of their own militaries. Nor could they depend on Soviet aid. In every country but Romania the ruling elites blinked. In the latter they lost anyway.

Finally, there was Ronald Reagan. He understood what communism was about, that it truly was an "Evil Empire." But he also believed that communism could be defeated, that the most ruthless totalitarian system ever created could be tossed into the dustbin of history.

On June 12, 1987 he stood in front of the Brandenburg Gate and said: "General Secretary Gorbachev, if you seek peace, if you seek prosperity for the Soviet Union and Eastern Europe, if you seek liberalization: Come here to this gate! Mr. Gorbachev, open this gate! Mr. Gorbachev, tear down this wall!"

Another 29 months would pass, and Ronald Reagan would leave office, but the Brandenburg Gate did open.

Today it is almost as if the Wall never existed. Only a few small sections remain of the massive concrete structure that ran roughly 100 miles around West Berlin, a free island deep within the Evil Empire. Yet it is a testament to man's inhumanity to man which we can ill afford to forget.

The "wall" started out as barbed wire along streets, followed by brick walls. The structure grew more fearsome over time, mixing concrete walls, wire mesh fencing, watch towers, and anti-vehicle trenches. Yet several thousand people made it over, under, or around the Wall and border fortifications lining the rest of the border between the two Germanys. Human ingenuity knows few bounds when people are seeking freedom.

Alas, far more people failed in their attempt to be free. Tens of thousands of East Germans were imprisoned for "Republikflucht," or attempting to flee the East German paradise. Worse, roughly 1,000 people were murdered attempting to escape East Germany, some 200 from Berlin.

The first person to die while attempting to escape was 58-year-old Ida Siekmann, who jumped from her building to the bordering road in West Berlin on August 22, 1961 (the structure was later demolished to create a "death strip"). Two days later a 24-year-old tailor, Guenter Litfin, was shot and killed while attempting to swim the River Spree.

A year later an 18-year-old bricklayer, Peter Fechter, was shot and left to bleed to death in the death strip near Checkpoint Charlie within full view of residents in West Berlin — who could do nothing for him. On February 6, 1989, 20-year-old Chris Gueffroy became the last East German to be murdered while seeking to escape his national prison. He and a friend thought the order to shoot had been lifted; he was hit ten times and died on the spot. His friend was injured but survived — to spend time in prison. On March 8, 32-year-old Winfried Freudenberg, an electrical engineer, became the last person to die in an escape attempt, when his home-made balloon crashed.

The fall of the Wall, and the evil system behind it, deserves to be celebrated. Not just on November 9. But every day.

Two decades later much remains to be done by those who love liberty. Abroad tyranny remains: North Korea's odious dictatorship brutalizes and starves its people, the Castros' dictatorship remains in power a half century after the Cuban revolution, and China has reformed its economy, not its political system. Russia is retrogressing, while in some Eastern European states economic reforms have stalled, political systems have deadlocked, and communist crimes remain unpunished.

At home liberty is threatened, though not as dramatically. The expansive welfare state rather than the brutal authoritarian state is on the march, threatening to consume the health care system. While spending wildly on bailouts, pork, and everything in between, Congress is considering a massive energy tax, which would devastate the private economy. Our society seems set to become both less free and less prosperous.

Yet hope remains. Two decades ago what had only seemed to be a faint dream became a reality. The Berlin Wall fell. Communism disappeared. Hundreds of millions of subjects of the Soviet empire became free.

The spirit of liberty remains. Sometimes deeply buried. But the spirit of liberty remains.

At the same time, there is a remarkable lack of moral concern in the West with the atrocities committed under communist systems, including the tens of millions of people who perished as a result of communist policies. By contrast there has been a great deal of impassioned condemnation of the outrages of Nazism. The most important reason for treating Nazism and communism differently has been the perception that communist crimes were unintended consequences of the pursuit of lofty goals whereas the goals of Nazism themselves were unmitigated evil.

Western intellectuals who had once idealized the Soviet Union have done little soul searching regarding the roots of their beliefs. The long association of idealism with animosity toward commerce and capitalism among Western intellectuals has contributed to a reluctance to criticize a system ostensibly established in opposition to the values they abhorred.

Public attitudes in former communist countries have been conflicted because of the arguable complicity of many citizens in keeping the old system in power. A predominant attitude in Eastern Europe and Russia toward the former communist systems has been a mixture of oblivion, denial, and repression.

Contemporary Western attitudes toward the fall of the Soviet system suggest that political beliefs endure when they are widely shared and can satisfy important emotional needs.

While greatly concerned with communism in the late 1940s and early 1950s, Americans -- hostile or sympathetic -- actually knew little about communism, and little is said here today about the unraveling of the Soviet empire. The media's fleeting attention to the momentous events of the late 1980s and early 1990s matched their earlier indifference to communist systems. There is little public awareness of the large-scale atrocities, killings and human rights violations that occurred in communist states, especially compared with awareness of the Holocaust and Nazism (which led to to far fewer deaths). The number of documentaries, feature films or television programs about communist societies is minuscule compared with those on Nazi Germany and/or the Holocaust, and few universities offer courses on the remaining or former communist states. For most Americans, communism and its various incarnations remained an abstraction.

The different moral responses to Nazism and communism in the West can be interpreted as a result of the perception of communist atrocities as byproducts of noble intentions that were hard to realize without resorting to harsh measures. The Nazi outrages, by contrast, are perceived as unmitigated evil lacking in any lofty justification and unsupported by an attractive ideology. There is far more physical evidence and information about the Nazi mass murders, and Nazi methods of extermination were highly premeditated and repugnant, whereas many victims of communist systems died because of lethal living conditions in their places of detention. Most of the victims of communism were not killed by advanced industrial techniques.

Communist systems ranged from tiny Albania to gigantic China; from highly industrialized Eastern European countries to underdeveloped African ones. While divergent in many respects, they had in common a reliance on Marxism-Leninism as their source of legitimacy, the one-party system, control over the economy and media, and the presence of a huge political police force. They also shared an ostensible commitment to creating a morally superior human being -- the socialist or communist man.

Political violence under communism had an idealistic origin and a cleansing, purifying objective. Those persecuted and killed were defined as politically and morally corrupt and a danger to a superior social system. The Marxist doctrine of class struggle provided ideological support for mass murder. People were persecuted not for what they did but for belonging to social categories that made them suspect.

In the aftermath of the fall of Soviet communism, many Western intellectuals remain convinced that capitalism is the root of all evil. There has been a long tradition of such animosity among Western intellectuals who gave the benefit of doubt or outright sympathy to political systems that denounced the profit motive and proclaimed their commitment to create a more humane and egalitarian society, and unselfish human beings. The failure of communist systems to improve human nature doesn't mean that all such attempts are doomed, but improvements will be modest and are unlikely to be attained by coercion.

Soviet communism collapsed for many reasons, including the economic inefficiency that resulted in chronic shortages of food and consumer goods, and pervasive and mendacious propaganda, which amounted to the routine misrepresentation of reality highlighting the gap between theory and practice, and promise and fulfillment. The political will of leaders behind the Iron Curtain diminished over time -- in part because of Nikita Khrushchev's 1956 revelations about Joseph Stalin's crimes but also because of their own experiences of the system's flaws. They no longer had the will to crush dissent. In the 1980s, Mikhail Gorbachev allowed new revelations of the errors and evils of communism to be aired -- further undermining the legitimacy of communist rule.

The failure of Soviet communism confirms that humans motivated by lofty ideals are capable of inflicting great suffering with a clear conscience. But communism's collapse also suggests that under certain conditions people can tell the difference between right and wrong. The embrace and rejection of communism correspond to the spectrum of attitudes ranging from deluded and destructive idealism to the realization that human nature precludes utopian social arrangements and that the careful balancing of ends and means is the essential precondition of creating and preserving a decent society.

In democratic Capitalism, said Karl Marx, the rich became richer and the poor poorer. Marxism inspired young idealists for over a century. Lenin's revolution in Russia in 1917 was hailed as a new dawn. Stalin's invasions brought Communism to Eastern Europe. Communist governments there pledged to create a paradise for workers, who would be freed from exploitative Capitalists and instead work for the state, which would give them full employment and welfare.

Czech author Milan Kundera says of the Communists, "They had a grandiose plan, a plan for a brand new world in which everyone would find his place: the creation of an idyll of justice for all. People have always aspired to an idyll, a garden where nightingales sing, a realm of harmony where the world does not rise up as a stranger against man, nor man against other men."

Problem: this supposed paradise was imposed at gun-point. Nevertheless leftists cheered, dismissing objectors as Capitalist elitists. These elitists would deservedly be decimated, but the masses would get equality and fabulous benefits in paradise.

Alas, this equality was a sham: equality is not possible between those imposing the rules and those imposed upon. Eastern Europeans found that the supposed paradise was actually a cage in which they were fed and watered, but denied basic freedoms to speak, act or move. Masses of youngsters began emigrating from the Communist paradises to the supposed hell-holes of the West.

Migration was easiest from East Germany to West Germany. Official migration touched 197,000 in 1950, 165,000 in 1951, 182,000 in 1952 and 331,000 in 1953. It was impossible to pretend that all these youngsters were just greedy Capitalist reactionaries.

So, Communist countries closed their borders and jailed those seeking to escape. Kundera says the Communist paradise was supposed to be a place "where every man is a note in a magnificent Bach fugue; but anyone who refuses his note is a mere black dot, useless and meaningless, easily caught and squashed between the fingers like a fly. Since by (Communist) definition an idyll is one world for all, the people who wished to emigrate were implicitly denying its validity. So, instead of going abroad they were put behind bars." Escape from paradise was forbidden: it might lead to the unthinkable notion that Communism was not paradise after all.

The Communist dilemma was worst in Berlin city, divided between a Communist east and democratic west. Escape was easiest and most massive here. So, in 1961 the Communists built the Berlin Wall through the entire Berlin border. Unlike most security walls, this did not aim to keep outsiders out: it aimed to keep citizens caged within. Nevertheless, thousands of East Berliners sought to cross, and hundreds were gunned down.

The Brezhnev Doctrine of the Soviet Union held that once a country became Communist, Soviet arms would keep it Communist. Soviet tanks crushed uprisings in Hungary in 1956 and Czechoslovakia in 1968. The same doctrine took Soviet tanks into Afghanistan in 1979. But they suffered a humiliating debacle. When Gorbachev became Soviet president, he withdrew from Afghanistan, ending the Brezhnev Doctrine. In 1989, he told Communist rulers in Eastern Europe that they could no longer depend on Soviet tanks to thwart popular uprisings. Within three months, popular uprisings ousted Communist regimes right through Eastern Europe.

In August 1989, Hungary dismantled border barriers with Austria. Within days, hordes of Eastern Europeans, including 13,000 East Germans, escaped into Austria. Mass demonstrations against Communist rule erupted across Eastern Europe. To soothe public anger, the Communists opened the gates of the Berlin Wall on November 9. Within days, Berliners had chipped away and broken the Wall, amidst delirious cheering. Soon after, the Communist government fell.

Communists and socialists everywhere, including in India, were dismayed. They could not understand why East Germans blessed with income equality, free social welfare and full employment should flee to the highly unequal West, which bristled with unemployment and social perils. An answer came in a letter to a newspaper editor.

"My daughter's hamster (a pet white mouse) has food, water, shelter and even medical care, and a cage full of fun curly tubes. The hamster responds by constantly trying to chew his way to freedom. I think we all understand what freedom is, and it is not a gilded cage."

Iran's misery index for the 1991-2008 period is presented in the accompanying chart. It must be stressed that Iran's true inflation, interest and unemployment rates are probably higher than those reported. In consequence, the true level of the index is probably higher than the one in the accompanying chart. That said, the pattern of "ups" and "downs" in the index is reliable.

Several things stand out: the level of the index has been quite elevated during the 1991-2008 period; the Rafsanjani years were a bit of a rollercoaster ride, with a dramatic increase followed by a sharp reduction and then a final up-tick in the level of "misery"; the Khatami years were characterized by relative stability and a mild improvement in the state of economic affairs; and the Ahmadinejad period has been marked by a steady deterioration in economic conditions.

The misery index is not the only metric that measures economic well being. The accompanying chart plots the course of the Iranian rial against the U.S. dollar.

Since 1989, when Rafsanjani became President, the rial has lost 99.3% of its value against the U.S. dollar. The maxi-devaluations during the Rafsanjani and Khatami periods didn't buy Iran anything – except misery.

While the rial's depreciation against the greenback during the Ahmadinejad period has been modest (9.6%), the rial has come under increased pressure as capital flight has intensified since 2007.

Not surprisingly, Iran ranks near the bottom – 137 out of 183 countries – in the World Bank's Doing Business 2010 – a recently released (9/9/2009) report that measures the vitality of free markets and the ease of doing business. The accompanying table indicates where Iran ranks relative to countries in the Middle East and North Africa (MENA) region.

Poverty is a scourge which leaves those in its grip to lead lives that are brutish, dangerous, and short. Economic growth is a poverty elixir. From the works of the earliest economists – Richard Cantillon (1680 – 1734), Adam Smith (1723 – 1790) and Jacques Turgot (1727 – 1781) – we have learned that economic liberty is a crucial precondition for sustained economic growth and a concomitant reduction of misery. But what are the elements that produce such a liberal economic order?

Private property and contract rights should be established. The following criteria should guide the establishment of private property: universality, exclusivity and transferability.

Universality guarantees that all resources are either owned or ownable by a private person or entity. Exclusivity guarantees that those who own property have the exclusive right to use their property as long as that use does not harm other property owners. And transferability guarantees that owners can freely transfer their property rights.

Fiscal order and transparency should be established. To establish control over public spending and reduce waste, fraud and corruption – governments should publish a national set of accounts that includes a balance sheet of its assets and liabilities, and an accrual-based annual operating statement of income and expenses. These financial statements should meet international accounting standards and should be subject to an independent audit.

Budget deficits and government spending should be kept under control. One way to achieve control over the scope and scale of government is to require "super majority" voting for important fiscal decisions: taxing, spending and the issuance of debt.

Inflationary pressures should be kept under control. To encourage economic development, inflation rates should be kept low and predictable.

For many developing nations, this inflation objective can best be achieved by abolishing their central banks and replacing them with currency boards that issue fully convertible, stable, domestic currencies, or by simply doing away with domestic currencies and replacing them with convertible stable foreign currencies.

The advantages of open international trade should be exploited. Liberal trade policies facilitate the efficient allocation of resources and stimulate economic growth. This is particularly true in small economies, where real competition can only be obtained by allowing foreign producers to compete freely in domestic markets.

Complex tax systems and excessive tax rates should be avoided. Complex tax systems coupled with excessive tax rates distort behavior and create large disincentives to economic activity, while yielding little revenue.

Subsidies and tax incentives for private industry should be avoided. Subsidies and tax incentives that are designed to achieve particular objectives may or may not actually assist in obtaining those goals. One thing is certain: they distort economic choices and resource allocation, and retard economic growth.

Privileges and immunities should be avoided. For example, state-created monopoly privileges and immunities for unions, such as exclusive representation, compulsory union membership, and immunity from antitrust laws, should be avoided. Privileges and immunities distort markets and act as a drag on economic growth.

Price controls should be avoided. Price controls, including interest rate ceilings, cannot be justified on economic grounds. They tend to vitiate the signaling role that prices should play. Hence, price controls impede the movement of resources from lower-valued to higher-valued uses and result in resource misallocation and lower economic growth.

Market interventions and restrictions on competition should be avoided. Market intervention and restrictions on competition, such as the use of marketing boards, result in the politicization of economic life, inefficient enterprises, resource misallocation, and the retardation of economic growth.

State-owned enterprises should be privatized. State-owned enterprises are inefficient. For example, sales, adjusted profits, and productivity per employee are lower for state-owned enterprises than they are for private firms.

Sales per dollar of investment are lower, profits per dollar of assets are lower, wages and operating costs per dollar of sales are higher, sales grow at a slower rate, and, with few exceptions (petroleum), stateowned enterprises for which accounts are presented properly generate accounting losses that are passed on to taxpayers.

Unclear boundaries between public and private activity should be avoided. When boundaries between the public and private sector are unclear, it is symptomatic of poorly defined property rights. Ill-defined property rights distort resource allocation and retard economic growth. Government bailouts of insolvent private firms are but one example of unclear boundaries between public and private activity.

The manipulation and repression of private capital markets should be avoided. The manipulation and repression of private capital markets distort the savings and investment process, retard foreign direct investment, promote capital flight, and generally act as a drag on economic growth.

Iran has not only ignored the preceding enumeration, but its populist President Mahmoud Ahmadinejad has flaunted all economic principles. In Iran, private property and contract rights are not secure.

This lack of security, particularly for foreign investors, has thrown Iran's oil and gas development into a cocked hat. For example, the lack of an integrated domestic pipeline system forced Iran to cut gas exports to Turkey last year, casting doubt on Iran as a secure energy exporter.

Fiscal order, transparency and control are nowhere to be found in Iran. Government expenditures are estimated to have increased – in line with President Ahmadinejad's populist proclivities – by 55% during the fiscal 2007-08 through 2008-09 period.

Price controls are widespread. These result in implicit subsidies equal to about 25% of GDP. Explicit subsidies are equal to another 5% of GDP, or about 16% of the central government's expenditures.

Banks are mandated to extend credit to certain favored sectors of the economy. The specific sectors and levels of credit are laid out in Iran's fiveyear development plan.

Even things like privatization are perverted in Iran. For example, when state-owned enterprises are privatized, the majority of the shares are often purchased by other state-owned entities, such as pension funds.

Iran's economic policies have put it in a death spiral whose speed is governed, in large part, by the price of oil.

Just what, if anything, does Latvia today have in common with Argentina in 2001? On the surface, it appears that Latvia is employing the same type of exchange-rate system as did Argentina. Latvia's currency trades in a narrow band of plus or minus 1% around a peg of 0.7028 lats per euro. In 2001, the Argentine peso was linked to the U.S. dollar at one to one. But the similarities stop there.

Latvia and its Baltic neighbors have been models of fiscal prudence (see Tables 1 and 2). Before last year, when the recession began, all had low budget deficits or even budget surpluses. They have shown willingness to make tough cuts in government spending. They also have ratios of debt to GDP that remain quite low by international standards. Argentina, in contrast, had persistent problems with cutting spending and had a much higher debt to GDP ratio.

In the monetary sphere, there is a straightforward way to determine whether a monetary authority that links its currency to another is in danger of breaking the link: compare it to an "automatic" system. The most automatic system is a currency board, which issues money convertible on demand into a foreign anchor currency at a fixed rate of exchange. As reserves, a currency board holds foreign assets equal to 100% or slightly more of the monetary base (its note, coin, and deposit liabilities).

These characteristics ensure that the quantity of domestic currency in circulation is determined solely by market demand for domestic currency. They imply that for a currency board, net foreign reserves (foreign assets minus foreign liabilities) should be close to 100% of the monetary base. Moreover, "reserve pass-through" (the change in the monetary base divided by the change in net foreign reserves over the period in question) should also be close to 100%.

During the three years before Argentina's currency crisis of December 2001-January 2002, Argentina's monetary system, often mistakenly termed a currency board, was not operating in "automatic" fashion. Its reserve pass-through was not even close to 100%, and after mid 2001, its net foreign reserves as a percentage of its monetary base fell well below 100% (see Chart 1). By comparison, Latvia's monetary system — even though not legally a currency board system — is operating largely as though it were one. In consequence, Latvia could convert its entire monetary base into euros at the current exchange rate. The same can be said of Estonia and Lithuania — two countries that officially adopted modified currency board systems in 1992 and 1994, respectively.

The data speak clearly. Latvia and its Baltic neighbors are not repeats of Argentina. Their economies have suffered greatly from a sudden stop of foreign investment and from recession in Western Europe, but they retain ample foreign reserves.

They would do better to officially adopt the euro, even without the blessing of the European Central Bank, than to devalue their national currencies.

The UN long has claimed to represent the greatest aspirations of humanity, running back to the Universal Declaration of Human Rights, which was approved more than six decades ago. But the UN's Commission on Human Rights routinely embarrassed the "international community." Often dominated by human rights abusers, the body routinely whitewashed oppressive governments and spent much of its time attacking Israel. It was one of Turtle Bay's finest comedy clubs -- only the performances were underwritten by U.S. taxpayers.

Three years ago the Commission was replaced by the Human Rights Council in a vain attempt to improve operations. The Bush administration refused to dignify the body with America's presence, but in March the Obama administration announced its decision to return. Doing so obviously was a mistake.

The membership list reads like a Who's Who of repressive regimes: Angola, Egypt, Gabon, China, Jordan, Saudi Arabia, Azerbaijan, Russia, and Cuba. Many of the other members have lesser human rights problems. Authoritarian states have an obvious incentive to go easy on their fellow autocracies. Even worse, these member governments view violating human rights as a positive good and one of the chief responsibilities of government (in their hands, at least).

As part of its commitment to human rights, the Council conducts an annual review -- which culminates in a three hour debate on the nation's human rights record. Strangely, these reviews seem a bit, shall we say, superficial?

Cuba's record isn't hard to assess. The State Department helpfully summarizes the Cuban record in its annual human rights report:

The government continued to deny its citizens their basic human rights and committed numerous, serious abuses. The government denied citizens the right to change their government. At year's end there were at least 205 political prisoners and detainees. As many as 5,000 citizens served sentences for "dangerousness," without being charged with any specific crime. The following human rights problems were reported: beatings and abuse of detainees and prisoners, including human rights activists, carried out with impunity; harsh and life-threatening prison conditions, including denial of medical care; harassment, beatings, and threats against political opponents by government-recruited mobs, police, and State Security officials; arbitrary arrest and detention of human rights advocates and members of independent professional organizations; denial of fair trial; and interference with privacy, including pervasive monitoring of private communications.

The group Freedom House ranks Cuba at the bottom in both political rights and civil liberties. "Although the degree of repression has ebbed and flowed over the past decade, the neutralization of organized political dissent remains a regime priority," explains Freedom House.

Freedom House compiles a special report on freedom of the press and, not surprisingly, ranks Cuba as "not free" in this category as well. There was some relaxation of repression last year, but "Cuba continued to have the most restrictive laws on free speech and press freedom in the hemisphere." Moreover, "state security agents continued to threaten, arrest, detain, imprison, and restrict the right of movement of local and foreign journalists throughout the year."

Cuba also is one of the worst violators of religious liberty. Last year, explained the State Department in its annual International Religious Freedom Report: "The government continued to exert control over all aspects of social life, including religious expression. Certain groups, particularly Seventh-day Adventists and Jehovah's Witnesses, faced significant harassment and maltreatment." Although repression had eased of late, "The Ministry of the Interior continued to engage in efforts to control and monitor religious activities and to use surveillance, infiltration, and harassment against religious groups, religious professional, and laypersons." Last month the United States Commission on International Religious Freedom placed Cuba on its Watch List since "Within this reporting period, the government expanded its efforts to silence critics of its religious freedom policies and crack down on religious leaders whose churches operate outside of the government-recognized umbrella organizations for Protestant denominations."

There are worse offenders, of course. Compare any country against Burma or North Korea and even the worse human rights offender looks pretty good. But Cuba's record could not survive the most cursory review by a serious body. Unfortunately, the Human Rights Council is not a serious body.

The UN issued an official press release summarizing the debate, if it can be called that, on Cuba and two other states (Saudi Arabia and Cameroon):

In the discussion on Cuba, speakers said Cuba had withstood many tests, and continued to uphold the principles of objectivity, impartiality and independence in pursuance of the realization of human rights. Cuba was and remained a good example of the respect for human rights, including economic, social and cultural rights. The Universal Periodic Review of Cuba clearly reflected the progress made by Cuba and the Cuban people in the protection and promotion of human rights, and showed the constructive and responsive answer of Cuba to the situation of human rights. Cuba was the victim of an unjust embargo, but despite this obstacle, it was very active in the field of human rights. The trade, financial and economic blockade by the United States should be brought to an end, as it was the primary obstacle to the full development of Cuba.

In short, the problem is not the brutality of the Castros' regime. It is the American trade embargo -- counterproductive in my view, but ignored by everyone else and actually used by the Cuban government to enhance its control. As my Cato Institute colleague Juan Carlos Hidalgo put it, "This is not from The Onion, but the UN."

However, the Council summary does not do the debate justice. Pakistan wished Cuba well in realizing "all human rights for all citizens." Venezuela (you don't have to be a member to comment) lauded "the iron will" of Cuba's government. Russia said, "Cuba had taken a serious and responsible approach." Uzbekistan "stressed Cuba's work in the promotion of human rights." China declared that "Cuba had made important contributions to the international human rights cause." Egypt opined that "Cuba's efforts were commendable." And so it went.

Again, this is not from the pages of The Onion. It is from a debate before the Human Rights Council.

Needless to say, the Cuban government was pleased. The Cuban Interests Section (which acts as Havana's de facto embassy) put out a press release headlined: "Cuba recognized in the Human Rights Council." Havana grandly announced that it was accepting most of the Council's recommendations, and "reaffirmed its commitment to the strengthening of international cooperation on human rights issues and to the UN Human Rights Council, which must be based on the principles of universality, objectivity, impartiality and non-selectiveness."

Is there some way, in theory, in which the Human Rights Council might help advance the cause of human rights? Perhaps, but it certainly is not apparent how that might be. The official "Report of the Working Group on the Universal Periodic Review" of Cuba was as stomach-churning as the ensuing debate. Rather than advancing the cause of human liberty, the Council is providing cover for the oppressors and persecutors. Like the Castro Brothers & Co.

After receiving its UN whitewash, the Cuban government exclaimed: "The exemplary achievements of the Cuban Revolution in relation to human rights have been acknowledged once again by the international community. It has not been possible to silence the truth."

Rather than going back into the Council, the U.S. and other serious states should make a quick exit. The problem is not Cuba. It is the UN. Saudi Arabia, too, received gentle treatment. Up the next day were Azerbaijan and China -- the latter of which praised the records of Cuba, Saudi Arabia, and Cameroon. This incestuous process will continue, day after day, at the expense of the rest of us.

Human rights. United Nations. Never shall the twain meet, except in a tiresome comedy routine in an expensive club operating out of a famed high-rise in New York's Turtle Bay.

Trade liberalization has the greatest potential to help Africa emerge from poverty. Yet that is where the least amount of progress has been made. Negotiations on trade liberalization have ground to a halt, and the threat of protectionism looms large as the current global economic slowdown worsens.

The Gleneagles Summit, for all its good intentions, gave rise to unrealistic expectations. The heavy emphasis on aid and debt relief made Western actions appear to be chiefly responsible for poverty alleviation in Africa. In reality, the main obstacles to economic growth in Africa rest with Africa's policies and institutions, such as onerous business regulations and weak protection of property rights.

Africa remains the poorest and least economically free region on earth. The West should do all it can to help Africa integrate with the rest of the world. It should eliminate remaining restrictions on African exports and end Western farm subsidies. Africans, however, will have to make most of the changes needed to tackle African poverty.

The G-20 is meeting to try and fix the allegedly floundering capitalist system. The media are part of the chorus; the Financial Times, for example, has a new series, "Future of Capitalism," with contributions like "Let fairness triumph over corporate profit."

What this debate misses is that the most vocal critics of U.S. capitalism are sinking at least as fast as the U.S. itself. President Chavez of Venezuela has long sworn by a socialist Bolivarian revolution in Latin America, but his economic model is in shambles today. Nor is the situation any better in Bolivia, Ecuador, Russia or Iran.

The International Monetary Fund estimates that Venezuela and Iran needed an oil price of $90 to $95 a barrel to balance their budgets. When the price rose to $147 a barrel, these countries, awash in petro-dollars, made grandiose plans. Chavez offered half his oil to Latin American friends at concessional rates. As oil prices have crashed, his spending plans are in disarray and Chavez has to run down his foreign exchange reserves. Chavez now needs a rebound in the U.S. system he derides to survive.

President Ahmedinajad in Iran also went on a spending spree when oil revenues were high. He switched Iran's foreign reserves from dollars to euros to teach the "Yankees" a lesson. But his spending plans become untenable after oil revenue plunged by two-thirds. Inflation is running at 26%. Ahmedinajad could well lose the coming Iranian election.

The Russian economy, which soared along with oil prices, is now crashing in tandem. Putin and his former KGB colleagues own chunks of natural-resource companies, some of which are nominally state-controlled. They allow other oligarchs to flourish on the condition that they toe the party line. The Russian stock market has fallen almost 80% — more than any other. Even after Russia spent a third of its foreign exchange reserves defending the ruble, it fell from 25 to 35 to the dollar.

It is no accident that so many critics of Western capitalism are petro-states. A market economy succeeds by providing incentives for higher productivity and incomes. A state-controlled system is lousy at providing the right incentives and is bad for productivity. But a petro-state thrives on mineral wealth, not productivity or efficiency.

Socialists bemoan the capitalist emphasis on profit and growth, and focus on distributing wealth instead. This would be fine if wealth appeared out of nowhere, and all governments had to do was distribute it. But if the wealth had to be produced first, markets do it much better.

However, in petro-states, oil revenue is the equivalent of manna from heaven, so the ruler can, at least for a while, focus on distributing wealth rather than creating it. Under Chavez, Venezuela's oil production has dropped from 3.2 million barrels a day in 1998 to just 2.4 million barrels a day in 2008. The manifest inefficiency of his system was cloaked by the bonanza arising from high oil prices. Ditto for Ahmedinajad's Iran.

Many critics of the U.S. model are in fact pathetically dependent on it. When capitalist economies decline, so do the supposedly rival models. Far from being rival models, they could, with only modest exaggeration, be called parasites of Western capitalism.

Now, being a parasite is not comfortable, so petro-state rulers are understandably irked by their dependency. But why do Singapore and Mauritius, which are just as dependent on Western economic prosperity, not feel shackled by the linkage? The answer is that global inter-dependence has been used by Singapore and Mauritius to strengthen their skills and human capabilities and become globally competitive. They are the richest states in their neighborhood because they are the most productive. This is not true of petro-states, which owe their high incomes to exhaustible mineral wealth.

In April 2008, Iran started pricing its oil in euros and yen rather than dollars and switched the bulk of its foreign exchange reserves out of dollars into euros and yen. But it weakened only itself, not the U.S. The dollar has strengthened hugely in the last year — the euro is down from a peak of $1.60 to just $1.28. Countries that switched their reserves to euros and yen have lost heavily.

The true strength of a system is revealed in times of adversity. Today, despite U.S. economic travails, the world views the dollar as a safe haven. The U.S. system is flawed, but the others are no better and are sometimes worse.

The G-20 meeting needs to focus on major reforms of the existing system. But these should aim at a better Western capitalism, not a Bolivarian or Iranian alternative.

Since the end of its civil war, El Salvador has transformed its economy by implementing a far-reaching liberalization process which has included the privatization of state enterprises, deregulation, trade and financial liberalization, privatization of the pension system along the lines of Chile's successful reform, and the adoption of the U.S dollar as the official currency. Today, El Salvador is among the twenty-five freest economies in the world, according to the Fraser Institute's Economic Freedom of the World Report.

These reforms have paid off handsomely. Between 1991 and 2007, the percentage of households in poverty fell from 60 percent to 34.6 percent. Extreme poverty declined from 28.2 percent of households to 10.8 percent during the same period. Just one decade after the implementation of the first reforms, net enrollment in primary education increased by close to 10 percentage points, infant mortality declined by 40 percent, and the population without access to safe water was halved.

Still, critics question the market reforms, pointing to El Salvador's low income levels and mediocre growth rates. Some argue that improvements in the country's social indicators are the result of the hundreds of millions of dollars that Salvadorans receive in remittances every year. However, there is ample evidence that official figures underestimate the performance of the economy, mostly because the service sector—an area in which El Salvador is the leader in the region—is grossly undervalued in the country's estimation of GDP. The economy is probably more than 30 percent larger than indicated by the official data, and the average per capita growth rate since 1992 has been approximately 5.2 percent per year, markedly higher than the official estimate of 1.9 percent.

The threat to such achievements lies in the former Marxist guerrilla group, FMLN, which abandoned armed struggle in 1992 for electoral politics and became the country's main opposition party. Instead of pursuing a modern center-left course along the lines of Chile's governing Concertacion Nacional, the FMLN has decided to keep its hard-left agenda. Despite nominating Mauricio Funes, a popular moderate figure, as its presidential candidate, high-ranking FMLN officials have made clear their intentions to undo the market reforms that El Salvador has implemented and emulate the socialist revolution of Venezuela's Hugo Chávez.

There are several reasons why the FMLN leads in most polls despite the development accomplishments of the last decade and a half. First, under the presidency of Antonio Saca, the ruling ARENA party lost the reformist drive that characterized previous administrations since 1989. Worse, ARENA's presidential candidate, Rodrigo Ávila, has adopted populist rhetoric that runs counter to the market reforms.

But perhaps the main source of popular discontent against ARENA is the climate of violence that currently besets the country. With a murder rate of 60.7 per 100,000 inhabitants in 2007, El Salvador is the most violent country in the world. This lack of basic security imposes enormous costs on the Salvadoran economy and scares away investment. According to a study by El Salvador's National Public Security Council, the violence cost the country $2 billion in 2006—nearly 11 percent of GDP.

Another factor contributing to FMLN's popularity is that a third of El Salvador's adult population is less than 30 years old. These are the voters who do not remember, or have very distant memories of, their country as it was fifteen years ago. It is no coincidence that support for the FMLN is particularly strong among the younger population. As one of my Salvadoran colleagues noted during a visit to San Salvador last year, "It's true; young people today have problems paying for their cell phones, gas for their cars, and college tuition. What they don't remember is that fifteen years ago their parents couldn't afford phones or cars, lived in shanty towns, and couldn't even dream of going to college."

Hopefully they will not have to ever find out for themselves, and there will come a day when elections in El Salvador won't have so much at stake.

The results of the market reforms are notable: between 1991 and 2007, the percentage of households below the poverty line fell from 60 percent to 34.6 percent. However, official figures point to mediocre average annual per capita growth during the period 1992–2007—only 1.9 percent— which is very similar to Latin America's average of 1.6 percent in the same period. But official figures grossly underestimate the performance of the economy because of flawed measurement. In fact, the economy is probably more than 30 percent larger than indicated by the official data. Accordingly, the average per capita growth rate since 1992 has been approximately 5.2 percent per year.

El Salvador still has much to do on its policy agenda. In particular, high crime rates constitute a major hindrance to further growth. This lack of security represents the greatest threat to sustained growth and liberal policies.

Nonetheless, the country is showing the rest of the region how economic freedom can pave the way for development and how globalization offers great opportunities for developing countries that are willing to implement a coherent set of mutually supportive market reforms.

There are two organizing principles of society: first, consent, the so-called voluntary principle, which relies on individual freedom and responsibility and, second, coercion, the use of force to command people and politicize economic life.

Of course, Smith favored consent over coercion but recognized, as did classical liberals, that some use of force is necessary to prevent injustice - that is, the violation of one's legitimate ("natural") rights to life, liberty and property.

For Smith, justice did not mean "doing good with other people's money"; it meant, "doing no harm". As such, justice is consistent with the Taoist principle of wu wei, or noninterference. According to Smith, if private property rights were protected by the "laws of justice", free trade would lead to mutually beneficial gains. Individuals seeking their own gain would also increase the wealth of the nation.

Long before Smith explained his "invisible hand doctrine", Lao-tzu taught that "people spontaneously increase their wealth" when they are left alone. Likewise, the great Han historian Sima Qian understood what Nobel laureate economist F. A. Hayek later called the "principle of spontaneous order". According to Sima, "when all work willingly at their trade ... things will appear unsought and people will produce them without being asked [commanded]".

China lost the notion of spontaneous order during the chaos of the Great Leap Forward and the Cultural Revolution. Central planning destroyed, rather than created, wealth because it abolished private property and economic freedom. Today, as the result of more than 30 years of economic liberalization, the Chinese people are richer and freer.

China's "peaceful development" has helped create a middle class and, more important, an entrepreneurial class willing to take risks in a global economy.

The process of "creative destruction", which economist Joseph Schumpeter described, is evident in China's development.

Faced with constant change and a global financial crisis, China's leaders are not calling for protectionism, and Chinese entrepreneurs are searching for new opportunities.

When Mr Wen says "the society that we desire ... is one in which people can achieve all-round development in a free and equal environment", he should reflect on the following passage from the Theory of Moral Sentiments:

"In the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder."

Hong Kong's adherence to "small government, big market" has served the people well. The mainland's economy is not yet the freest in the world, but it could be - if "social harmony" were combined with the security of people and property, so that individuals could plan their own lives under a transparent and stable rule of law.

Mr Wen, in his interview, appears to recognize the need for institutional reform and further liberalization. The challenge is to recognize that the role of a just government is not to redistribute income and wealth, which violates private property rights, but to extend the range of individual choices by limiting the power of government and expanding the scope of markets.

Morality arises from consent, not coercion. Equality under just laws is the basis for freedom because government is limited in its powers; equality of income brought about by government intervention, however, destroys freedom and with it economic development - in the liberal sense.

China's spectacular economic progress since 1978 is due to the expansion of mutually beneficial exchanges through opening to the outside world and internal reform, with greater protection of the non-state sector and private property rights. What its leaders need to remember is, as Smith put it, that "beneficence is always free, it cannot be extorted by force".

Beijing can best "achieve all-round development in a free and equal environment" if private property rights are expanded and legal norms comply with the voluntary principle.

The danger is that the current financial crisis is expanding the size and scope of government both in China and the west. It is ironic that the crisis is being blamed on "the free market" when, in fact, the fundamental cause was market socialism, not market liberalism.

The importance of economic freedom, domestically and abroad, was a consistent theme for Mr Bush, going back to his first presidential campaign. In 2002, the Bush administration unveiled a new approach to foreign aid, the Millennium Challenge Account, with the goal of a US$5 billion annual budget by 2006.

Mr Bush stated that aid would be given to countries that "govern justly, invest in their people and encourage economic freedom", and the US would no longer dole out funds to corrupt, autocratic governments.

Unfortunately, while he was actively trying to promote economic freedom abroad, his domestic policies were eroding that freedom for Americans. In a recent study - the Economic Freedom of the World: 2008 Annual Report - released by a consortium of thinktanks, America was tied for eighth place, with a score of 7.86 on a scale of 0-10, with 10 being an extremely high level of economic freedom.

The results are based on 42 different factors taken from a variety of international data sources. Hong Kong came top and the US also ranked below Switzerland, Chile, and Canada, among others. That is troubling enough. Yet, this one-year snapshot misses the significant decline in economic freedom since 2000 and how that decline reversed a long-term trend of increasing economic freedom in the US.

In 1970, the US also ranked eighth, with a score of 7.61. That rose steadily over the next three decades, to 8.55 in 2000, second only to Hong Kong. Starting in 2000, economic freedom began to decline sharply, losing nearly two-thirds of a point. Only eight countries had a decrease of half a point or more during this period. And only Niger, Venezuela, Argentina and Zimbabwe fared worse than the US.

America's decline came from three areas: government spending, legal and property rights, and regulation. First, Washington was spending and regulating more at the end of Mr Bush's presidency than at the beginning. The ranking associated with government spending fell to 39th from 18th, and the regulation ranking fell to 14th from 2nd. Second, and most disturbing, is Mr Bush's legacy in the legal and property rights arena, where the ranking fell to 28th from 9th highest in the world.

Mr Bush's attempts to highlight the importance of economic freedom around the world with the Millennium Challenge Account were laudable. Emphasising economic freedom abroad is surely the best way to promote growth and poverty alleviation. Unfortunately, Mr Bush's presidency left his own citizens less free economically.

The Baltic nation of Lithuania has been a shining star. Freed from Soviet tyranny almost two decades ago, the Lithuanians have created a civil society that protects human rights, is a vibrant democracy, and has a strong free market economy with one of the highest growth rates in Europe - almost 9 percent last year. But now their economy is in danger because of the actions of government officials in Washington and, to a lesser extent, of those in the major capitals of Europe, and now even of some of their own leaders.

Vilnius, the capital of Lithuania, is studded with many new modern architectural gems. The "old town," parts of which stem from the Middle Ages, has gone though a glorious restoration and is filled with fine shops and restaurants. Unfortunately, construction, as in the United States, is now rapidly winding down as mortgages become increasingly difficult to obtain. As a small nation with only 3.3 million people, Lithuania depends heavily on foreign, particularly Scandinavian, banks for most of its retail and commercial banking services.

When interbank lending locks up among the major international banks, it has an immediate spillover effect on smaller banks throughout the world. The banks that service Lithuania are not eligible for U.S. Treasury and Fed bailouts, putting them at an immediate competitive disadvantage in a world of global financial flows.

The Lithuanians have just elected a new "conservative" government, which now faces an economic slowdown not of its own making. (Sounds familiar?) Unfortunately, the new leaders have proposed tax changes whose consequences are likely to make things worse. They understand a slower economy will result in less government revenue, but rather than take care of the problem by eliminating or reducing ineffective government programs, they are proposing increasing taxes on business.

Specifically, they have proposed increasing the corporate income tax rate, dividends and the tax from royalties from the current 15 percent to 20 percent. Other competitive countries have been reducing their corporate income tax rates, most recently the Bulgarians who now have a 10 percent flat-rate corporate tax. The Lithuanian government has also proposed a complicated increase in the tax on the smallest businesses, which almost certainly will lead to more tax evasion. The consequences of these tax increases will be slower economic growth, less international competitiveness, hence most likely less tax revenue rather than more.

Many policymakers and politicians in Washington seem to be incapable of thinking through the consequences of many of their bad ideas. When a "bailout" is given to one firm, all of its competitors are put at a disadvantage. For example, General Electric Capital, a unit of General Electric Corp., was given taxpayer funds "to make sure that the unit did not fail." But what are the consequences of such an action?

Because companies can move funds from one unit to another, an action to strengthen one unit of the company is to the advantage of all of the other units. GE's jet engine division competes with United Technologies' jet engine division (Pratt & Whitney), but now GE has a little additional competitive advantage.

GE also owns NBC, including MSNBC and NBC News. As former Reagan administration official and columnist Jim Pinkerton has correctly noted, MSNBC and NBC's news coverage has been strongly slanted toward the Democrats. Chris Matthews, well-known MSNBC commentator, who openly shills for the Democrats, has indicated he may run for the U.S. Senate. So here we have a case of the taxpayers giving a subsidy to a private company that gives a major TV forum to a partisan who uses it to further his own political agenda.

At the very minimum, GE should have been required to fully divest GE Capital in an exchange for the government funds to GE Capital. If News Corp., the owner of Fox News and the Wall Street Journal, had been given a "bailout" by the Treasury, the Democrats in Congress would have been outraged (and quite correctly so).

Two decades ago, the Lithuanian people had the courage to rise up and fight a government that had misspent their funds, mangled their economy, and trampled on their liberties. As a consequence of their victory, they became free and prosperous.

The U.S. government, though a long way from the old Soviet Union, is increasingly mangling the American economy, misspending taxpayer dollars, and often disregards personal liberties. This most often happens because political leaders do not and are not forced by many in the media and the body politic to think through and properly explain the likely consequences of their ideas and actions. This needed change is so obvious that it should be able to be accomplished without another revolution.

The answer quite simply is that the Georgia leaders are not so arrogant to think they know better than markets, and hence they are relying on the market to solve most of their problems.

Georgia is a poor country, but for the last four years it has experienced some of the highest economic growth rates on the planet - from more than 9 percent to 12 percent per year. It has been eight years since my last visit to Georgia, and observable changes are quite remarkable. The New Economic School in Georgia just hosted the European Resource Bank (a coalition of primarily European economic policy organizations) meeting this year, which is what brought me back.

After having experienced sputtering reform and progress from the time of the fall of the Soviet Union, Georgians elected perhaps the freest market government in the world four years ago. The president, prime minister and state chancellor are all dedicated free marketeers who studied F.A. Hayek and Milton Friedman and have learned from the successes of Margaret Thatcher and Ronald Reagan.

Many, including former high-ranking Russian officials, have argued that part of Moscow's motive in invading Georgia was to punish this newly successful upstart that was formerly part of the old empire. While Russia was becoming less democratic, Georgia was becoming more democratic. While Russia has engaged in renationalization and re-regulation, Georgia has engaged in mass privatization and deregulation.

Much of the inspiration and drive for the radical free market reform of the Georgian economy comes from a mountain of a man named Kakha Bendukidze, whom I first had the pleasure of meeting some years ago in Russia. Kakha, as he is commonly referred to, is the head of the State Chancellery and one very smart and wise fellow.

Commenting on the international financial crisis, he correctly observed that as long as governments continue to rely on central banks and extensive regulation of the financial industry rather than free banking, "periodic financial crises will continue to plague mankind." He argues that it is unrealistic, as Hayek and Friedman also did, to assume central bankers know more and can outguess the market, and that financial regulators can somehow prevent the next crisis, since they are unlikely to see where it is coming from.

Georgia has been engaged in fundamental tax reform, rate lowering and flattening, including removing almost all taxes on capital that are the seed corn of the economy. The Georgians are actively reducing the size of government by doing away with ineffectual programs and those that can be better done by the private sector.

As part of their successful effort to get rid of much of the corruption that had been rampant, they reduced the number of government workers by 50 percent, raised the salaries of those who remained and put in place a zero tolerance policy regarding corruption.

As part of their effort to deregulate, they have reduced the number of required licenses from 950 to 144. It is now possible to do all the paperwork and obtain the permits to start a new business in one day. Registration of a change in property ownership now takes two hours instead of the previous 30 days.

Georgia once had a major problem with smugglers, but the new leadership removed almost all tariffs and other trade barriers, and with it the profits for smuggling and related corruption.

At the time of the invasion, the government resisted putting in price controls and other forms of resource allocation. As a result, there was no sustained jump in prices, and the free market quickly filled whatever shortages were caused by the war. In fact, if the leaders of the central bank exceed the inflation targets, they will be fired.

The prime minister, Lado Gurgenidze, was both educated and spent considerable time in the United Kingdom and clearly was influenced by Mrs. Thatcher. I asked him if he was concerned that the pressures to grow the size of government because of the invasion would undermine Georgia's reforms (note: history shows governments almost always grow in relative size versus the private economy in the time of crisis, such as wars or financial instability, even if governments create the crisis).

The prime minister replied that the Georgians have not retreated from their reforms, including shrinking the size of government, and they fully understand any retrenchment would be very damaging.

Georgia does have problems, including the large number of refugees resulting from the war. But unlike Washington and the European governments, the Georgian leaders did not deal with their crisis by creating the new "program of the day." Instead, they told the people the government would continue to stay out of their way and the people would have to find ways to solve the new problems. Most of them have done that quite well and the government remains highly popular.

There is a message here for the political leaders of America and Europe, but I expect most of them still will not get it.

The fundamental issue, at least from an economic perspective, is whether it is a good idea for government to distort the allocation of labor and capital. This sounds like arcane economic jargon, but it is the key issue because the long-term prosperity of a nation -- and the living standards of its people -- depends on whether resources are channeled to their most productive uses. Hong Kong has enjoyed astounding economic success because government rarely interferes in the market, whereas France suffers from economic stagnation because of burdensome levels of taxes, government spending and regulation.

The United States is somewhere between Hong Kong and France. We generally allow markets to operate, which is why disposable income in America is so much higher than it is in France. But our government does intervene in some areas (such as housing), and this hurts our competitiveness and explains why we don't grow as fast as Hong Kong.

Government intervention in housing is pervasive. Let's start with the policies that encourage over-investment in housing and then focus on the policies that contributed to the market meltdown. A number of government policies are designed to steer people toward housing, including:

• The home mortgage interest deduction, which provides a tax preference for middle-class and upper-class people to invest in housing.
• The Federal Housing Administration, which subsidizes home ownership for lower-income buyers.
• Traditional Fannie Mae and Freddie Mac subsidies, which tilt the playing field so that investors put more money in residential real estate.

These policies sound good, which is why politicians put them in place, but they are economically harmful because they encourage people to put money in residential real estate instead of other forms of investment. There is nothing wrong with having lots of nice housing, of course, but when government interference makes housing excessively attractive, this necessarily means less money is available for other purposes -- such as providing capital for future economic growth. This is why scholarly research generally has found that housing subsidies hurt long-run growth.

Other housing subsidies, put in place in more recent years, played a key role in causing the current turmoil. A bipartisan push to increase home ownership resulted in laws and regulation that dramatically expanded the activities of government-sponsored enterprises (Fannie Mae and Freddie Mac) and put them on a mission of funding loans to people with poor credit. Combined with too much liquidity, thanks to the Federal Reserve's lax monetary policy, this "perfect storm" of bad policy created a housing bubble. Now the bubble has burst, and we are suffering through the consequences.

As a stereotypical house-in-the-suburbs American, I certainly appreciate the value of home ownership. But sometimes there can be too much of a good thing. Government subsidies have hurt our economy in the long run by reducing business investment, and they have slammed our economy in the short run by causing an unsustainable bubble. Maybe it's time to replace government mistakes with market forces.

The frosty land of curling and Celine Dion has long been a destination for Americans fleeing the puritanical, war-mongering excesses of the States. And now, according to a new study, our hockey-loving, socialized-health-care-having neighbors to the north have surpassed the U.S. in its degree of economic freedom. Not only can Canadians more accurately pronounce laissez faire, they have more of it. And that was before the U.S. government nationalized half our mortgage industry and bought the world's largest insurance company.

In last year's Economic Freedom of the World Index, published by an international consortium of think tanks (including my employer), Canada and the U.S., the so-called "land of the free," were running neck and neck. But in this year's study -- which tracks things like the size of government, burden of economic regulation and free trade -- Canada squeaked out a tiny advantage: it ranked seventh compared to eighth place for the U.S. Strictly speaking, it's a statistical tie. But if the U.S. doesn't have the freest economy in North America, much less the world, what do freedom-loving Americans have to keep us from running for the border?

Economic freedom isn't everything, right? The U.S. does more to protect free speech and the right to bear arms in self-defense. And Canadian medical socialism surely benefits from the fact that most Canadians are only a short drive from the slightly more market-based American system. But if the United States of warrantless wiretaps, secret courts, militarized drug busts and mass minority imprisonment is not clearly more economically free than Canada, then it probably has no claim to being a freer country overall.

And now the U.S. government is about to commit hundreds of billions of taxpayer dollars to bail out financiers who made a series of terrible decisions, in effect socializing just the downside of financial risk. America's revolutionary founders pledged their lives fortunes, and sacred honor for this?

Vancouver's not that cold, you know.

Will Wilkinson says wanna dodge the draft, get gay-married or smoke a joint without fear of life in the clink? Where do you go? Canada! (August 13, 2008) [MP3]

In a sports contest there is a winner and a loser; it's what economists call a "zero-sum game". Politicians often view economic competition in a like manner, so that China's rise implies lost opportunities for other countries. That is why members of the US Congress often perceive an American trade deficit with China as bad but a surplus as good. Such mercantilist thinking is dangerous because it can lead to trade wars and, thus, to economic nationalism.

Unlike the policy of engagement and dialogue, which has worked well to promote peaceful development, protectionism would limit alternatives open to people, reduce the wealth of nations and increase the chance of conflict. Fortunately, a recent poll by the Chicago Council on Global Affairs shows that a majority (64 per cent) of Americans favour "friendly co-operation and engagement" as the appropriate response to China's rise.

The win-win nature of free trade, and its reliance on a system of private property and the rule of law, is in stark contrast to a planned economy with state ownership and no economic freedom. Under central planning and autarky, there is no room for expanding individual choice.

When Beijing chose to embark on the path of economic liberalisation 30 years ago, no one could have foreseen the spectacular transformation that was to occur. Now, in the aftermath of an "exceptional" Olympics, the entire world recognises the progress China has made.

What is less visible is the conflict between power and freedom. Behind the planned harmony of the Beijing Games stands the vast power of the state. The challenge facing China is how to balance and limit that power so that it allows the spontaneous order of the market to create new opportunities and wealth.

In a planned order, there is certainty and apparent order, but no freedom. In a liberal market order, there is uncertainty of results - but the rules of the game are well defined and the process of development consensual. People become rich by creating new goods and services that make people, including the poor, better off. Internal and external trade is instrumental in that process, as are institutions that protect private property rights.

China's current "socialist market economy" favours a balance of power over freedom. Yet, it has been the opening to the outside world, the widening of market alternatives to state control, and the expansion of private ownership that have enriched people and increased the demand for protection of private property.

China will need to widen and deepen its privatisation effort so farmers can fully share in future prosperity, the governing process will have to become more transparent, and rule of law must replace cronyism and corruption.

The current emphasis on inequality, both by analysts in China and by foreign commentators, misses the mark. Pointing to a widening gap between rich and poor neglects the essential issue of coercion versus freedom. In a planned order, rulers can make the distribution of measured income very equal, but the distribution of power will be highly unequal, as the late Lord Bauer liked to remind proponents of a redistributive state.

Fairness and freedom go hand in hand, if by fairness one means "just rules of conduct". If China is to become a truly "great society", the fairness of rules, not outcomes, needs to be the focus.

Ending the hukou (internal passport) system that discriminates against rural migrants would increase income mobility. If farmers were given fully transferable rights to their property, which could be used as collateral for entrepreneurial activities, social co-operation - rather than class conflict - would result.

Social and economic harmony requires a proper balance between coercion and consent. Achieving that balance will be the major challenge for China going forward. The Beijing Games were "exceptional", but they should not be used as a blueprint for China's future development.

As Adam Smith noted: "In the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature [ruler] might choose to impress upon it.

"If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder."

During the Cultural Revolution, central planning dominated, capitalism was a crime, and Mao Zedong called upon people to "strike hard against the slightest sign of private ownership." Today most prices are set by market demand and supply, capitalists can join the Chinese Communist Party, and the PRC constitution proclaims, "The lawful private property of citizens is inviolable."

The Property Law, enacted in 2007, gives further protection to the private sector and to individual property rights. That legislation reflects the political influence of the growing middle class and private entrepreneurs who have a large stake in continued economic liberalization, which has allowed them a lifestyle few would have dreamed of just a short time ago. Millions of people now enjoy the privacy of their own homes and cars, the freedom to travel, and the enormous benefits of cell phones and the Internet.

While China would win an Olympic gold medal for its economic performance since 1978, it would clearly not be a medalist in the quest for personal freedom. But China also would not be in last place. In 1995, Chinese journalist Jianying Zha wrote in her book China Pop, "The economic reforms have created new opportunities, new dreams and to some extent a new atmosphere and new mindsets. . . . There is a growing sense of increased space for personal freedom." Many would agree.

It would be foolish to focus only on China's flaws without recognizing the progress made in improving people's lives — progress due to the removal of restrictions on economic and personal choices, rather than to central planning. In particular, globalization and the information revolution have played crucial roles in China's development. Without the benefits of trade, China would still be poor.

The slow pace of political reform and the violation of human rights should be of serious concern, but using trade sanctions against China to promote human rights would do the opposite. Unlike trade, protectionism denies individuals the freedom to expand their effective alternatives, thus limiting their choices. Sanctions would fuel the flames of economic nationalism, harm U.S. consumers, and embolden hardliners in Beijing.

It makes no sense to use such a blunt instrument in an attempt to "advance" human rights in China when trade itself is an important human right. Instead, the United States can best help the Chinese people by continuing its policy of engagement and avoiding destructive protectionism.

Trade increases the wealth of nations and reduces the risk of conflict. Hong Kong, the world's freest economy, learned long ago the benefits of international trade and the rule of law. Its development strategy — "small government, big market" — has clearly influenced the Mainland, and the "freedom virus" is spreading.

The challenge for China's new generation of leaders is to continue on the path of "peaceful development" and not let politics get in the way of the market. If China is to prosper and become the world's largest economy, Beijing needs to allow market socialism to wither away and market liberalism to flourish. That transformation would require a transparent and just legal system that fully protects people's rights to life, liberty and property.

To help China along that path, the United States should continue the Strategic Economic Dialogue initiated by Presidents Bush and Hu Jintao. Two other positive steps would be to end the discrimination against China in antidumping cases by recognizing the PRC as a market economy, and admit China to the G-8 as a normal rising power. Those acts of friendship would reassure Beijing that the United States welcomes China's rise and does not view the Middle Kingdom as an inevitable enemy. At the same time, we should not ignore the human rights violations that do occur and use diplomatic pressure to help move China toward a legitimate rule of law.

While tourists admire the compelling architecture in Beijing and other cities, they should not forget that what counts in the long run is not the physical infrastructure but the formal and informal institutions that limit government power and enhance freedom.

Ultimately, the Chinese people must determine the form of their governmental and other institutions, but the United States can help by upholding the same market-liberal principles it wants China to adopt. Finally, by adhering to a free-trade agenda, the U.S. government can show the Chinese people that Americans practice what they preach.

The standard view of the Greek Olympics was a festival uniting amateur sportsmen in the name of peace. It was invented by aristocrats like modern Games founder Pierre de Coubertin. Hitler, who staged the 1936 Games had a similar romantic vision.

The ancient reality could not have been further from these misconceptions. Athletes competed for filthy lucre and armies routinely violating the Olympic truce.

The modern Games broke with their predecessors. They allowed politics to overshadow sports. The Communist bloc used the Games as an ideological showcase. While the Western world lay mired in stagflation, the Olympics lost their ancient bearings.

Today's proliferation of commercialism is a positive step. The Olympics have returned to their fitting role as a forum for athletes seeking fame and riches -- and showing the rest of us a good time. Tradition meet meritocracy, Coubertin meet Milton Friedman; The Games have reverted to their entertainment, ritual, and financial essence.

So when the torch came to San Francisco, Arnold Schwarzenegger defended the right to censure China, but he opposed a boycott because sports, he said, "should not be used ... to do diplomacy."

History shows that the Governator -- a former Mr. Olympia -- is right: Spotlight the horrific Chinese actions but don't use sports for political purposes. Boycotts are a Cold War relic and a departure from the economics-focused origins of the Olympics.

Ilya Shapiro discusses the 2008 Olympics on Marketplace (July 10, 2008) [MP3]

With the fall of the Berlin Wall, much of the former communist bloc embraced tariff reductions, tax cuts and privatisation. Most African countries, unfortunately, remain ambivalent about the merits of economic liberalisation. That will have to change if Africa is to take advantage of globalisation and other opportunities in the 21st century.

The Economic Freedom of the World report, which is co-published annually by the Fraser Institute in Canada and the Cato Institute, measures economic freedom in 141 countries.

Countries are rated on a scale from zero to 10, with a higher number signifying a greater degree of economic freedom. According to last year's report, the average economic freedom in the former communist countries of Europe and Central Asia increased by 2,9 points, from 4,9 in 1995 to 7,8 in 2005. In contrast, it grew from 5,1 to 5,6 in sub-Saharan Africa — an increase of only half a point.

The difference in economic performance between the two regions over the past decade is telling. None of the 23 former communist countries in Europe and central Asia, for which the World Bank data is available, experienced an overall decline in per capita income. In contrast, incomes fell in nine out of 44 sub-Saharan African countries. On average, incomes rose 71% in former communist countries. They rose 23% in Africa. When oil exporters are taken into account, the income increase in Europe and central Asia falls to 63%. In Africa, it falls to 14%.

Some African intellectuals reject economic liberalism as a foreign transplant. But economic dirigisme, which much of the African intelligentsia took to like a fish to water, was no more African than market liberalism. Both philosophies were codified by Europeans — Karl Marx and Adam Smith respectively.

Others reject economic liberalism as a philosophy of the European colonialists. Thankfully, the reality is more nuanced. In the case of the British empire, for example, free traders who backed the repeal of the Corn Laws, like the future Liberal prime minister William Gladstone, tended to be opposed to colonialism. Conversely, politicians who supported agricultural protectionism, like the future Conservative prime minister Benjamin Disraeli, tended to support British imperialism as well.

The link between liberal economics and colonialism has always been tenuous. Luxembourg, the world's richest country, for example, never had colonies. Nor does a colonial past mean present-day destitution. Hong Kong was a colony until 1997. Yet, adjusted for purchasing power parity, Hong Kong was the world's eighth richest territory in 2006 — right after Switzerland.

In many cases, the income gap between Europe and Africa grew larger after independence. Angus Maddison from the University of Groningen estimates that between 1870, or four years before the British established their Gold Coast colony, and 1957 when the Gold Coast became independent Ghana, Ghanaian income per capita adjusted for inflation increased from $439 to $1241, or 183%.

Between 1957 and 2003, the Ghanaian per capita income barely moved, rising to $1360 or less than 10%. To put those numbers into perspective, a Brit was 6,5 times richer than a Ghanaian in 1957. By 2003, the gap between the two grew to 16.

That opposition to market liberalism remains deep-seated in Africa is all the more unfortunate considering that Africa is home to one of the most successful examples of a liberal approach to economic development in the world. When Botswana became independent in 1966, her income per capita was $473. In SA, it was $3615. By 2003, the inflation adjusted per capita income in Botswana was $4937. An average South African earned 13% less. Today the Batswana are — after the oil-rich Gabonese — the second richest people in Africa.

Between 1970 and 2000, Botswana's gross domestic product growth rate per capita has averaged more than 7% a year. That rate, the World Bank found, can be attributed to, among others, macroeconomic stability, fiscal discipline, free trade and a relatively free labour market. The bank's assessment is consistent with the Economic Freedom of the World 2007 report, which found Botswana to be, yet again, the freest economy in Africa — roughly on par with Belgium.

Other African countries should follow Botswana's example, and adopt policies and institutions conducive to high and sustained rates of growth. There is, as former British prime minister Margaret Thatcher used to say, no alternative.