PUBLISHED : Wednesday, 14 November, 2001, 12:00am
UPDATED : Wednesday, 14 November, 2001, 12:00am

HERE IS MY suggestion to the Heritage Foundation. Scrap that complicated analysis of 50 different economic variables to rank all countries by economic freedom. You have just stumbled across the one that says it all.

It is your newly refined black-market score, and it is the only one you need. By measuring the extent to which black markets operate in any country you get an almost perfect reverse indicator of economic freedom in that country.

Think about it. Economic freedom is really a measure of how much private individuals are free from government intervention in their efforts to generate an income for themselves. The more they are restrained by government the more they resort to subverting government by generating that income on a black market.

You may say, of course, that private interests, pricing cartels for example, also can restrain economic freedom. True, but when have we thought of people who evade a private cartel as operating in a black market? Only the diamond cartel tries to make us believe this. In any case, it is a general rule that cartels only thrive where governments first create a breeding ground for them.

So, if you find a country with extensive black markets, both in range and depth, you are bound to have a country with a government that sticks its fingers into every economic pie. In short, a country that cannot rate high on anyone's index of economic freedom.

All you then need is a good measuring stick for how deep and wide these black markets are. Use it to take your measure, turn the stick upside down and, hey presto, you have a better economic-freedom index than the Heritage Foundation's at a fraction of the cost.

Let's look, however, at the measuring stick the Heritage Foundation uses. It comes from a group that has set itself up as a corruption watchdog and calls itself Transparency International. Who are they?

A quick Internet search and out it comes. First is a George Soros foundation, second is the US Agency for International Development (USAid) and third is something in Switzerland called Foundation Volkart Vision. Once more, who are they? Why, that Soros foundation plus USAid again. You get the picture.

So it should not surprise you to find a confused understanding of black markets here, and a difficulty in distinguishing them from corruption. It is an American view of the world - if you harbour copyright pirates who hinder us from ripping you off on recorded music and movies you have a black market, a bad thing.

In actual fact, black markets are much wider than this and the freest of all markets. For hundreds of millions of people around the world they hold rapacious governments at bay and are the only reasonably priced source of goods to maintain any standard of living. Of course, you get corruption with them. Officials must be paid to look the other way.

But just ask yourself if people in China could have done half as well for themselves over the past 30 years if they had not found their way around myriad forms of official theft masquerading as taxes and even more regulations to protect official monopolies.

In fact, and Mr Soros himself should know it, in the formative stages of any market economy there is not much distinction between free enterprise and 'criminal' enterprise. A better school of entrepreneurial talent than the black market has never been found. Yesterday's 'criminals' become today's captains of industry. It happens all the time. But this supposed black market that the Heritage Foundation says we have in Hong Kong is actually just Copyright Robin Hood taking from the foreign rich to help the local poor. Hurrah for black markets if this is one.