Transcript Economic Freedom of the World: Annual Report 2004

Economic Freedom of the
World: 2007 Annual Report

Fraser Institute

September 4, 2007
1
THANK YOU FOR
COMING!

The key to changing policy in the world is
changing the climate of opinion about what
works and what does not work in
encouraging world development
 The key to changing the climate of opinion
is providing the widest possible audience
with good information about the causes of
development and under-development
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Economic Freedom of the
World Project

Objective: find a way to measure economic
freedom and explore the connection
between it and other variables
 20 year project
 Led by the late Milton Friedman, Rose
Friedman and Michael Walker
 Involved 60 of the world’s top scholars
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What is The Economic
Freedom of the World Index?
 An
annual compilation of data representing factors
which make a country economically free
 Authors: James Gwartney and Robert Lawson
 A compendium of 42 government policies affecting
economic freedom based on objective data or
independent surveys
 A ranking of 141 countries representing 95% of the
world’s population according to the extent to which
they permit their citizens to be economically free
 Now a collaboration of Institutes in 71 different
countries
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What is Economic Freedom
Individuals have economic freedom when
property they acquire without the use of force,
fraud, or theft is protected from physical invasions
by others and they are free to use, exchange, or
give their property as long as their actions do not
violate the identical rights of others. An index of
economic freedom should measure the extent to
which rightly acquired property is protected and
individuals are engaged in voluntary transactions.
James Gwartney et al. 1996
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Components of The Economic
Freedom of the World Index

Size of government and taxation
 Private property and the rule of law
 Soundness of Money
 Trade regulation and tariffs
 Regulation of business, labour and capital
markets
 Based entirely on objective or third party
data for 141 countries
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Talk about making a difference …
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Member Institutes of Economic Freedom of the World
Albanian Center for Economic
Network
Research, Albania
Fundación Libertad, Argentina
Institute of Public Affairs, Australia
TIGRA®, Austria
Center for Economic and Political
Research, Azerbaijan
The Nassau Institute, Bahamas
Making Our Economy Right (MOER),
Bangladesh
Scientific Research Mises Center,
Belarus
Centre for the New Europe, Belgium
Fundacion Libertad y Democracia
(FULIDE), Bolivia
Instituto Liberal do Rio de Janeiro,
Brazil
Institute for Market Economics,
Bulgaria
Cambodia Institute of Development
Study, Cambodia
The Fraser Institute, Canada
Instituto Libertad y Desarrollo, Chile
ILP- Instituto Libertad y Progreso,
Colombia
Instituto para la Libertad y el
Análisis de Políticas, Costa Rica
The Institute of Economics, Croatia
Liberální Institut, Czech Republic
Center for Politiske Studier (CEPOS),
Denmark
Fundación Economía y Desarrollo
Inc., Dominican Republic
Instituto Ecuatoriano de Economía
Política, Ecuador
International University Concordia
Audentes, Audentes University,
Estonia
Association pour la Liberté
Economique et le Progrès Social
(ALEPS), France
Society for Disseminating Economic
Knowledge:“New Economic School –
Georgia”, Georgia
Liberales Institut, Germany
The Institute of Economic Affairs, Ghana
Centro de Investigaciones Económicas
Nacionales, Guatemala
Institut de Recherche pour la Liberte
Economique et la Prosperite (IRLEP), Haiti
Hong Kong Centre for Economic Research,
Hong Kong
Szazadveg Foundation, Hungary
Centre for Social and Economic Research,
Iceland
Centre for Civil Society, India
The Institute for Development of Economics
and Finance, Indonesia
Open Republic Institute, Ireland
Institute for Advanced Strategic and
Political Studies, Israel
Centro Einaudi, Italy
Bureau d'Analyse d'Ingenierie et de
Logiciels (BAILO), Ivory Coast
African Research Center for Public Policy
and Market Process, Kenya
Center for Free Enterprise, Korea
Economic Policy Institute-Bishkek
Consensus, Kyrgyz Republic
Lithuanian Free Market Institute, Lithuania
D'Letzeburger Land, Luxembourg
Centro de Investigación para el Desarrollo
A.C., Mexico
Open Society Forum, Mongolia
The Center for Entrepreneurship and
Economic Development, Montenegro
The New Zealand Business Roundtable, New
Zealand
Institute of Public Policy Analysis, Nigeria
Civita – Center for Business and Society
Alternate Solutions Institute, Pakistan
Fundación Libertad, Panama
Centro de Investigación y Estudios
Legales (CITEL), Peru
The Center for Research and
Communication, Philippines
Centrum im. Adama Smitha, Poland
Causa Liberal, Portugal
Romania Think Tank, Romania
Institute of Economic Analysis, Russia
The F.A. Hayek Foundation, Slovak
Republic
The Free Market Foundation of Southern
Africa, South Africa
Pathfinder Foundation
, Sri Lanka
International Research Foundation (IRF),
Sultanate of Oman
Timbro, Sweden
Liberales Institut, Switzerland
Arthur Lok Jack Graduate School of
Business, The University of the West
Indies, Trinidad, W.I.
Association for Liberal Thinking, Turkey
The Ukrainian Center for Independent
Political Research, Ukraine
The Institute of Economic Affairs, United
Kingdom
CATO Institute, USA
The Centre for the Dissemination of
Economic Knowledge (CEDICE),
Venezuela
Research Center for Entrepreneurship and
Development Policies, Vietnam
Free Market Center (FMC), Yugoslavia
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Zambia Institute for Public Policy Analysis
(ZIPPA), Zambia
Sample of Press Coverage for
Fraser Institute’ Economic Freedom of the World 2006
Postman, Estonia
All Africa, Africa
Ambito Financiero, ArgentinaL'Agefi Suisse, France
Press Digest, Hong Kong
El Litoral, Argentina
Reuters, Hong Kong
Daily News, Bahrain
Standard, Hong Kong
Daily Star, Beirut
Budapest Business Journal, Hungary
Mmegi, Botswana
MTI Eco News, Hungary
Ekonomika, Bratislava
Business Weekly, Iceland
Capital Weekly, Bulgaria
Frettabladid, Iceland
Investor, Bulgaria
Business Standard, India
Novinar, Bulgaria
Times of India, India
Economist, International
Sega, Bulgaria
Zeev Klein, Israel
Sofia Echo, Bulgaria
Corrier Economica, Italy
Calgary Herald, Canada
Il Corriere della Sera, Italy
Vancouver Sun, Canada
Il Tempo, Italy
Globe and Mail, Canada
Indiscreto, Italy
National Post, Canada
Jakarta Post, Jakarta
South China Morning Post, Korea Economic Daily, Korea
China
Korea Herald, Korea
Xinhua News Agency, China Korea Times, Korea
Business Day, Colombia
Seoul Daily, Korea
La Colombiano, Colombia
Yon Hap News, Korea
Latvian News Agency, Latvia
La Republica, Colombia
Bernama Daily, Malaysia
Portafolio, Colombia
La Prensa Libre, Costa Rica Business Times, Malaysia
Daily Express, Malaysia
Baltic Business Weekly, Estonia
El Economista, Mexico
El Financiero, Mexico
El Universal, Mexico
Tiempo, Mexico
Daily News, Montenegro
Daily Press, Montenegro
Mina business, Montenegro
Pobjeda, Montenegro
Faz.Net, Netherlands
International Herald Tribune, New Zealand
Business Recorder, Pakistan
Poland Today, Poland
Rompres, Romania
BBC Monitoring, Russia
Kommersant, Russia
Biz Day, South Africa
Business Day, South Africa
Mail and Guardian, South Africa
News 24, South Africa
Sunday times, South Africa
Libertad Digital, Spain
Taipei Times, Taiwan
Bangkok Post, Thailand
Turkish Daily News, Turkey
Business Journal, US
TCS Daily, US
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Washington Times, US
Sub-national and Regional Indices
10
Economic Freedom of the Arab World
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Marketization Index of Chinese Provinces
12
Economic Freedom Index of Indian States
13
Economic Freedom Index of German States
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Economic Freedom Index of
Argentinean Provinces
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Economic Freedom of North America
16
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Introducing the 2007 Economic
Freedom of the World Index Results
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19
Overall Economic Freedom Index
and the Top 10
Hong Kong
Singapore
New Zealand
Switzerland
Average of Top 10
United States
United Kingdom
Canada
Estonia
Ireland
Australia
0
2
4
6
8
10
Score (out of 10)
20
Source: The Fraser Institute.
Overall Economic Freedom Index
and the Bottom Ten
Chad
Togo
Niger
Burundi
Venezuela
Central Afr. Rep.
Congo, Rep. Of
Angola
Congo, Dem. R.
Myanmar
Zimbabwe
0
2
4
6
Score (out of 10)
Source: The Fraser Institute.
8
10
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Economic Freedom Over Time
Economic Freedom Score
10
8
6 6.1
5.5
5.4 5.5
5.7
6.0
6.4
6.4 6.4
6.4 6.4
6.6
4
2
0
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005
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Source: The Fraser Institute.
Economic Freedom and the Top 10
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Size of Government and the Top 10
Hong Kong
Singapore
United States
Switzerland
Average of Top 10
Estonia
Canada
United Kingdom
New Zealand
Australia
Ireland
0
2
4
6
Score (out of 10)
Source: The Fraser Institute.
8
10
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Legal System and Property Rights
and the Top 10
New Zealand
Switzerland
Australia
United Kingdom
Canada
Average of Top 10
Singapore
Ireland
Hong Kong
United States
Estonia
0
2
Source: The Fraser Institute.
4
6
Score (out of 10)
8
10
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Sound Money and the Top 10
United States
Singapore
Switzerland
Ireland
Canada
Average of Top 10
New Zealand
Hong Kong
Estonia
United Kingdom
Australia
0
2
Source: The Fraser Institute.
4
6
Score (out of 10)
8
10
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Freedom to Trade Internationally
and the Top 10
Hong Kong
Singapore
Ireland
Estonia
Average of Top 10
New Zealand
United Kingdom
United States
Canada
Switzerland
Australia
0
2
Source: The Fraser Institute.
4
6
Score (out of 10)
8
10
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Regulations and the Top 10
New Zealand
Hong Kong
Singapore
United States
Average of Top 10
United Kingdom
Switzerland
Estonia
Canada
Australia
Ireland
0
2
Source: The Fraser Institute.
4
6
Score (out of 10)
8
10
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Credit Market Regulations
and the Top 10
New Zealand
Estonia
United Kingdom
Hong Kong
Average of Top 10
Ireland
Australia
United States
Canada
Singapore
Switzerland
0
2
Source: The Fraser Institute.
4
6
Score (out of 10)
8
10
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Labor Market Regulations
and the Top 10
Hong Kong
Singapore
United States
Switzerland
New Zealand
Average of Top 10
United Kingdom
Canada
Australia
Estonia
Ireland
0
2
4
6
8
10
Score (out of 10)
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Source: The Fraser Institute.
Business Regulations
and the Top 10
New Zealand
Singapore
Hong Kong
Canada
Average of Top 10
Ireland
Australia
Switzerland
Estonia
United States
United Kingdom
0
2
Source: The Fraser Institute.
4
6
Score (out of 10)
8
10
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Why is Economic Freedom
Important?

Economic rights are fundamental rights in
the sense that without them there can be no
political freedom or civil freedoms
 They are a prerequisite for growth and
development
 They are a prerequisite for broader human
development
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The impact on economic
growth and development
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Income (per person) of the
Bottom Ten
Venezuela
Angola
Zimbabwe
Togo
Chad
Congo, Rep. Of
Central Afr. Rep.
Niger
Congo, Dem. R.
Burundi
0
10,000
20,000
30,000
40,000
50,000
60,000
GDP per Capita, 2005 (ppp)
Sources: The Fraser Institute; The World Bank, World Development Indicators
CD-ROM, 2007.
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Income (per person) of the Top 10
United States
Ireland
Switzerland
Hong Kong
Canada
United Kingdom
Australia
Singapore
New Zealand
Estonia
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
GDP per Capita, 2005 (ppp)
Sources: The Fraser Institute; The World Bank, World Development Indicators35
CD-ROM, 2007.
Per Capita Income and Economic
Freedom Quartile
GDP Per Capita
(ppp), 2005
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Least Free
Quartile
3rd Quartile
2nd Quartile
Most Free
Quartile
Least Free …………… Most Free
Sources: The Fraser Institute; The World Bank, World Development
Indicators CD-ROM, 2007.
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GDP Per Capita % Growth,
1990-2005
Growth in Real GDP Per Capita
and Economic Freedom Quartile
2.5
2.0
1.5
1.0
0.5
0.0
Least Free
Quartile
3rd Quartile
2nd Quartile
Most Free
Quartile
Least Free ……………..….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators37
CD-ROM, 2007.
Foreign direct investment,
net inflows (% of GDP), 2005
Foreign Direct Investment and
Economic Freedom Quartile
16
14
12
10
8
6
4
2
0
Least Free
Quartile
3rd Quartile
2nd Quartile
Most Free
Quartile
Least Free ……………..….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators38
CD-ROM, 2007.
Economic Freedom,the Poor, and
Inequality
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Income Share of the Poorest 10% and
Income Share Held by
Lowest 10%, 1995-2005
Economic Freedom
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Least Free
Quartile
3rd
Quartile
2nd
Quartile
Most Free
Quartile
Least Free …….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CDROM, 2007.
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Per Capita Income of Poorest 10%
and Economic Freedom
Income amount held by lowest 10% (1995-2005)
Income share held by lowest 10% (1995-2005)
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Least Free Quartile
3rd Quartile
2nd Quartile
Most Free Quartile
Least Free …….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators41
CD-ROM, 2007.
Economic Freedom,
Other Freedoms and
Democracy
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Economic Freedom Versus Corruption
Higher value indicates lower level of corruption
Corruption Rating
(out of 10)
10
8
6
4
2
0
Least Free
Quartile
3rd Quartile
2nd Quartile
Most Free
Quartile
Least Free ………….. Most Free
Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index,
available at http://www.transparency.org.
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Economic Freedom and Political Rights
Lower ratings indicate higher level of political rights
Political Rights
(out of 10)
5.0
4.0
3.0
2.0
1.0
0.0
Least Free
Quartile
3rd Quartile
2nd Quartile
Most Free
Quartile
Least Free ……………. Most Free
Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings,
1972 through 2005, available at http://www.freedomhouse.org/.
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Economic Freedom and Civil Liberties
Lower ratings indicate higher level of civil liberties
Civil Liberties
(out of 10)
5.0
4.0
3.0
2.0
1.0
0.0
Least Free
Quartile
3rd Quartile
2nd Quartile
Most Free
Quartile
Least Free …….. Most Free
Sources: The Fraser Institute; Freedom House, Freedom in the World Country
Ratings, 1972 through 2005, available at http://www.freedomhouse.org/.
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The impact of Economic Freedom on
the UN’s Human Development Index
and other indicators of well-being
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United Nations
Human Development
Index
Human Development Index and
Economic Freedom Quartiles
1.0
0.8
0.6
0.4
0.2
0.0
Least Free
Quartile
3rd Quartile
2nd Quartile
Most Free
Quartile
Least Free ……………. Most Free
Sources: The Fraser Institute; United Nations Development Programmme, Human
Development Indicators 2006, available at http://hdr.undp.org/.
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Life Expectancy at Birth and
Economic Freedom Quartiles
80
Years
60
40
20
0
Least Free
Quartile
3rd Quartile
2nd Quartile
Most Free
Quartile
Least Free ……………. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-
ROM, 2007.
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Per 1,000 live births, 2005
Infant Mortality and Economic
Freedom Quartile
80
60
40
20
0
Least Free
Quartile
3rd Quartile
2nd Quartile
Most Free
Quartile
Least Free ………..…. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators
CD-ROM, 2007.
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% of Population Using Improved
Water Sources
100
Percentage
80
60
40
20
0
Least Free
Quartile
3rd Quartile
2nd Quartile
Most Free
Quartile
Least Free …………….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators
CD-ROM, 2007.
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New research:
Spread of Global Economic Freedom
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Spread of Global Economic Freedom

Global foreign policy has been grounded in the
idea that freedom, including economic freedom,
spreads among countries.

Russell S. Sobel and Peter T. Leeson, in chapter
2, search for the “contagion” of economic
freedom between geographic neighbors and
trade partners using a panel of more than 100
countries between 1985 and 2000.
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Spread of Global Economic Freedom
Empirical Evidence

The results confirm that economic freedom does
indeed spread through both geography and trade.

Specifically, countries “catch” about 20% of their
average geographic neighbors’ and trading partners’
levels and changes in economic freedom.

The results also suggest freedom does not spread as
strongly as the domino theory behind American and
Soviet foreign relations during the Cold War
suggested.
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Policy Implications

While economic freedom changes in one country
have only a modest impact on neighboring
countries, when multiple neighbors experience
simultaneous changes in economic freedom the
impact is much greater.

By liberalizing their trade with foreign nations,
economically free countries can exert at least a
modest positive impact on economic freedom in
less free nations.

Free-trade agreements that allow a number of
nations to simultaneously coordinate trade
liberalization could have a sizeable influence on
spreading economic freedom.
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Conclusions
Economic Freedom

Increases prosperity for all
 Reduces poverty
 Increases other freedoms
 Improves quality of life
All this can be seen in today’s data
and lessons from history
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www.freetheworld.com
www.fraserinstitute.ca
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