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1
Economic Freedom of the Economic Freedom of the World: 2007 Annual ReportWorld: 2007 Annual Report
Fraser Institute
September 4, 2007
2
THANK YOU FOR THANK YOU FOR COMING!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
3
Economic Freedom of the Economic Freedom of the World ProjectWorld 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 WalkerInvolved 60 of the world’s top scholars
4
What is The Economic What is The Economic Freedom of the World Index?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
5
What is Economic FreedomWhat 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
6
Components of The Economic Components of The Economic
Freedom of the World IndexFreedom of the World Index
Size of government and taxationPrivate property and the rule of lawSoundness of MoneyTrade regulation and tariffsRegulation of business, labour and capital
marketsBased entirely on objective or third party
data for 141 countries
7
Talk about making a difference …Talk about making a difference …
8
Albanian Center for Economic Albanian Center for Economic Research, AlbaniaResearch, AlbaniaFundación Libertad, ArgentinaFundación Libertad, ArgentinaInstitute of Public Affairs, AustraliaInstitute of Public Affairs, AustraliaTIGRA®, AustriaTIGRA®, AustriaCenter for Economic and Political Center for Economic and Political Research, AzerbaijanResearch, AzerbaijanThe Nassau Institute, BahamasThe Nassau Institute, BahamasMaking Our Economy Right (MOER), Making Our Economy Right (MOER), BangladeshBangladeshScientific Research Mises Center, Scientific Research Mises Center, BelarusBelarusCentre for the New Europe, BelgiumCentre for the New Europe, BelgiumFundacion Libertad y Democracia Fundacion Libertad y Democracia (FULIDE), Bolivia(FULIDE), BoliviaInstituto Liberal do Rio de Janeiro, Instituto Liberal do Rio de Janeiro, BrazilBrazilInstitute for Market Economics, Institute for Market Economics, BulgariaBulgariaCambodia Institute of Development Cambodia Institute of Development Study, Cambodia Study, Cambodia The Fraser Institute, CanadaThe Fraser Institute, CanadaInstituto Libertad y Desarrollo, ChileInstituto Libertad y Desarrollo, ChileILP- Instituto Libertad y Progreso, ILP- Instituto Libertad y Progreso, ColombiaColombiaInstituto para la Libertad y el Instituto para la Libertad y el Análisis de Políticas, Costa RicaAnálisis de Políticas, Costa RicaThe Institute of Economics, CroatiaThe Institute of Economics, CroatiaLiberální Institut, Czech RepublicLiberální Institut, Czech RepublicCenter for Politiske Studier (CEPOS), Center for Politiske Studier (CEPOS), DenmarkDenmarkFundación Economía y Desarrollo Fundación Economía y Desarrollo Inc., Dominican RepublicInc., Dominican RepublicInstituto Ecuatoriano de Economía Instituto Ecuatoriano de Economía Política, EcuadorPolítica, Ecuador International University Concordia Audentes, Audentes University, EstoniaAssociation pour la Liberté Economique et le Progrès Social (ALEPS), France
Alternate Solutions Institute, PakistanAlternate Solutions Institute, PakistanFundación Libertad, PanamaFundación Libertad, PanamaCentro de Investigación y Estudios Centro de Investigación y Estudios Legales (CITEL), PeruLegales (CITEL), PeruThe Center for Research and The Center for Research and Communication, PhilippinesCommunication, PhilippinesCentrum im. Adama Smitha, PolandCentrum im. Adama Smitha, PolandCausa Liberal, PortugalCausa Liberal, PortugalRomania Think Tank, RomaniaRomania Think Tank, RomaniaInstitute of Economic Analysis, RussiaInstitute of Economic Analysis, RussiaThe F.A. Hayek Foundation, Slovak The F.A. Hayek Foundation, Slovak RepublicRepublicThe Free Market Foundation of Southern The Free Market Foundation of Southern Africa, South AfricaAfrica, South AfricaPathfinder FoundationPathfinder Foundation , Sri Lanka, Sri LankaInternational Research Foundation (IRF), International Research Foundation (IRF), Sultanate of OmanSultanate of OmanTimbro, SwedenTimbro, SwedenLiberales Institut, SwitzerlandLiberales Institut, SwitzerlandArthur Lok Jack Graduate School of Arthur Lok Jack Graduate School of Business, The University of the West Business, The University of the West Indies, Trinidad, W.I.Indies, Trinidad, W.I.Association for Liberal Thinking, TurkeyAssociation for Liberal Thinking, TurkeyThe Ukrainian Center for Independent The Ukrainian Center for Independent Political Research, UkrainePolitical Research, UkraineThe Institute of Economic Affairs, United The Institute of Economic Affairs, United KingdomKingdomCATO Institute, USACATO Institute, USAThe Centre for the Dissemination of The Centre for the Dissemination of Economic Knowledge (CEDICE), VenezuelaEconomic Knowledge (CEDICE), VenezuelaResearch Center for Entrepreneurship Research Center for Entrepreneurship and Development Policies, Vietnamand Development Policies, VietnamFree Market Center (FMC), YugoslaviaFree Market Center (FMC), YugoslaviaZambia Institute for Public Policy Analysis Zambia Institute for Public Policy Analysis (ZIPPA), Zambia(ZIPPA), Zambia
Member Institutes of Economic Freedom of the World Network
Society for Disseminating Economic Knowledge:“New Economic School – Georgia”, GeorgiaLiberales Institut, GermanyThe Institute of Economic Affairs, GhanaCentro de Investigaciones Económicas Nacionales, GuatemalaInstitut de Recherche pour la Liberte Economique et la Prosperite (IRLEP), HaitiHong Kong Centre for Economic Research, Hong KongSzazadveg Foundation, HungaryCentre for Social and Economic Research, IcelandCentre for Civil Society, IndiaThe Institute for Development of Economics and Finance, IndonesiaOpen Republic Institute, IrelandInstitute for Advanced Strategic and Political Studies, IsraelCentro Einaudi, ItalyBureau d'Analyse d'Ingenierie et de Logiciels (BAILO), Ivory CoastAfrican Research Center for Public Policy and Market Process, KenyaCenter for Free Enterprise, KoreaEconomic Policy Institute-Bishkek Consensus, Kyrgyz RepublicLithuanian Free Market Institute, LithuaniaD'Letzeburger Land, LuxembourgCentro de Investigación para el Desarrollo A.C., MexicoOpen Society Forum, MongoliaThe Center for Entrepreneurship and Economic Development, MontenegroThe New Zealand Business Roundtable, New ZealandInstitute of Public Policy Analysis, NigeriaCivita – Center for Business and Society Incorporated, Norway
9
Sample of Press Coverage forFraser Institute’ Economic Freedom of the World 2006
All Africa, AfricaAll Africa, AfricaAmbito Financiero, ArgentinaAmbito Financiero, ArgentinaEl Litoral, ArgentinaEl Litoral, ArgentinaDaily News, BahrainDaily News, BahrainDaily Star, BeirutDaily Star, BeirutMmegi, BotswanaMmegi, BotswanaEkonomika, BratislavaEkonomika, BratislavaCapital Weekly, BulgariaCapital Weekly, BulgariaInvestor, BulgariaInvestor, BulgariaNovinar, BulgariaNovinar, BulgariaSega, BulgariaSega, BulgariaSofia Echo, BulgariaSofia Echo, BulgariaCalgary Herald, CanadaCalgary Herald, CanadaVancouver Sun, CanadaVancouver Sun, CanadaGlobe and Mail, CanadaGlobe and Mail, CanadaNational Post, CanadaNational Post, CanadaSouth China Morning Post, South China Morning Post, ChinaChinaXinhua News Agency, ChinaXinhua News Agency, ChinaBusiness Day, ColombiaBusiness Day, ColombiaLa Colombiano, ColombiaLa Colombiano, ColombiaLa Republica, ColombiaLa Republica, ColombiaPortafolio, ColombiaPortafolio, ColombiaLa Prensa Libre, Costa RicaLa Prensa Libre, Costa RicaBaltic Business Weekly, Baltic Business Weekly, EstoniaEstonia
El Economista, MexicoEl Economista, MexicoEl Financiero, MexicoEl Financiero, MexicoEl Universal, MexicoEl Universal, MexicoTiempo, MexicoTiempo, MexicoDaily News, MontenegroDaily News, MontenegroDaily Press, MontenegroDaily Press, MontenegroMina business, MontenegroMina business, MontenegroPobjeda, MontenegroPobjeda, MontenegroFaz.Net, NetherlandsFaz.Net, NetherlandsInternational Herald Tribune, New ZealandInternational Herald Tribune, New ZealandBusiness Recorder, PakistanBusiness Recorder, PakistanPoland Today, PolandPoland Today, PolandRompres, RomaniaRompres, RomaniaBBC Monitoring, RussiaBBC Monitoring, RussiaKommersant, RussiaKommersant, RussiaBiz Day, South AfricaBiz Day, South AfricaBusiness Day, South AfricaBusiness Day, South AfricaMail and Guardian, South AfricaMail and Guardian, South AfricaNews 24, South AfricaNews 24, South AfricaSunday times, South AfricaSunday times, South AfricaLibertad Digital, SpainLibertad Digital, SpainTaipei Times, TaiwanTaipei Times, TaiwanBangkok Post, ThailandBangkok Post, ThailandTurkish Daily News, TurkeyTurkish Daily News, TurkeyBusiness Journal, USBusiness Journal, USTCS Daily, USTCS Daily, USWashington Times, USWashington Times, USEl Universal, VenezuelaEl Universal, Venezuela
Postman, EstoniaPostman, EstoniaL'Agefi Suisse, FranceL'Agefi Suisse, FrancePress Digest, Hong KongPress Digest, Hong KongReuters, Hong KongReuters, Hong KongStandard, Hong KongStandard, Hong KongBudapest Business Journal, HungaryBudapest Business Journal, HungaryMTI Eco News, HungaryMTI Eco News, HungaryBusiness Weekly, IcelandBusiness Weekly, IcelandFrettabladid, IcelandFrettabladid, IcelandBusiness Standard, IndiaBusiness Standard, IndiaTimes of India, IndiaTimes of India, IndiaEconomist, InternationalEconomist, InternationalZeev Klein, IsraelZeev Klein, IsraelCorrier Economica, ItalyCorrier Economica, ItalyIl Corriere della Sera, ItalyIl Corriere della Sera, ItalyIl Tempo, ItalyIl Tempo, ItalyIndiscreto, ItalyIndiscreto, ItalyJakarta Post, JakartaJakarta Post, JakartaKorea Economic Daily, KoreaKorea Economic Daily, KoreaKorea Herald, KoreaKorea Herald, KoreaKorea Times, KoreaKorea Times, KoreaSeoul Daily, KoreaSeoul Daily, KoreaYon Hap News, KoreaYon Hap News, KoreaLatvian News Agency, LatviaLatvian News Agency, LatviaBernama Daily, MalaysiaBernama Daily, MalaysiaBusiness Times, MalaysiaBusiness Times, MalaysiaDaily Express, MalaysiaDaily Express, Malaysia
10
Sub-national and Regional IndicesSub-national and Regional Indices
11
Economic Freedom of the Arab WorldEconomic Freedom of the Arab World
12
Marketization Index of Chinese Provinces
13
Economic Freedom Index of Indian States
14
Economic Freedom Index of German States
15
Economic Freedom Index of Argentinean Provinces
16
Economic Freedom of North AmericaEconomic Freedom of North America
17
18
Introducing the 2007 Economic Introducing the 2007 Economic Freedom of the World Index ResultsFreedom of the World Index Results
19
20
Overall Economic Freedom Index Overall Economic Freedom Index and the Top 10and the Top 10
0 2 4 6 8 10
Score (out of 10)
Australia
Ireland
Estonia
Canada
United Kingdom
United States
Average of Top 10
Switzerland
New Zealand
Singapore
Hong Kong
Source: The Fraser Source: The Fraser Institute.Institute.
21
Overall Economic Freedom Index Overall Economic Freedom Index and the Bottom Tenand the Bottom Ten
0 2 4 6 8 10
Score (out of 10)
ZimbabweMyanmar
Congo, Dem. R.Angola
Congo, Rep. OfCentral Afr. Rep.
VenezuelaBurundi
NigerTogoChad
Source: The Fraser Source: The Fraser Institute.Institute.
22
Economic Freedom Over TimeEconomic Freedom Over Time
6.15.5 5.4 5.5 5.7 6.0
6.4 6.4 6.4 6.4 6.4 6.6
0
2
4
6
8
10
Eco
nom
ic F
reed
om S
core
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005
Source: The Fraser Source: The Fraser Institute.Institute.
23
Economic Freedom and the Top 10Economic Freedom and the Top 10
24
Size of Government and the Top 10Size of Government and the Top 10
0 2 4 6 8 10
Score (out of 10)
Ireland
Australia
New Zealand
United Kingdom
Canada
Estonia
Average of Top 10
Switzerland
United States
Singapore
Hong Kong
Source: The Fraser Source: The Fraser Institute.Institute.
25
Legal System and Property Rights Legal System and Property Rights and the Top 10and the Top 10
0 2 4 6 8 10
Score (out of 10)
Estonia
United States
Hong Kong
Ireland
Singapore
Average of Top 10
Canada
United Kingdom
Australia
Switzerland
New Zealand
Source: The Fraser Source: The Fraser Institute.Institute.
26
Sound Money and the Top 10Sound Money and the Top 10
0 2 4 6 8 10
Score (out of 10)
Australia
United Kingdom
Estonia
Hong Kong
New Zealand
Average of Top 10
Canada
Ireland
Switzerland
Singapore
United States
Source: The Fraser Source: The Fraser Institute.Institute.
27
Freedom to Trade Internationally Freedom to Trade Internationally and the Top 10and the Top 10
0 2 4 6 8 10
Score (out of 10)
Australia
Switzerland
Canada
United States
United Kingdom
New Zealand
Average of Top 10
Estonia
Ireland
Singapore
Hong Kong
Source: The Fraser Source: The Fraser Institute.Institute.
28
Regulations and the Top 10Regulations and the Top 10
0 2 4 6 8 10
Score (out of 10)
Ireland
Australia
Canada
Estonia
Switzerland
United Kingdom
Average of Top 10
United States
Singapore
Hong Kong
New Zealand
Source: The Fraser Source: The Fraser Institute.Institute.
29
Credit Market Regulations Credit Market Regulations and the Top 10and the Top 10
0 2 4 6 8 10
Score (out of 10)
Switzerland
Singapore
Canada
United States
Australia
Ireland
Average of Top 10
Hong Kong
United Kingdom
Estonia
New Zealand
Source: The Fraser Source: The Fraser Institute.Institute.
30
Labor Market Regulations Labor Market Regulations and the Top 10and the Top 10
0 2 4 6 8 10
Score (out of 10)
Ireland
Estonia
Australia
Canada
United Kingdom
Average of Top 10
New Zealand
Switzerland
United States
Singapore
Hong Kong
Source: The Fraser Source: The Fraser Institute.Institute.
31
Business Regulations Business Regulations and the Top 10and the Top 10
0 2 4 6 8 10
Score (out of 10)
United Kingdom
United States
Estonia
Switzerland
Australia
Ireland
Average of Top 10
Canada
Hong Kong
Singapore
New Zealand
Source: The Fraser Source: The Fraser Institute.Institute.
32
Why is Economic Freedom Why is Economic Freedom Important?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
33
The impact on economic The impact on economic growth and developmentgrowth and development
34
Income (per person) of the Income (per person) of the Bottom TenBottom Ten
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP per Capita, 2005 (ppp)
BurundiCongo, Dem. R.
NigerCentral Afr. Rep.
Congo, Rep. OfChadTogo
ZimbabweAngola
Venezuela
Sources: The Fraser Institute; The World Bank, World Development Sources: The Fraser Institute; The World Bank, World Development Indicators Indicators CD-ROM, 2007.CD-ROM, 2007.
35
Income (per person) of the Top 10Income (per person) of the Top 10
$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000
GDP per Capita, 2005 (ppp)
EstoniaNew Zealand
SingaporeAustralia
United KingdomCanada
Hong KongSwitzerland
IrelandUnited States
Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.CD-ROM, 2007.
36
Per Capita Income and Economic Per Capita Income and Economic Freedom QuartileFreedom Quartile
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
GD
P P
er C
apit
a (p
pp
), 2
005
Least FreeQuartile
3rd Quartile 2nd Quartile Most FreeQuartile
Least Free …………… Most FreeLeast Free …………… Most FreeSources: The Fraser Institute; The World Bank, World Development Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.Indicators CD-ROM, 2007.
37
Growth in Real GDP Per Capita Growth in Real GDP Per Capita and Economic Freedom Quartileand Economic Freedom Quartile
0.0
0.5
1.0
1.5
2.0
2.5
GD
P P
er
Ca
pit
a %
Gro
wth
,
19
90
-20
05
Least FreeQuartile
3rd Quartile 2nd Quartile Most FreeQuartile
Least Free ……………..….. Most FreeLeast Free ……………..….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.CD-ROM, 2007.
38
Foreign Direct Investment and Foreign Direct Investment and Economic Freedom QuartileEconomic Freedom Quartile
0
2
4
6
8
10
12
14
16
Fo
reig
n d
ire
ct
inv
es
tme
nt,
ne
t in
flo
ws
(%
of
GD
P),
20
05
Least FreeQuartile
3rd Quartile 2nd Quartile Most FreeQuartile
Least Free ……………..….. Most FreeLeast Free ……………..….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.CD-ROM, 2007.
39
Economic Freedom,the Poor, andEconomic Freedom,the Poor, andInequalityInequality
40
Income Share of the Poorest 10% and Income Share of the Poorest 10% and
Economic FreedomEconomic Freedom
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Inco
me S
hare
Held
by
Lo
west
10%
, 1995-2
005
Least FreeQuartile
3rdQuartile
2ndQuartile
Most FreeQuartile
Least Free …….. Most FreeLeast Free …….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.ROM, 2007.
41
Per Capita Income of Poorest 10% Per Capita Income of Poorest 10% and Economic Freedomand Economic Freedom
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
Least Free Quartile 3rd Quartile 2nd Quartile Most Free Quartile0.0
0.5
1.0
1.5
2.0
2.5
3.0
Income amount held by lowest 10% (1995-2005)Income share held by lowest 10% (1995-2005)
Least Free …….. Most Free Least Free …….. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators
CD-ROM, 2007.CD-ROM, 2007.
42
Economic Freedom, Economic Freedom, Other Freedoms and Other Freedoms and DemocracyDemocracy
43
Economic Freedom Versus CorruptionEconomic Freedom Versus CorruptionHigher value indicates lower level of corruptionHigher value indicates lower level of corruption
0
2
4
6
8
10
Co
rru
pti
on
Ra
tin
g
(ou
t o
f 1
0)
Least FreeQuartile
3rd Quartile 2nd Quartile Most FreeQuartile
Least Free ………….. Most FreeLeast Free ………….. Most Free Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index,
available at http://www.transparency.org.available at http://www.transparency.org.
44
Economic Freedom and Political RightsEconomic Freedom and Political Rights Lower ratings indicate higher level of political rightsLower ratings indicate higher level of political rights
0.0
1.0
2.0
3.0
4.0
5.0
Po
liti
cal
Rig
hts
(o
ut
of
10)
Least FreeQuartile
3rd Quartile 2nd Quartile Most FreeQuartile
Least Free ……………. Most FreeLeast Free ……………. Most Free
Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 1972 through 2005, available at http://www.freedomhouse.org/.1972 through 2005, available at http://www.freedomhouse.org/.
45
Economic Freedom and Civil LibertiesEconomic Freedom and Civil Liberties Lower ratings indicate higher level of civil liberties Lower ratings indicate higher level of civil liberties
0.0
1.0
2.0
3.0
4.0
5.0
Civ
il L
iber
ties
(o
ut
of
10)
Least FreeQuartile
3rd Quartile 2nd Quartile Most FreeQuartile
Least Free …….. Most FreeLeast Free …….. Most Free Sources: The Fraser Institute; Freedom House, Freedom in the World Country Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 1972 through 2005, available at http://www.freedomhouse.org/.Ratings, 1972 through 2005, available at http://www.freedomhouse.org/.
46
The impact of Economic Freedom on The impact of Economic Freedom on the UN’s Human Development Index the UN’s Human Development Index and other indicators of well-beingand other indicators of well-being
47
Human Development Index and Human Development Index and Economic Freedom QuartilesEconomic Freedom Quartiles
0.0
0.2
0.4
0.6
0.8
1.0
Un
ited
Nat
ion
s H
um
an D
evel
op
men
t In
dex
Least FreeQuartile
3rd Quartile 2nd Quartile Most FreeQuartile
Least Free ……………. Most FreeLeast Free ……………. Most Free
Sources: The Fraser Institute; United Nations Development Programmme, Human Sources: The Fraser Institute; United Nations Development Programmme, Human Development Indicators 2006, available at http://hdr.undp.org/.Development Indicators 2006, available at http://hdr.undp.org/.
48
Life Expectancy at Birth and Life Expectancy at Birth and Economic Freedom QuartilesEconomic Freedom Quartiles
0
20
40
60
80
Yea
rs
Least FreeQuartile
3rd Quartile 2nd Quartile Most FreeQuartile
Least Free ……………. Most FreeLeast Free ……………. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-Sources: The Fraser Institute; The World Bank, World Development Indicators CD-
ROM, 2007.ROM, 2007.
49
Infant Mortality and Economic Infant Mortality and Economic Freedom QuartileFreedom Quartile
0
20
40
60
80
Per
1,0
00 li
ve b
irth
s, 2
005
Least FreeQuartile
3rd Quartile 2nd Quartile Most FreeQuartile
Least Free ………..…. Most FreeLeast Free ………..…. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators
CD-ROM, 2007.CD-ROM, 2007.
50
% of Population Using Improved % of Population Using Improved Water SourcesWater Sources
0
20
40
60
80
100
Per
cen
tag
e
Least FreeQuartile
3rd Quartile 2nd Quartile Most FreeQuartile
Least Free …………….. Most FreeLeast Free …………….. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators
CD-ROM, 2007.CD-ROM, 2007.
51
New research:New research: Spread of Global Spread of Global Economic FreedomEconomic Freedom
52
Spread of Global Economic FreedomSpread 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.
53
Spread of Global Economic Freedom 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.
54
Policy ImplicationsPolicy 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.
55
ConclusionsConclusionsEconomic Freedom
Increases prosperity for allReduces poverty Increases other freedomsImproves quality of life
All this can be seen in today’s data All this can be seen in today’s data and lessons from historyand lessons from history
56
www.freetheworld.comwww.freetheworld.com
www.fraserinstitute.cawww.fraserinstitute.ca