Global Economic Freedom Up Slightly
The Economic Freedom of the World — an annual report, co-published by the Cato Institute, the Canada-based Fraser Institute, and the Economic Freedom Network, a group of independent research and educational institutes in nearly 100 nations and territories worldwide — seeks to measure the consistency of the institutions and policies of various countries with voluntary exchange and the other dimensions of economic freedom.
Based on data from 2016 (the most recent year for which comparable data is available), the report is the world’s premier measurement of economic freedom, using 42 distinct variables to create an index ranking countries around the world based on policies that encourage economic freedom.
Economic freedom is measured in five different areas: (1) size of government, (2) legal system and property rights, (3) access to sound money, (4) freedom to trade internationally, and (5) regulation of credit, labor, and business.
Each country is rated on a 0-10 scale where a higher value indicates a higher level of economic freedom.
The United States returned to the top 10 with the 6th freest economy after an absence of several years, with an overall rating of 8.03, according to the 2018 Index.
“The increase in the United States’ economic freedom score is welcome, but it remains notably below the level it enjoyed at the beginning of this century,” said Ian Vasquez, director of the Center for Global Liberty and Prosperity at the Cato Institute.
During the 2009-2016 term of President Obama, the U.S. score initially continued to decline as it had under President Bush. From 2013 to 2016, however, the U.S. increased its rating from 7.74 to its current standing. This is still well below the high-water mark of 8.62 in 2000 at the end of the Clinton presidency.
Hong Kong and Singapore occupy the top two positions. The next highest scoring nations are New Zealand, Switzerland, Ireland, United States, Georgia, Mauritius, United Kingdom, Australia and Canada, the last two tied for 10th place. Venezuela is again ranked as the lowest in economic freedom out of the countries of this year’s report.
The rankings of some other major countries are Germany (20th), Japan (41st), Italy (54th), France (57th), Mexico (82nd), Russia (87th), India (96th), China (108th), and Brazil (144th).
Three new countries — Belarus, Iraq, and Sudan — were added to the Index this year, bringing the total number of jurisdictions measured to 162. The Index also integrates differential legal treatment according to gender, thus taking into account the fact that women do not have the same level of economic freedom as men do in all nations.
”Women benefit from greater economic freedom as there is greater gender equality in countries that are more economically free,“ continued Vasquez.
The cornerstones of economic freedom include personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately owned property. The data shows people living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer life spans.
Nations in the top quartile of economic freedom had an average per capita GDP of US $40,376 in 2016, compared to $5,649 for bottom quartile nations. Moreover, the average income of the poorest 10% in the most economically free nations is almost twice the average per capita income in the least free nations. Life expectancy is 79.5 years in the top quartile compared to 64.4 years in the bottom quartile, and happiness levels are much higher in economically free nations than in unfree nations.
