The Cato Institute

Global Economic Freedom Up Slightly

For the first time in almost a decade, the United States  ranks within the top ten economically freest countries…

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 (20^th), Japan (41^st), Italy (54^th), France (57^th), Mexico (82^nd), Russia (87^th), India (96^th), China (108^th), and Brazil (144^th).

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.

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U.S. Ranks 11th in Global Economic Freedom

The United States, for decades amongst the most economically free countries in the world, now ranks 11th in the annual Economic Freedom of the World report….

The foundations of economic freedom are personal choice, voluntary exchange, and open markets. As Adam Smith, Milton Friedman, and Friedrich Hayek have stressed, freedom of exchange and market coordination provide the fuel for economic progress. Without exchange and entrepreneurial activity coordinated through markets, modern living standards would be impossible.

Potentially advantageous exchanges do not always occur. Their realization is dependent on the presence of sound money, rule of law, and security of property rights, among other factors. 

Economic Freedom of the World — co-published by the Cato Institute, the Fraser Institute in Canada and more than 70 think tanks around the world — seeks to measure the consistency of the institutions and policies of various countries with voluntary exchange and the other dimensions of economic freedom.

Hong Kong and Singapore retain the top two positions with a score of 8.97 and 8.81 out of 10, respectively. The rest of this year’s top scores are New Zealand, 8.48; Switzerland, 8.44; Ireland, 8.19; the United Kingdom, 8.05; Mauritius, 8.04; Georgia, 8.01; Australia, 7.99; and Estonia, 7.95.

The United States, for decades among the top four countries in the index, ranks 11th. The rankings of other large economies in this year’s index are Germany (23rd), South Korea (32nd), Japan (39th), France (52nd), Italy (54th), Mexico (76th), India (95th), Russia (100th), China (112th), and Brazil (137th). The 10 lowest-rated countries are: Iran, Chad, Myanmar, Syria, Libya, Argentina, Algeria, Republic of Congo, Central African Republic, and, lastly, Venezuela.

Nations in the top quartile of economic freedom had an average per capita GDP of US $42,463 in 2015, compared to $6,036 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 80.7 years in the top quartile compared to 64.4 years in the bottom quartile, and political and civil liberties are considerably higher in economically free nations than in unfree nations.

This year’s report, for the first time, adjusts the rankings for gender equality. Countries receive lower scores if women there are not legally accorded the same level of economic freedom as men.

This year’s report also finds that support for anti-immigrant, populist parties in OECD countries increases where economic freedom is low and state-provided social welfare protection is high.

The first Economic Freedom of the World report, published in 1996, was the result of a decade of research by a team which included several Nobel Laureates and over 60 other leading scholars in a broad range of fields, from economics to political science, and from law to philosophy. This is the 21st edition of Economic Freedom of the World and this year’s publication ranks 159 countries and territories for 2015, the most recent year for which data are available.

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Hong Kong Once Again Comes in First in Global Ranking of Economic Freedom

Hong Kong is once again the most economically free jurisdiction in the world, according to the annual Economic Freedom of the World Report. 

The foundations of economic freedom are personal choice, voluntary exchange, and open markets. As Adam Smith, Milton Friedman, and Friedrich Hayek have stressed, freedom of exchange and market coordination provide the fuel for economic progress. Without exchange and entrepreneurial activity coordinated through markets, modern living standards would be impossible.

Potentially advantageous exchanges do not always occur. Their realization is dependent on the presence of sound money, rule of law, and security of property rights, among other factors. Economic Freedom of the World seeks to measure the consistency of the institutions and policies of various countries with voluntary exchange and the other dimensions of economic freedom.

Global economic freedom increased slightly in this year’s report, but remains below its peak level of 6.92 in 2007. The average score increased to 6.86 in 2013, the most recent year for which data is available. In this year’s index, Hong Kong retains the highest rating for economic freedom, 8.97 out of 10. The rest of this year’s top scores are Singapore, 8.52; New Zealand, 8.19; Switzerland, 8.16; United Arab Emirates, 8.15; Mauritius, 8.08; Jordan, 7.93; Ireland, 7.90; Canada, 7.89; and the United Kingdom and Chile at 7.87.

The United States, once considered a bastion of economic freedom, now ranks 16th in the world with a score of 7.73. Due to a weakening rule of law, increasing regulation, and the ramifications of wars on terrorism and drugs, the United States has seen its economic freedom score plummet in recent years, compared to 2000 when it ranked second globally.

The rankings of other large economies in this year’s index are Japan (26th), Germany (29th), South Korea (39th), Italy (68th), France (70th), Mexico (93st), Russia (99th), China (111th), India (114th), and Brazil (118th).

Nations in the top quartile of economic freedom had an average per capita GDP of US$38,601 in 2013, compared to US$6,986 for bottom quartile nations. Moreover, the average income of the poorest 10% in the most economically free nations is about 50% greater than the overall average income in the least free nations. Life expectancy is 80.1 years in the top quartile compared to 63.1 years in the bottom quartile, and political and civil liberties are considerably higher in economically free nations than in unfree nations.

Co-published by the Cato Institute, the Fraser Institute in Canada, and more than 70 think tanks around the world. This year’s publication ranks 157 nations for 2014, the most recent year for which data are available.

Read the Economic Freedom of the World Report…

Global Economic Freedom Up Slightly, While Economic Freedom in the U.S. Continues to Fall

As Adam Smith, Milton Friedman, and Friedrich Hayek have stressed, freedom of exchange and market coordination provide the fuel for economic progress. 

Unfortunately, the 2015 Economic Freedom of the World report demonstrates that, while global economic freedom increased slightly, the United States, long considered the standard bearer for economic freedom among large industrial nations, has fallen precipitously—from second in 2000 to 8th in 2005 to 16th in this year’s report.

The U.S. has seen its economic freedom score plummet in recent years due to the expansion of the regulatory state, the war on terror, the war on drugs, and the erosion of property rights due to greater use of eminent domain.

“Given the strong link between economic freedom and improvements in the broad range of human well-being, the United States’ long-term decline is particularly worrisome and could cut its historic growth rate in half,” said Ian Vasquez, Director of the Center for Global Liberty and Prosperity at the Cato Institute.

Here’s how the U.S. scored in key components of economic freedom (from 0 to 10 where a higher value indicates a higher level of economic freedom):

• Size of Government: changed to 6.61 from 6.96 in last year’s report, falling to a rank of 74 from 62
• Legal System and Security of Property Rights: changed to 6.97 from 7.02, falling to a rank of 29 from 28
• Access to Sound Money: changed to 9.42 from 9.32, rising to a rank of 38 from 41
• Freedom to Trade Internationally: changed to 7.36 from 7.70, falling to a rank of 74 from 40
• Regulation of Credit, Labor and Business: changed to 8.27 from 8.06, rising to a rank of 13 from 21

Hong Kong topped this year’s ranking once again, followed by Singapore, New Zealand, Switzerland, and the United Arab Emirates. Other major countries’ rankings include Canada (9), the United Kingdom (10), Japan (26), Russia (99), China (111), and India (114).

Venezuela held on to the lowest ranking out of 157 countries.

Research shows people living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer life spans. The cornerstones of economic freedom include personal choice, voluntary exchange, freedom to compete, and security of private property.

“Economic freedom is unambiguously good for the poor, who enjoy significantly higher incomes in the most economically free countries compared to less free nations,” said Vasquez.

The annual Economic Freedom of the World report is produced by the Fraser Institute, a Canadian think-tank, in cooperation with the Cato Institute, and the Economic Freedom Network, a group of independent research and educational institutes in nearly 90 nations and territories worldwide.

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 security of property rights, (3) access to sound money, (4) freedom to trade internationally, and (5) regulation of credit, labor, and business.

• 2015 Economic Freedom of the World