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Economic Freedom of the World: 2009 Annual Report Michael Walker Senior Fellow The Fraser institute Released at Economic Freedom of the World Asian Network.

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Presentation on theme: "Economic Freedom of the World: 2009 Annual Report Michael Walker Senior Fellow The Fraser institute Released at Economic Freedom of the World Asian Network."— Presentation transcript:

1 Economic Freedom of the World: 2009 Annual Report Michael Walker Senior Fellow The Fraser institute Released at Economic Freedom of the World Asian Network Meeting Hosted by Friedrich Naumann Stiftung Siam Reap Cambodia October 9, 2009

2 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

3 Economic Freedom of the World Project Objective: find a way to measure economic freedom and explore the connection between it and other variables 25 year project Led by the late Milton Friedman and Rose Friedman and Michael Walker Involved 60 of the world’s top scholars

4 What is the Economic Freedom of the World Index? u An annual compilation of data representing factors which make a country economically free u Authors: James Gwartney and Robert Lawson u A compendium of 42 government policies affecting economic freedom based on objective data or independent surveys u 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 u Now a collaboration of Institutes in more than 70 different countries

5 Albanian Center for Economic Research (ACER), 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 Le Centre des Affaires Humaines (CEDAH),Burkina Faso The Cambodia Institute of Development Study, Cambodia Instituto Libertad y Desarrollo, Chile Instituto Libertad y Progreso (ILP), 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 Audentes, Estonia Association pour la Liberté Economique et le Progrès Social (ALEPS), France Center for Business and Society Incorporated (Civita), Norway International Research Foundation (IRF), Oman Alternate Solutions Institute, Pakistan Pal-Think for Strategic Studies, Palestine 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 Free Market Center (FMC), Serbia The F.A. Hayek Foundation, Slovak Republic The Free Market Foundation of Southern Africa, South Africa Pathfinder Foundation, Sri Lanka 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 (IEA), United Kingdom CATO Institute, USA The Centre for the Dissemination of Economic Knowledge (CEDICE), Venezuela Research Center for Entrepreneurship Development, Vietnam Zambia Institute for Public Policy Analysis (ZIPPA), Zambia Member Institutes of Economic Freedom of the World Network 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 (RSE), Iceland Centre for Civil Society, India The Institute for Development of Economics and Finance, Indonesia Open Republic Institute, Ireland Jerusalem Institute for Market Studies, Israel Centro Einaudi, Italy Bureau d'Analyse d'Ingenierie et de Logiciels (BAILO), Ivory Coast Young Entrepreneurs Association, Jordan 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 Prosperity Foundation, Nepal The New Zealand Business Roundtable, New Zealand Initiative for Public Policy Analysis, Nigeria

6 Members have created Sub-national and Regional Indices

7 Economic Freedom of the Arab World

8 Marketization Index of Chinese Provinces

9 Economic Freedom Index of Indian States

10 Economic Freedom Index of German States

11 Economic Freedom Index of Argentinean Provinces

12 12

13 Introducing the 2009 Economic Freedom of the World Index

14

15 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, third party data and independent surveys for 141 countries

16 16 And the Winners Are!

17 The Top 10 Source: The Fraser Institute.

18 The Bottom Ten Losers Are Source: The Fraser Institute.

19 And the Asian Winners Are….

20 20 In the Category Size of Government The winners ARE….

21 21 The Winners in the Category Size of Government Source: The Fraser Institute.

22 22 Progress toward reducing The Size of Government Source: The Fraser Institute.

23 23 The Winners in the Category Rule of Law and Property Rights ARE…

24 24 Source: The Fraser Institute.

25 25 Progress toward A Better Legal System & Property Rights Source: The Fraser Institute.

26 26 The Winners in the Category Sound Money ARE…..

27 27 Winners in the Category Sound Money Source: The Fraser Institute.

28 28 Progress toward Sound Money Source: The Fraser Institute.

29 29 The Winners in the Category Freedom to Trade with Foreigners ARE…..

30 30 Winners in the Freedom to Trade With Foreigners Source: The Fraser Institute.

31 31 Progress toward Freedom to Trade with Foreigners Source: The Fraser Institute.

32 32 The Winners in the Category Regulation of Business, Labour and Capital Markets ARE…..

33 33 Winners in the category Regulation Source: The Fraser Institute.

34 34Regulation Source: The Fraser Institute.

35 35 The Asian Winners Overall Source: The Fraser Institute.

36 36 Overall Economic Freedom Score Source: The Fraser Institute.

37 37 Overall Economic Freedom Rank Source: The Fraser Institute.

38 38

39 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

40 The impact on economic growth and development

41 Income (per person) of the Bottom Ten Income (per person) of the Bottom Ten Sources: The Fraser Institute; The World Bank, World Development Indicators, 2009.

42 Income (per person) of the Top 10 Sources: The Fraser Institute; The World Bank, World Development Indicators, 2009.

43 Per Capita Income and Economic Freedom Quartile Least Free ………………... Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2009.

44 Growth in Real GDP Per Capita and Economic Freedom Quartile Least Free ……………..…… Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2009.

45 Foreign Direct Investment and Economic Freedom Quartile Least Free ……………...…... Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2009.

46 Economic Freedom, the Poor, and Inequality

47 Per Capita Income of Poorest 10% and Economic Freedom Least Free ……………………. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2009.

48 Economic Freedom, Other Freedoms and Democracy

49 Economic Freedom and Corruption Least Free …………………. Most Free Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, 2006/2007, available at

50 Economic Freedom and Political Rights Least Free …………………. Most Free Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2007, available at

51 Economic Freedom and Civil Liberties Least Free …………………… Most Free Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2007, available at

52 The impact of Economic Freedom on the UN’s Human Development Index and other indicators of well-being

53 Human Development Index and Economic Freedom Quartiles Least Free ……………. Most Free Sources: The Fraser Institute; United Nations Development Programmme, Human Development Indicators 2009, available at

54 Life Expectancy at Birth and Economic Freedom Quartiles Least Free ……………. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2009.

55 Infant Mortality and Economic Freedom Quartile Least Free ………..………. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2009.

56 % of Population Using Improved Water Sources Least Free ………………... Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2009.

57 Environmental Performance and Economic Freedom Quartile Least Free ………..……….. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2009.

58 58 Is the EFW Project Working? Is Global Policy Performance improving? Is the Economic Freedom of the World ranking of policy producing better policy choices? Can the Economic Freedom of the World Data show us whether there is improvement? The following slides examine global policy conduct for patterns of development

59 59 What would we expect to find if the EFW process is working? A process of learning from experience Starting from disagreement amongst countries about the correct course of policy we would hope to see a reduction over time in the amount of policy variation and increasing adoption of polices that enhance economic freedom The following chart sequence shows what we would observe in a world which was learning from experience

60 60 What a desirable evolution of policy would look like

61 61 How has the Evolution toward Economic Freedom Actually Proceeded? In the following slides we examine the extent of agreement amongst countries about freedom policy choices over a thirty year period We examine each component of economic freedom separately and then the total measure

62 62 Global Agreement about The Size of Government

63 63 Global Agreement about The Size of Government

64 64 Evolution in Global Policy about the Size of Government

65 65 Global Agreement about property rights and the rule of law

66 66 Global Agreement about property rights and the rule of law

67 67 Evolution in Global Policy about Property Rights and Rule of Law

68 68 Global Agreement about the need for sound money

69 69 Global Agreement about the need for sound money

70 70 Evolution in Global Policy about the need for sound money

71 71 The Triumph of Milton Friedman Over World Inflation Rates

72 72 Global Agreement about Tariffs and Trade regulation

73 73 Global Agreement about Tariffs and Trade regulation

74 74 Evolution of Global Policy about Tariff and Trade Regulations

75 75 Global Agreement about regulation of business, labour and capital

76 76 Global Agreement about regulation of business, labour and capital

77 77 Evolution of Global Policy about Regulation

78 78 Global Agreement about Economic Freedom

79 79 Global Agreement about Economic Freedom

80 80 Evolution of Global Pursuit of Economic Freedom

81 Conclusions Economic Freedom Increases prosperity for all Reduces poverty Increases other freedoms Improves quality of life There is increasing global agreement about the need for more economic freedom Recent deviations from some aspects of economic freedom will be unlikely to persist in the face of the general move toward more freedom

82 All Data used in this report Available At For more ideas about Freedom Visit

83 83

84 84 Marketization Index of the Chinese Provinces

85 85 General gov't consumption as share of total consumption Source: The Fraser Institute.

86 86 Transfers and Subsidies as a Share of GDP Source: The Fraser Institute.

87 87 Gov't enterprises and investment as a share of gross investment Source: The Fraser Institute.

88 88 Top marginal tax rate Source: The Fraser Institute.

89 89 Independence of the Judiciary Source: The Fraser Institute.

90 90 Impartial Courts Source: The Fraser Institute.

91 91 Protection of Intellectual Property Source: The Fraser Institute.

92 92 Law and Order Source: The Fraser Institute.

93 93 Integrity of the legal system Source: The Fraser Institute.

94 94 Sound Money Source: The Fraser Institute.

95 95 Southeast Asian Countries and the Top Ten Taxes on International Trade Source: The Fraser Institute.

96 96 Taxes on International Trade Source: The Fraser Institute.

97 97 Regulatory Trade Barriers Source: The Fraser Institute.

98 98 International Capital Market Controls Source: The Fraser Institute.

99 99 International Capital Market Controls Source: The Fraser Institute.

100 100 Credit Market Regulation Source: The Fraser Institute.

101 101 Credit Market Regulation Source: The Fraser Institute.

102 102 Labor Market Regulations Source: The Fraser Institute.

103 103 Credit Market Regulations and the Top 10 Source: The Fraser Institute.

104 104 Labor Market Regulations and the Top 10 Source: The Fraser Institute.

105 105 Business Regulations and the Top 10 Source: The Fraser Institute.

106 106 Business Regulations Business Regulations Source: The Fraser Institute.

107 107 World Economic Freedom Source: The Fraser Institute.

108 108 The Race Toward The Market in Asia Source: The Fraser Institute.

109 109 The Race Toward The Market in Asia Source: The Fraser Institute.


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