1. Economic Freedom of the World: 2006 Annual Report
Fraser Institute
Policy Briefing
September 7, 2006
Mark Mullins, Executive Director
Amela Karabegovic, Senior Research Economist

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
20 year project
Led by Professor Milton Friedman, Rose Friedman and Michael Walker
Involved 60 of the world’s top scholars

4. 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 38 government policies affecting economic freedom based on objective data or independent surveys
A ranking of 130 countries representing 93% 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 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 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 130 countries

7. Talk about making a difference …

8. Member Institutes of Economic Freedom of the World Network
Albanian Center for Economic 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 Incorporated, Norway
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
Zambia Institute for Public Policy Analysis (ZIPPA), Zambia

9. Sample of Press Coverage for
Fraser Institute’ Economic Freedom of the World 2005
All Africa, Africa
Asia Pulse, Australia
Australian Financial Review, Australia
Scoop, Australia
Latin America News Digest, Brazil
Capital Weekly, Bulgaria
El Diario de Hoy, Central America
Diario Financiero, Chile
El Financiero, Chile
Xinhua News Agency, China
South China Morning Post, China
China Daily-Hong Kong Edition, China
Ambiito Juridico, Colombia
Portafolio, Colombia
La Prensa Libre, Costa Rica
El Financiero, Costa Rica
Hina, Croatia
Hospodarske Noviny, Czech Republic
Borsen, Denmark
Jyllands-Posten, Denmark
Baltic Business Weekly, Estonia
BBC Monitoring, Europe
Radio Liberty, Georgia
Frankfurter Allgemeine, Germany
Vereinigte, Germany
Financial Express, India
Hindustan Times, India
Journal of Commerce, International
El Cronista Comercial, International
El Nacional, International
International Herald Tribune, International
Israel Business Arena, Israel
Jerusalem Post, Israel
ItaliaOggi, Italy
Il Sole, Italy
Il Giornale, Italy
Korea Times, Korea
Seoul Daily, Korea
Korea Herald, Korea
Noticias Latinoamericanas, Mexico
Agencia Mexicanan De Noticias, Mexico
Republika, Montenegro
Financial Times Deutschland, Netherlands
Dominion Post, New Zealand
Times of Oman, Oman
Daily times, Pakistan
Rzeczpospolita, Poland
La Tribune, Canada
Montreal Gazette, Canada
Rumanian, Romania
St. Petersburg Times, Russia
Moscow Times, Russia
Interfax, Russia
Russian Publication, Russia
Plenipotentiary, Russia
Republika, Serbia/Montenegro
Vijesti, Serbia/Montenegro
Pobjeda, Serbia/Montenegro
Straits Times, Singapore
Ekonomicka Sloboda, Slovakia
Hodin Daily, Slovakia
Pravda Daily, Slovakia
Business Day, South Africa
El Economista, Spain
Libertad Digital, Spain
L'Agefl Suisse, Switzerland
Bangkok Post, Thailand
Trinidad Guardian, Trinidad & Tobago
Financial Times, UK
Investor's Business Daily, US
Financial Times, US
El Nacional, Venezuela

11. Introducing the 2006 Economic Freedom of the World Index Results

12. Overall Economic Freedom Index and the Top 10
Source: The Fraser Institute.

13. The top 10 and how they got there
Source: The Fraser Institute.

14. Countries having significant improvement since 1970
Source: The Fraser Institute.

15. Countries having significant deterioration since 1970
Source: The Fraser Institute.

16. Overall Economic Freedom Index and the Bottom Ten
Source: The Fraser Institute.

17. Economic Freedom Over Time
Source: The Fraser Institute.

18. Economic Freedom Over Time Adjusted for Population
Source: The Fraser Institute.

19. Economic Freedom and the Top 10

20. Size of Government and the Top 10
Source: The Fraser Institute.

21. Size of Government and the Top 10
Source: The Fraser Institute.

22. Size of Government and the Top 10
Source: The Fraser Institute.

23. Legal System and Property Rights and the Top 10
Source: The Fraser Institute.

24. Legal System and Property Rights and the Top 10
Source: The Fraser Institute.

25. Legal System and Property Rights and the Top 10
Source: The Fraser Institute.

26. Sound Money and the Top 10
Source: The Fraser Institute.

27. Sound Money and the Top 10
Source: The Fraser Institute.

28. Sound Money and the Top 10
Source: The Fraser Institute.

29. Freedom to Trade Internationally and the Top 10
Source: The Fraser Institute.

30. Freedom to Trade Internationally and the Top 10
Source: The Fraser Institute.

31. Freedom to Trade Internationally and the Top 10
Source: The Fraser Institute.

32. Regulations and the Top 10
Source: The Fraser Institute.

33. Regulations and the Top 10
Source: The Fraser Institute.

34. Regulations and the Top 10
Source: The Fraser Institute.

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

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

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

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

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

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

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

42. 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

43. The impact on economic growth and development

44. Income (per person) of the Bottom Ten
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2006.

45. Income (per person) of the Top 10
Note that Luxembourg was not one of the top ten last year.
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2006.

46. Per Capita Income and Economic Freedom Quartile
Least Free …………… Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.

47. Growth in Real GDP Per Capita and Economic Freedom Quartile
Least Free ……………..….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.

48. Economic Freedom and Unemployment
Least Free ……………..….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.

49. New research: Economic Freedom and Foreign Aid

50. Economic Freedom and Foreign Aid:
Millennium Development Goals
Halving poverty by 2015
Lack of empirical evidence on the effectiveness of aid

51. Economic Freedom and Foreign Aid:
Background:
As of 2000, approximately 75% of world’s poor live in Africa
In 1970, less than 15 percent of world’s poor lived in the region
From 1970 to 2000, Africa received $400 billions in foreign aid
Aid has growth continuously from 5% of GNI to 18% in 1995 when it peaked.

52. Economic Freedom and Foreign Aid:
New Research by professor William Easterly:
Foreign aid has no positive impact on economic growth in poor nations
This indicates that the “push” from foreign aid is ineffective in breaking the poverty trap
Easterly shows that once economic freedom is controlled for, poor nations grow faster than rich nations

53. Policy Implications:
Efforts to reduce poverty may not produce the results
Policy should be to promote economic freedom
Economic freedom has been shown to promote economic prosperity (and many other good outcomes)

54. Economic Freedom,the Poor, and Inequality

55. Human Poverty Index and Economic Freedom Quartile
Least Free …………..…. Most Free
Sources: The Fraser Institute; United Nations Development Programmme, Human Development Indicators 2005, available at

56. Income Share of the Poorest 10% and Economic Freedom
Least Free …….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD- ROM, 2005.

57. Per Capita Income of Poorest 10% and Economic Freedom
Least Free …….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.

58. Economic Freedom, Other Freedoms and Democracy

59. Economic Freedom Versus Corruption Higher value indicates lower level of corruption
Least Free ………….. Most Free
Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index 2005, available at

60. Least Free ……………. Most Free
Economic Freedom and Political Rights Lower ratings indicate higher level of political rights
Least Free ……………. Most Free
Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, through 2004, available at

61. Economic Freedom and Civil Liberties Lower ratings indicate higher level of civil liberties
Least Free …….. Most Free
Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 1972 through 2004, available at

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

63. Human Development Index and Economic Freedom Quartiles
Least Free ……………. Most Free
Sources: The Fraser Institute; United Nations Development Programmme, Human Development Indicators 2005, available at

64. Life Expectancy at Birth and Economic Freedom Quartiles
Least Free ……………. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD- ROM, 2005.

65. Infant Mortality and Economic Freedom Quartile
Least Free ………..…. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.

66. Economic Freedom and Labor force, children 10-14 (% of age group)
Least Free ……………. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.

67. % of Population Using Improved Water Sources
Least Free …………….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.

68. Economic Freedom and Happiness
Causes of Happiness, 68 nation study
Variables included:
Income
Economic Growth
Inflation
Only two variables had large effects:
Economic Freedom
Life Expectancy
Unemployment
Education
Political freedom

69. Economic Freedom and Happiness

70. 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

71. www.freetheworld.com www.fraserinstitute.ca