Presentation on theme: "Economic Freedom of the World: 2008 Annual Report Fraser Institute September 16, 2008."— Presentation transcript:
Economic Freedom of the World: 2008 Annual Report Fraser Institute September 16, 2008
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
Economic Freedom of the World Project Objective: find a way to measure economic freedom and explore the connection between it and other indicators 20 year project Led by the late Milton Friedman, Rose Friedman and Michael Walker Involved 60 of the worlds top scholars, including three Nobel Laureates: Milton Friedman, Douglass North, and Gary Becker
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 worlds population according to the extent to which they permit their citizens to be economically free u Now a collaboration of Institutes in 76 different nations and territories
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
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
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 Cambodia Institute of Development Study, Cambodia The Fraser Institute, Canada 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, Audentes University, 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 Free Society Institute (FSI), Slovenia 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 and Tobago 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 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 (CEED), Montenegro The Prosperity Foundation, Nepal The New Zealand Business Roundtable, New Zealand Institute of Public Policy Analysis, Nigeria
Sample of Press Coverage for Fraser Institute Economic Freedom of the World 2007 All Africa, Africa Business Day, Africa Business.lafrica.com, Africa La Nacion, Argentina Universia, Argentina Hetq Online, Armenia Gulf Daily News, Bahrain Zero Hora, Brazil Portal Acionista, Brazil O'Globo, Brazil Sofia Echo, Bulgaria Bulgarian Paper, Bulgaria Calgary Sun, Canada Globe and Mail, Canada National Post, Canada Toronto Sun, Canada Toronto Star, Canada Vancouver Sun, Canada China Post, China China Knowledge online, China Xinhua News, China Chinese Paper, China Business Day, Colombia Listin Diaro, Dominican Republic El Universon, Ecuador Faz.net, Germany German paper, Germany Die Presse, Germany Hong Kong Daily, Hong Kong Living in Hong Kong, Hong Kong Portfolio, Hungary Business Standard, India India Paper, India Dawn, Pakistan Invertia Peru, Peru Philippine Daily Enquirer, Philippines Poland Press, Poland Rompres, Romania Russian Paper, Russia Blic Online, Serbia Finance, Slovenia Izvoznookno, Slovenia Slovanian Press agency, Slovenia The Strait Times, Singapore IVO.co.za, South Africa Mail and Guardian, South Africa News 24, South Africa Actualidad Economica, Spain Agencia EFE, Spain Europa Press, Servicio Economico, Spain Invertia, Spain Terra Espana, Spain Sudanile website, Sudan Al Khaleej Newspaper, UAE Khaleej Times, UAE Bull & Bear Financial Report, US Business Journal, US OpEdNews.com (Newtown,PA) Public Choice, US TradingMarkets.com, US Wall Street Journal, US Yahoo Finance, US El Universal, Venezuela El Nacional, Venezuela Invertia, Venezuela Business News, Zambia Zimbabwe Guardian, Zimbabwe Zimbabwe Standard, Zimbabwe Business Standard, International El Economista, International Economist, International US4Arabs, International Reuters, International Globes Israel, Israel Israel Business Area, Israel Jerusalem Post, Israel Il Sole, Italy Al Ghad, Jordan Alrai Newspaper, Jordan Addustour Newspaper, Jordan Greaterkashmir.com, Kashmir Donga Daily, Korea Segye Daily, Korea Baltic Business Weekly, Latvia Latvian News Agency, Latvia Baltic Business Weekly, Latvia Nufooz web, Lebanon Edge Financial, Malaysia Edge Daily, Malaysia Agencia Mexicana de Noticias, Mexico La Jordana, Mexico La Cronica, Mexico UB Post, Mongolia Republika, Montenegro Market Montenegro, Montenegro Scoop, New Zealand Press, New Zealand Arabic Paper, Oman Oman Tribune, Oman Times of Oman, Oman Pakistan Press International, Pakistan The Post, Pakistan Pakistan Defence, Pakistan AHN, Pakistan
Size of Government and the Top 10 Source: The Fraser Institute.
Legal System and Property Rights and the Top 10 Source: The Fraser Institute.
Sound Money and the Top 10 Source: The Fraser Institute.
Freedom to Trade Internationally and the Top 10 Source: The Fraser Institute.
Regulations and the Top 10 Source: The Fraser Institute.
Credit Market Regulations and the Top 10 Source: The Fraser Institute.
Labor Market Regulations and the Top 10 Source: The Fraser Institute.
Business Regulations and the Top 10 Source: The Fraser Institute.
Why is Economic Freedom Important? Economic rights are fundamental rights in the sense that without them there can be no political or civil freedoms They are a prerequisite for growth and development They are a prerequisite for broader human development
Economic Freedom and Political Rights Higher ratings indicate higher levels of political rights Least Free …………………. Most Free Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2006, available at http://www.freedomhouse.org/.
Economic Freedom and Civil Liberties Higher ratings indicate higher levels of civil liberties Least Free …………………… Most Free Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2006, available at http://www.freedomhouse.org/.
Economic Freedom and Corruption Lower values indicate lower levels of corruption Least Free …………………. Most Free Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, 2006/2007, available at http://www.transparency.org.
The impact of Economic Freedom on the UNs Human Development Index and other indicators of well-being
Human Development Index and Economic Freedom Quartiles Higher ratings indicate higher levels of development Least Free ……………. Most Free Sources: The Fraser Institute; United Nations Development Programmme, Human Development Indicators 2008, available at http://hdr.undp.org/.
Life Expectancy at Birth and Economic Freedom Quartiles Least Free ……………. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2008.
Infant Mortality and Economic Freedom Quartile Least Free ………..………. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2008.
% of Population Using Improved Water Sources Least Free ………………... Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2008.
Environmental Performance and Economic Freedom Quartile Higher ratings indicate higher levels of environmental performance Least Free ………..……….. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2008.
New research: Economic Freedom and World Poverty
Economic Freedom and World Poverty Eradication of world poverty: a crucial matter for economist, policy makers and concerned citizens Seth W. Norton and James D. Gwartney, in chapter 2, explore the relationship between economic freedom and poverty in developing nations
Economic Freedom and World Poverty Facts Both the $1-per-day and the $2-per-day poverty rates have declined since 1980 The weighted (by population) mean poverty rate indicates that the overall $1-per-day poverty rate of developing countries was nearly cut in half between 1980 and 2004 (from 32% to 17%) Furthermore, various non-pecuniary indicators of poverty also imply that the well-being of the poor has improved during the past quarter of a century
Economic Freedom and World Poverty Empirical Evidence The results confirm a strong positive relationship between economic freedom and poverty reduction Specifically, the weighted $1-per-day poverty rate was 29.7% in 2004 for countries with EFW ratings of less than 5, but only 7.7% for countries with EFW ratings between 6 and 7 And the $2-per-day poverty rate declines from 51.5% to 46.2% to 38.9% as one moves from the least (less than 5) to the most free (between 6 and 7) developing nations A one-unit increase in economic freedom rating between 1980 and 1995 was associated with a 5.21 percentage-point reduction in the $1-per-day poverty rate and a 5.22 percentage- point reduction in the $2-per-day poverty rate
Economic Freedom and World Poverty Empirical Evidence The authors also examine the relationship between economic freedom and non-pecuniary set of poverty indicators: % of population with access to improved water Life expectancy at birth, total (years) Infant survival rate (per 1000) Under-five survival rate (per 1000) Physicians (per 1,000 people) % of population with adequate nourishment UN Human poverty index The results shows once again that poverty rates are substantially lower in persistently free developing nations compare to the economies with lower levels of economic freedom
Economic Freedom and World Poverty Empirical Evidence 72.6% of the population has access to safe water in the mostly unfree economies (less than 5) compared to nearly 100% in the mostly free developing nations (more than 7) Life expectancy of people in the mostly free group is over 20- years greater than for those in mostly unfree developing economies Mostly free economies have more than twice as many physicians per 1,000 population than mostly unfree economies
Economic Freedom and World Poverty Empirical Evidence For every 1,000 births, 64 more babies survive in mostly free developing countries per year than in the mostly unfree developing nations For every thousand children under age of five, 109 more children survive in mostly free developing nations each year than in those countries that are mostly unfree
Policy Implications Developing nations need to focus on increasing economic freedom to promote growth and reduce poverty Reductions in poverty rates are closely related to institutions and policies consistent with economic freedom Growth is the driving force behind reductions in poverty. Without economic growth, there will be little or no reduction in poverty
60 Policy Implications for Africa The authors investigate high poverty levels in Sub- Saharan Africa and find these nations need to increase economic freedom. Specifically, they need to Build the rule of law to protect property rights, encourage investment, and reduce corruption Remove trade barriers so that African nations, which tend to have small domestic market, can achieve gains from trade Simplify business regulations to encourage investment by eliminating unnecessary regulatory barriers, reduce corruption, and lower administrative costs on businesses
Conclusions Economic Freedom Increases prosperity for all Reduces poverty Increases other freedoms Improves quality of life