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1 Economic Freedom of the World: 2007 Annual Report Fraser Institute September 4, 2007.

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Presentation on theme: "1 Economic Freedom of the World: 2007 Annual Report Fraser Institute September 4, 2007."— Presentation transcript:

1 1 Economic Freedom of the World: 2007 Annual Report Fraser Institute September 4, 2007

2 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 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 the late Milton Friedman, Rose Friedman and Michael Walker Involved 60 of the worlds top scholars

4 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 worlds population according to the extent to which they permit their citizens to be economically free u Now a collaboration of Institutes in 71 different countries

5 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 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 141 countries

7 7 Talk about making a difference …

8 8 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 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 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, 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

9 9 Sample of Press Coverage for Fraser Institute Economic Freedom of the World 2006 All Africa, Africa Ambito Financiero, Argentina El Litoral, Argentina Daily News, Bahrain Daily Star, Beirut Mmegi, Botswana Ekonomika, Bratislava Capital Weekly, Bulgaria Investor, Bulgaria Novinar, Bulgaria Sega, Bulgaria Sofia Echo, Bulgaria Calgary Herald, Canada Vancouver Sun, Canada Globe and Mail, Canada National Post, Canada South China Morning Post, China Xinhua News Agency, China Business Day, Colombia La Colombiano, Colombia La Republica, Colombia Portafolio, Colombia La Prensa Libre, Costa Rica Baltic Business Weekly, Estonia El Economista, Mexico El Financiero, Mexico El Universal, Mexico Tiempo, Mexico Daily News, Montenegro Daily Press, Montenegro Mina business, Montenegro Pobjeda, Montenegro Faz.Net, Netherlands International Herald Tribune, New Zealand Business Recorder, Pakistan Poland Today, Poland Rompres, Romania BBC Monitoring, Russia Kommersant, Russia Biz Day, South Africa Business Day, South Africa Mail and Guardian, South Africa News 24, South Africa Sunday times, South Africa Libertad Digital, Spain Taipei Times, Taiwan Bangkok Post, Thailand Turkish Daily News, Turkey Business Journal, US TCS Daily, US Washington Times, US El Universal, Venezuela Postman, Estonia L'Agefi Suisse, France Press Digest, Hong Kong Reuters, Hong Kong Standard, Hong Kong Budapest Business Journal, Hungary MTI Eco News, Hungary Business Weekly, Iceland Frettabladid, Iceland Business Standard, India Times of India, India Economist, International Zeev Klein, Israel Corrier Economica, Italy Il Corriere della Sera, Italy Il Tempo, Italy Indiscreto, Italy Jakarta Post, Jakarta Korea Economic Daily, Korea Korea Herald, Korea Korea Times, Korea Seoul Daily, Korea Yon Hap News, Korea Latvian News Agency, Latvia Bernama Daily, Malaysia Business Times, Malaysia Daily Express, Malaysia

10 10 Sub-national and Regional Indices

11 11 Economic Freedom of the Arab World

12 12 Marketization Index of Chinese Provinces

13 13 Economic Freedom Index of Indian States

14 14 Economic Freedom Index of German States

15 15 Economic Freedom Index of Argentinean Provinces

16 16 Economic Freedom of North America

17 17

18 18 Introducing the 2007 Economic Freedom of the World Index Results

19 19

20 20 Overall Economic Freedom Index and the Top 10 Source: The Fraser Institute.

21 21 Overall Economic Freedom Index and the Bottom Ten Source: The Fraser Institute.

22 22 Economic Freedom Over Time Source: The Fraser Institute.

23 23 Economic Freedom and the Top 10

24 24 Size of Government and the Top 10 Source: The Fraser Institute.

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

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

27 27 Freedom to Trade Internationally and the Top 10 Source: The Fraser Institute.

28 28 Regulations and the Top 10 Source: The Fraser Institute.

29 29 Credit Market Regulations and the Top 10 Source: The Fraser Institute.

30 30 Labor Market Regulations and the Top 10 Source: The Fraser Institute.

31 31 Business Regulations and the Top 10 Source: The Fraser Institute.

32 32 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

33 33 The impact on economic growth and development

34 34 Income (per person) of the Bottom Ten Income (per person) of the Bottom Ten Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.

35 35 Income (per person) of the Top 10 Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.

36 36 Per Capita Income and Economic Freedom Quartile Least Free …………… Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.

37 37 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, 2007.

38 38 Foreign Direct Investment and Economic Freedom Quartile Least Free ……………..….. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.

39 39 Economic Freedom,the Poor, and Inequality

40 40 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, 2007.

41 41 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, 2007.

42 42 Economic Freedom, Other Freedoms and Democracy

43 43 Economic Freedom Versus Corruption Higher value indicates lower level of corruption Least Free ………….. Most Free Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, available at

44 44 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, 1972 through 2005, available at

45 45 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 2005, available at

46 46 The impact of Economic Freedom on the UNs Human Development Index and other indicators of well-being

47 47 Human Development Index and Economic Freedom Quartiles Least Free ……………. Most Free Sources: The Fraser Institute; United Nations Development Programmme, Human Development Indicators 2006, available at

48 48 Life Expectancy at Birth and Economic Freedom Quartiles Least Free ……………. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators CD- ROM, 2007.

49 49 Infant Mortality and Economic Freedom Quartile Least Free ………..…. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.

50 50 % of Population Using Improved Water Sources Least Free …………….. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2007.

51 51 New research: Spread of Global Economic Freedom

52 52 Spread of Global Economic Freedom Global foreign policy has been grounded in the idea that freedom, including economic freedom, spreads among countries. Russell S. Sobel and Peter T. Leeson, in chapter 2, search for the contagion of economic freedom between geographic neighbors and trade partners using a panel of more than 100 countries between 1985 and 2000.

53 53 Spread of Global Economic Freedom Empirical Evidence The results confirm that economic freedom does indeed spread through both geography and trade. Specifically, countries catch about 20% of their average geographic neighbors and trading partners levels and changes in economic freedom. The results also suggest freedom does not spread as strongly as the domino theory behind American and Soviet foreign relations during the Cold War suggested.

54 54 Policy Implications While economic freedom changes in one country have only a modest impact on neighboring countries, when multiple neighbors experience simultaneous changes in economic freedom the impact is much greater. By liberalizing their trade with foreign nations, economically free countries can exert at least a modest positive impact on economic freedom in less free nations. Free-trade agreements that allow a number of nations to simultaneously coordinate trade liberalization could have a sizeable influence on spreading economic freedom.

55 55Conclusions Economic Freedom Increases prosperity for all Reduces poverty Increases other freedoms Improves quality of life All this can be seen in todays data and lessons from history

56 56


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