2008 Index of Economic FreedomContributorsAmbassador Terry Miller is Director of the Center for International Trade and Economics at The Heritage Foundation.Kim R. Holmes, Ph.D., is Vice President for Foreign and Defense Policy and Director of the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.Edwin J. Feulner, Ph.D., is President of The Heritage Foundation.Mary Anastasia OGrady is a member of the Editorial Board of The Wall Street Journal and Editor of the Journals Americas column.William W. Beach is Director of the Center for Data Analysis at The Heritage Foundation.Paul A. Gigot is Editor of The Wall Street Journal Editorial Page.Anthony B. Kim is a Policy Analyst in the Center for International Trade and Economics at The Heritage Foundation.Daniella Markheim is Jay Van Andel Senior Trade Policy Analyst in the Center for Interna-tional Trade and Economics at The Heritage Foundation.Stephen L. Parente is Associate Professor of Economics at the University of Illinois at UrbanaChampaign.James M. Roberts is Research Fellow for Economic Freedom and Growth in the Center for International Trade and Economics at The Heritage Foundation.Carl J. Schramm is President and CEO of the Ewing Marion Kauffman Foundation.Guy Sorman is a French journalist and author.Caroline Walsh is a Research Assistant in the Center for International Trade and Economics at The Heritage Foundation.Tim Kane, Ph.D., is former Director of the Center for International Trade and Economics at The Heritage Foundation.2008 Index of Economic FreedomKim R. Holmes, Ph.D.Edwin J. Feulner, Ph.D.Mary Anastasia OGradywith Anthony B. Kim, Daniella Markheim, and James M. RobertsCopyright 2008 by The Heritage Foundation and Dow Jones & Company, Inc.The Heritage Foundation The Wall Street Journal214 Massachusetts Avenue, NE Dow Jones & Company, Inc.Washington, DC 20002 200 Liberty Street(202) 546-4400 New York, NY 10281heritage.org (212) 416-2000 www.wsj.comCover images by iStockphoto, World BankISBN: 978-0-89195-276-3ISSN: 1095-7308vTable of ContentsForeword ................................................................................................................................................ ixPaul A. GigotPreface ..................................................................................................................................................... xiEdwin J. Feulner, Ph.D.Acknowledgments .............................................................................................................................. xiiiKim R. Holmes, Ph.D., Edwin J. Feulner, Ph.D., and Mary Anastasia OGrady Whats New in the 2008 Index? ........................................................................................................... xvExecutive Summary ................................................................................................................................1Chapter 1: Economic Fluidity: A Crucial Dimension of Economic Freedom ................................15Carl J. SchrammChapter 2: Narrowing the Economic Gap in the 21st Century .......................................................23Stephen L. ParenteChapter 3: Globalization Is Making the World a Better Place .........................................................35Guy SormanChapter 4: Methodology: Measuring the 10 Economic Freedoms .................................................39William W. Beach and Tim Kane, Ph.D.Chapter 5: Economic Freedom in Five Regions ................................................................................57James M. Roberts and Anthony B. KimChapter 6: The Countries .....................................................................................................................73vi 2008 Index of Economic FreedomAlbania ............................................................ 77 Algeria ............................................................ 79 Angola............................................................. 81 Argentina ........................................................ 83 Armenia .......................................................... 85 Australia ......................................................... 87 Austria ............................................................ 89 Azerbaijan ...................................................... 91 The Bahamas .................................................. 93 Bahrain ............................................................ 95 Bangladesh ..................................................... 97 Barbados ......................................................... 99 Belarus ............................................................ 101 Belgium ........................................................... 103 Belize ............................................................... 105 Benin ............................................................... 107 Bolivia ............................................................. 109 Bosnia and Herzegovina .............................. 111 Botswana ........................................................ 113 Brazil ............................................................... 115 Bulgaria ........................................................... 117 Burkina Faso .................................................. 119 Burma (Myanmar) ......................................... 121 Burundi ........................................................... 123 Cambodia ....................................................... 125 Cameroon ....................................................... 127 Canada ............................................................ 129 Cape Verde ..................................................... 131Central African Republic .............................. 133Chad ................................................................ 135 Chile ................................................................ 137 China, Peoples Republic of ......................... 139 Colombia ........................................................ 141 Congo, Democratic Republic of (formerly Zaire) .......................................................... 143Congo, Republic of ........................................ 145 Costa Rica ....................................................... 147 Croatia ............................................................. 149 Cuba ................................................................ 151 Cyprus (Greek) .............................................. 153 Czech Republic .............................................. 155 Denmark ......................................................... 157 Djibouti ........................................................... 159 Dominican Republic ..................................... 161 Ecuador ........................................................... 163 Egypt ............................................................... 165 El Salvador ..................................................... 167Equatorial Guinea ......................................... 169Estonia ............................................................ 171 Ethiopia ........................................................... 173 Fiji .................................................................... 175 Finland ............................................................ 177 France .............................................................. 179 Gabon .............................................................. 181 The Gambia .................................................... 183 Georgia ........................................................... 185 Germany ......................................................... 187 Ghana .............................................................. 189 Greece ............................................................. 191 Guatemala ...................................................... 193 Guinea ............................................................. 195 GuineaBissau ............................................... 197 Guyana............................................................ 199 Haiti ................................................................. 201 Honduras ........................................................ 203 Hong Kong ..................................................... 205 Hungary ......................................................... 207 Iceland ............................................................. 209 India ................................................................ 211 Indonesia ........................................................ 213 Iran .................................................................. 215 Iraq .................................................................. 217 Ireland ............................................................. 219 Israel ................................................................ 221 Italy.................................................................. 223 Ivory Coast ..................................................... 225 Jamaica ............................................................ 227 Japan ............................................................... 229 Jordan .............................................................. 231 Kazakhstan ..................................................... 233 Kenya .............................................................. 235 Korea, Democratic Peoples Republic of (North Korea) ............................................ 237Korea, Republic of (South Korea) ................ 239 Kuwait ............................................................ 241 Kyrgyz Republic ............................................ 243 Table of Contents vii Laos ................................................................. 245 Latvia .............................................................. 247 Lebanon .......................................................... 249 Lesotho ........................................................... 251 Libya ............................................................... 253 Lithuania ........................................................ 255 Luxembourg ................................................... 257 Macedonia ...................................................... 259 Madagascar .................................................... 261 Malawi ............................................................ 263 Malaysia.......................................................... 265 Mali ................................................................. 267 Malta ............................................................... 269 Mauritania ...................................................... 271 Mauritius ........................................................ 273 Mexico ............................................................. 275 Moldova.......................................................... 277 Mongolia......................................................... 279 Montenegro .................................................... 281 Morocco .......................................................... 283 Mozambique .................................................. 285 Namibia .......................................................... 287 Nepal ............................................................... 289 The Netherlands ............................................ 291 New Zealand .................................................. 293 Nicaragua ....................................................... 295 Niger ............................................................... 297 Nigeria ............................................................ 299 Norway ........................................................... 301 Oman............................................................... 303 Pakistan .......................................................... 305 Panama ........................................................... 307 Paraguay ......................................................... 309 Peru ................................................................. 311 The Philippines .............................................. 313 Poland ............................................................. 315 Portugal .......................................................... 317 Qatar................................................................ 319 Romania .......................................................... 321 Russia .............................................................. 323 Rwanda ........................................................... 325 Saudi Arabia ................................................... 327 Senegal ............................................................ 329Serbia ............................................................... 331Sierra Leone.................................................... 333 Singapore ........................................................ 335 Slovak Republic ............................................. 337 Slovenia .......................................................... 339 South Africa ................................................... 341 Spain ................................................................ 343 Sri Lanka ......................................................... 345 Sudan .............................................................. 347 Suriname......................................................... 349 Swaziland ....................................................... 351 Sweden............................................................ 353 Switzerland .................................................... 355 Syria ................................................................ 357 Taiwan ............................................................. 359 Tajikistan ......................................................... 361 Tanzania .......................................................... 363 Thailand .......................................................... 365 Togo ................................................................. 367Trinidad and Tobago ..................................... 369Tunisia ............................................................. 371 Turkey ............................................................. 373 Turkmenistan ................................................. 375 Uganda ........................................................... 377 Ukraine ........................................................... 379 United Arab Emirates ................................... 381 United Kingdom ............................................ 383 United States .................................................. 385 Uruguay .......................................................... 387 Uzbekistan ...................................................... 389 Venezuela ....................................................... 391 Vietnam ........................................................... 393 Yemen .............................................................. 393 Zambia ............................................................ 397 Zimbabwe....................................................... 399Appendix ........................................................ 401Major Works Cited ........................................ 409Advisory BoardThe following members of the Advisory Board for the 2008 Index of Economic Freedom were con-sulted as part of the ongoing review of the methodology used in this years edition. Their advice, insights, and critiques, as well as the efforts of many others who participated in the review pro-cess, are gratefully acknowledged.William W. Beach, The Heritage FoundationMaria Sophia Aguirre, Catholic University of AmericaAxel Dreher, ETH Zurich, KOF Swiss Economic InstituteDouglas Holtz-Eakin, Economist, Washington, D.C.Tim Kane, Economist, Washington, D.C.Mordechai Max Kreinin, Michigan State UniversityPhilippe Lacoude, Economist, Paris and Washington, D.C.Richard Roll, University of California, Los AngelesFriedrich Schneider, University of LinzixForewordI dont know who first used the word glo-balization, but he was probably no friend of capitalism. The word is bureaucratic and implies that the world economy is subject to the control of some vast, nefarious force beyond human influence. The reality is that the world economy is enjoying its strongest run of pros-perity in 40 years thanks to the greater ability of billions of individuals to make free choices in their own self-interest. The Index of Economic Freedom has been encouraging this trend for 14 years, and at the end of 2007, we can happily say it continues.The world economy extended its multiyear run of 5 percent or so annual GDP growth this year, notwithstanding an American slowdown due mainly to the housing correction. As I write this, the U.S. economy seems to have survived the August credit crunch related to the collapse of the sub-prime mortgage market. The sum-mer squall showed once again how interrelated financial markets have become, with sub-prime losses popping up around the world and even causing an old-fashioned bank run at Northern Rock in the United Kingdom.The episode is naturally leading to soul-searching about the stability of this brave new world of global financeincluding the spread of asset securitization, the rise of hedge funds, and an explosion in derivatives. This introspec-tion ought to be healthy. The sub-prime fiasco has, at the very least, exposed the need for more careful vetting by investors, but regula-tors and bankers are also sure to examine the rules for transparency and capital requirements to prevent the spread of problems throughout the financial system. The event also shows the need for more careful driving by Americas Federal Reserve, whose easy-money policy in the first half of this decade was the root cause of the housing boom and bust. The good news is that, at least so far, there hasnt been a regula-tory overreaction that could stymie growth.The irony of the year has been the shift-ing economic policy trends in America and France, of all places. The U.S. political debate x 2008 Index of Economic Freedomis moving in a negative direction as fairness and income redistribution replace growth as the policy lodestar and proposals for tax increases proliferate. The Bush tax cuts of 2003 were crucial to kicking the economy out of its post-9/11, post-dot.com doldrums. But they expire after 2010 and are in serious jeop-ardy. The free-trade agenda has also stalled as bilateral pacts with Latin America and South Korea face heavy going on Capitol Hill. The 2008 election will be as much a referendum on economic policy as on foreign policy.Perhaps the rest of the world will have to teach America a policy lesson or two. As the Index shows, Europe overall has moved in a freer direction this decade. This is due in large part to reform in the former Eastern Europe, as well as to the policy competition caused by the success of the euro. With capital and peo-ple free to move and governments no longer able to inflate their way out of fiscal difficulty, the trend has been toward lower tax rates and labor market liberalization.Miracle of miracles, even France has been mugged by this reality. Nicolas Sarkozy made the revival of the French economy a main theme of his successful campaign for president, and he has followed with proposals for what he called a new social contract founded on work, merit and equal opportunity. We should all hope he succeedsnot merely to compensate for any slowdown in America, but for its own sake to help Europe break away from its self-imposed sense of diminished expectations. In any event, this policy churning in Europe shows how the ability to move capital freely across borders imposes a price on bad government decisions.The larger point is that if we step back from the daily turmoil, we can see that we live in a remarkable era of prosperity and spreading freedom. Hundreds of millions of people are being lifted out of poverty around the world as global trade and investment expand and countries like India and China liberalize parts of their economies. The International Monetary Fund reported in early 2007 that every country in the world, save for a couple of small dictator-ships, was growing. This prosperity can itself create discontent due to the rapidity of change, and it certainly poses a challenge to political leaders who are obliged to explain and manage its consequences. The Index of Economic Freedom exists to help in that explanation, and we hope readers continue to find it a source of compara-tive policy wisdom.Paul A. GigotEditorial Page EditorThe Wall Street JournalOctober 2007xiPrefaceOur confidence in freedom as a liberating moral force and the foundation of true democracy has never been stronger. The victory of political freedom as a universal ideal advances and continues to drive revolution-ary change throughout the world. Now, as we progress into the 21st century, more countries understand the importance of adopting insti-tutional frameworks to enhance their citizens economic freedom. The link between economic freedom and prosperity has never been clear-er. People around the world are demanding that their governments support and maintain economic environments that provide the best chance for economic growth and the creation of wealth.A countrys level of economic freedom reflects the ability of ordinary citizens to make economic decisions on their own. It includes the freedom to choose a job, start a business, work where one chooses, borrow money, and use a credit card. It ranges from buying a house to having a choice in health care, from being fairly taxed to being treated justly by the courts. The higher the economic freedom in a country, the easier it is for its people to work, save, invest, and consume.Yet the struggle for economic freedom faces determined opposition. Tariffs are just one example of protectionism that never lacks champions, and those who want special privi-leges will always pressure societies to expand the size and weight of government interven-tion. Special privileges for the few mean less prosperity for the many.The Index of Economic Freedom has document-ed the link between economic opportunity and prosperity with research and analysis for 14 years. Published jointly by The Heritage Foun-dation and The Wall Street Journal, the Index has painted a global portrait of economic freedom and established a benchmark by which to gauge a countrys prospects for economic success. It follows a simple tenet: Something cannot be improved if it is not measured. Tracing the path to economic prosperity, the annual Index xii 2008 Index of Economic Freedomcontinues to serve as a critical tool for students, teachers, policymakers, business leaders, inves-tors, and the media. The findings of the Index are clear and straightforward: Countries with an enduring commitment to economic freedom enjoy greater prosperity than do those with less economic freedom.The 2008 Index, covering 162 countries, shows that economic freedom worldwide con-tinues to advance steadily, albeit at a slower rate than one might hope. In this 14th edition, most of the 20 freest countries from last year are still ranked among the freest, while others in the middle of the pack have experienced some shuffling as a result of varying efforts at reform.Europe, Asia, and the Americas are the three freest regions. Asia has both the worlds freest economy and its least free economy. More than half of the top 20 freest countries are found in Europe, and the Americas are home to some of the richest and most dynamic countries in the world.For countries pursuing sustainable prosper-ity, the Index reveals that both policy direction and commitment to economic freedom matter. For example, the erosion of economic freedom in the Americas reflects some countries rever-sals of free-market policies and stalled pursuit of economic freedom. Venezuela, in particular, is risking long-run economic failure as Presi-dent Hugo Chvez takes the country further down an antifree market path.The 2008 Index contains three notable guest chapters written by outside scholars. A chapter by Carl Schramm, President and CEO of the Ewing Marion Kauffman Foundation, high-lights the importance of economic fluidity and how it fosters innovation and entrepreneur-ship as a crucial element of economic freedom. Professor Stephen Parente of the University of Illinois at UrbanaChampaign documents the necessity of dismantling barriers to economic catching-up so that all economies can have the chance to flourish in the 21st century. Guy Sor-man, a French journalist and author, reminds us of six major characteristics of the globaliza-tion that we enjoy today and of the potential threats to it.This edition also contains a chapter ana-lyzing each of the five geographic regionsa focus that matters for local competition. And, of course, this edition includes our traditional country pages with new charts highlighting the changes in each economys economic freedom and detailed explanations analyzing each of the freedoms.As our Index has demonstrated again in this edition, economic freedom is the key to creat-ing an environment that allows a virtuous cycle of entrepreneurship, innovation, and sustained economic growth to flourish. Leaders who commit to expanding economic freedom will realize the fruits of their labor. For citizens living in such a country, increased economic freedom will improve their standard of living, make their daily lives more stable, and help to ensure a bright future for their families.Edwin J. Feulner, Ph.D., PresidentThe Heritage FoundationNovember 2007xiiiAcknowledgmentsWe wish to express our profound grati-tude to the many individuals, especial-ly those at The Heritage Foundation, who have made such valuable contributions to this 14th annual edition of the Index of Economic Freedom. The Heritage Foundations Center for International Trade and Economics (CITE) pro-duces the Index, an effort that this year involved CITE Director Terry Miller and Anthony Kim, Daniella Markheim, and James Roberts, as well as Research Assistant Caroline Walsh. Former Director of CITE Tim Kane and former Research Assistant Andrew Peek made significant contri-butions to the 2008 Index.Others at The Heritage Foundation also made invaluable contributions to this years edition. We are particularly grateful to Center for Data Analysis Director William Beach for his continued support and for his contribu-tions to the methodology chapter.In the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for Interna-tional Studies, Ariel Cohen and James Phillips wrote introductory paragraphs and provided their expertise. We are also grateful once again for the many insights provided by Helle C. Dale, Director of the Allison Center and by Kathy Gudgel, Assistant to the Vice President, and Janice A. Smith, Special Assistant to the Vice President, The Kathryn and Shelby Cullom Davis Institute for International Studies.In the Asian Studies Center, Director Walter Lohman and Lisa Curtis, Bruce Klingner, and John J. Tkacik, Jr., wrote country backgrounds and provided assistance. Likewise, in the Margaret Thatcher Center for Freedom, Sally McNamara and Brett Schaefer wrote coun-try backgrounds, and Director Nile Gardner offered valuable guidance. In the Information Technology Department, invaluable help was provided by Vice President of Information Technology Michael Spiller and Michael Smith. We are grateful for their professionalism.In Publishing Services, Director Therese Pen-nefather and Elizabeth Brewer were responsible xiv 2008 Index of Economic Freedomfor all aspects of the production process, including the design and layout that make this 14th edition the most readable and accessible yet published, as well as for developing the world and country maps and formatting the charts and tables.We are grateful to Director of Online Com-munications Ted Morgan, Tosan Ogharaerumi, and the other IT staff for placing the entire Index on the Heritage Web site (www.heritage.org/index/). We also thank Bridgett Wagner, Mike Franc, Rebecca Hagelin, Alison Fraser, James Dean, and Todd Gaziano for their insightful contributions and support.We once again gratefully acknowledge the continuing efforts of Senior Editor Richard Odermatt, who is responsible for final review of the completed text, and Senior Copy Editor William T. Poole, who bears the primary respon-sibility for editing the entire book. Each year, their professionalism, commitment, and atten-tion to detail have been crucial in maintaining consistency of tone and making the Index a real-ity. We are likewise grateful to Editor Jon Rode-back, who carefully reviewed every one of the many charts and tables included in the book. In addition, the dedicated research of CITE interns Caroline DuMond, Christopher Grau, Joseph Lawler, Celeste Le Roux, Jay Soley, and Samantha Soller did much to make the special-ists in-depth analysis possible.Countless individuals serving with various accounting firms, businesses, research orga-nizations, U.S. government agencies, foreign embassies, and other organizations again coop-erated by providing us with the data used in the Index. Their assistance is much appreciated. As always, we acknowledge our enduring debt to Heritage Trustee Ambassador J. William Middendorf II, who originally encouraged us to undertake such a study of global economic freedom.Finally, we would like to express our appre-ciation to the many people who, year after year, either praise or criticize the Index of Eco-nomic Freedom so enthusiastically. The sup-port and encouragement of people in all parts of the world continue to inspire The Heritage Foundation and The Wall Street Journal in their ongoing collaboration on this important work. We hope this years effort once again matches the expectations of our supporters, as well as the thoughtful critics who so often have pro-vided the insights that enable us to continue to improve the Index.Kim R. Holmes, Ph.D.Edwin J. Feulner, Ph.D.Mary Anastasia OGradyNovember 2007xvWhats New in the 2008 Index?Every year, the editors evaluate the Index of Economic Freedom and consider ways to improve the product. This years edition of the Index continues the substance and style of the 2007 edition with a renewed emphasis on a more scientific and objective methodol-ogy coupled with an accessible format. There are few dramatic changes in the 2008 Index, but there are a number of important refinements.These changes continue the Heritage Foun-dation/Wall Street Journal tradition of year-by-year improvement. For example, changes in the methodology were instituted in 2000, 2002, 2004, 2006, and 2007 to enhance the robustness of one or more of the 10 factors that are used to measure overall economic freedom. Each time, the entire time series is revised so that all scores are as consistent as possible, dating back to 1995. Our goal is to make the Index a resource that is credible, usable, and relevant to a changing world, with new data and knowl-edge, while also consistent with our heritage.A more detailed explanation of what has changed, as well as what has not changed, in the 2008 Index follows: Free Downloads at www.heritage.org/index. The Index Web site has been revised to include free downloads of each chapter and even each individual country page. These can be used for briefing books, student handouts, or anything else that readers find useful. The Web site also has new audio and video presen-tations by Index scholars, as well as all of the raw data and related research papers. Non-Tariff Barrier Penalty. The Index methodology is consistent with the revisions made in 2007, measuring the same 10 economic freedoms in each economy and using exactly the same underlying data. The only change is a set of refinements in the equations used for three of the 10 freedoms. One of these refinements is in trade freedom, which has always included a penalty for non-tariff barriers (NTBs). Until now, it has been a binary penalty equal to a reduction of 20 percentage points in the trade freedom xvi 2008 Index of Economic Freedomscore as calculated by tariffs, and thus a reduc-tion of 2 percentage points in a countrys total score. The change is that the NTB penalty now ranges in increments of 5 percentage points, up to a 20-percentage point maximum penalty. As a result, a country with moderate import restric-tions will have 10 percentage points subtracted from its trade freedom score. This change was also applied retroactively so that previous pen-alties of 20 percentage points dating back to 1995 were largely reduced to 15 or 10 percentage points. The effect has been to raise overall scores, since the vast majority of countries utilize NTBs and had the penalty in place. This is an improve-ment in the level of detail that the Index provides, allowing greater differentiation and fairness in reflecting economic policies across countries. Taxes and Expenditures. The introduc-tion of a new methodology in 2007 produced some results that could not be anticipated until grading was completed. One surprise was that average scores for each of the 10 free-doms varied widely. The best score was fis-cal freedom, which averaged 82.8, but this sent the unintended signal that the area least in need of reform was taxation. Regrettably, tax reform is badly needed in almost all countries, and the creeping size of government taxation and expenditure is a signature reason for the existence of the Index. In fact, most economists would agree that the primary area of success in economic governance has been the rise of stable prices and low inflation, largely as a result of independent central banking, imply-ing that the best score on average should be in monetary freedom. To remedy the balance among the 10 economic freedoms in the Index, an adjustment was made to two equations with no change in the underlying data. Since the equations to calculate scores for financial freedom and government size were producing overly generous scores, the coefficients were tightened in each case. The same equation is used to calculate scores through the entire time series back to 1995, so these changes were made retroactively and seamlessly in past scores. The effect was to lower scores for every country. The overall effect of the higher average scores for trade freedom and lower average scores for fiscal freedom and govern-ment size was neutral. New 10 Freedoms Chart. Each country page includes two charts. The first shows how the countrys overall economic freedom score has changed from 1995 to the present. The sec-ond shows, numerically and graphically, the score of each of the 10 freedoms. New this year, this second chart also includes an up-or-down arrow that signals the change during the most recent year. For example, you can see that the United States worsened in four freedoms, improved in one other, and is unchanged in the remaining three freedoms. The overall effect was under a full percentage point decline, but these new arrows help to identify exactly what areas are causing the score to slip.We hope the changes in the Index make it an even better research tool and a more accessible policymaking guide. Whatever changes may be made from year to year, however, our goal remains constant: to advance human freedom. We believe that todays Index might even make the transition to a better world faster and surer.One of the editors paramount concerns is that the Index always remains a useful tool for researchers. This means that the integrity of the current-year scores is crucial. During a period of aggressive improvements, there undoubt-edly will be mistakes in the scores, based on our errors and errors in source data. We cannot promise perfection, but we do promise objec-tivity: Our methods and modifications will always be transparent and duplicable by other scholars.Moreover, even though the Index itself is published in January, based on policies and data available as of the previous June, we remain committed to providing the most accu-rate and up-to-date measures online and will make any needed corrections in that source file immediately. For researchers who want to weight the Index or consider individual com-ponents in statistical analysis, the 10 freedoms and even the raw data are also available trans-parently online. Revised scores of individual factors for all years are available for download at www.heritage.org/Index.1Executive SummaryThis is the 14th edition of The Heritage Foundation/Wall Street Journal Index of Economic Freedom. Over the past years, the Index has documented the link between eco-nomic opportunity and prosperity, researching and analyzing economic policies in countries around the world. That trend continues in the 2008 Index, which paints a portrait of econom-ic freedom around the world and establishes a benchmark by which to gauge a countrys chances of economic success.The idea of producing a user-friendly index of economic freedom as a tool for policymak-ers and investors was first discussed at The Heritage Foundation in the late 1980s. The goal then, as it is today, was to develop a system-atic, empirical measurement of economic free-dom in countries throughout the world. To this end, the decision was made to establish a set of objective economic criteria that, since the inau-gural edition in 1995, have been used to study and grade various countries for the annual publication of the Index of Economic Freedom.Economic theory dating back to the publi-cation of Adam Smiths The Wealth of Nations in 1776 emphasizes the lesson that basic insti-tutions that protect the liberty of individu-als to pursue their own economic interests result in greater prosperity for the larger society. Perhaps the idea of freedom is too sophisticated, as popular support for it seems constantly to erode before the onslaught of populism, whether democratic or autocratic. Yet modern scholars of political economy are rediscovering the central fact that free institutions are essential to rapid long-term growth. In other words, the techniques may be new, but they reaffirm classic truths. The objective of the Index is to catalogue those economic institutions in a quantitative and rigorous manner.Yet the Index is more than a simple ranking based on economic theory and empirical study. It also identifies the variables that comprise economic freedom and analyzes the interaction of freedom with wealth.2 2008 Index of Economic FreedomThe 2008 Index of Economic Freedom cov-ers 162 countries across 10 specific factors of economic freedom, which are listed below. Chapter 4 explains these factors in detail. High scores approaching 100 represent higher levels of freedom. The higher the score on a factor, the lower the level of government interference in the economy.The 10 Economic Freedoms Business Freedom Trade Freedom Fiscal Freedom Government Size Monetary Freedom Investment Freedom Financial Freedom Property Rights Freedom from Corruption Labor FreedomTaken together, these 10 freedoms offer an empirical depiction of a countrys degree of economic freedom. A systematic analysis of the 10 freedoms has demonstrated again this year that economic freedom is the key to creating an environment that allows a virtuous cycle of entrepreneurship, innovation, and sustained economic growth and development to flour-ish. Economies with higher levels of economic freedom enjoy higher living standards.HIGHLIGHTS FROM THE 2008 INDEXGlobal economic freedom continues to hold steady while progressing more slowly than one might hope. The global economic freedom score is 60.3 percent, essentially the same as last year. In the years since the Index began in 1995, world economic freedom has improved by 2.6 percentage points. Overall, each regions economic freedom holds steady, Chart 1Source. |im |. |olmos. |dvio . |ooloo|. aod Ma|y Aoastasia OG|ady. )''/@e[\of]