economic freedom of the world: 2011 annual report

Economic Freedom of the World: Economic Freedom of the World: 2011 Annual Report2011 Annual Report

Economic Freedom of the Economic Freedom of the World ProjectWorld 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,

including three Nobel Laureates

What is the Economic What is the Economic Freedom of the World Index?Freedom of the World Index?� An annual compilation of data representing factors

which make a country economically free� Authors: James Gwartney, Robert Lawson, and Joshua

Hall� A compendium of 42 government policies affecting

economic freedom based on objective data or independent surveys

� 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

� Now a collaboration of Institutes in 85 nations and territories

What is Economic FreedomWhat 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 Components of the Economic Freedom of the World IndexFreedom 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

The EFW Network is a collaboration The EFW Network is a collaboration of 85 Countriesof 85 Countries

Afghanistan Economic and Legal Studies Afghanistan Economic and Legal Studies Organization (AELSO), AfghanistanOrganization (AELSO), AfghanistanAlbanian Center for Economic Research (ACER), Albanian Center for Economic Research (ACER), AlbaniaAlbaniaFundaciFundacióónn Libertad, ArgentinaLibertad, ArgentinaCentre of Political, Legal and Economic Researches Centre of Political, Legal and Economic Researches and Forecasting (PLERF), Armeniaand Forecasting (PLERF), ArmeniaInstitute of Public Affairs, AustraliaInstitute of Public Affairs, AustraliaTIGRATIGRA ®®, Austria, AustriaCenter for Economic and Political Research, Center for Economic and Political Research, AzerbaijanAzerbaijanThe Nassau Institute, BahamasThe Nassau Institute, BahamasMaking Our Economy Right (MOER), BangladeshMaking Our Economy Right (MOER), BangladeshScientific Research Scientific Research MisesMisesCenter, BelarusCenter, BelarusCentre for the New Europe, BelgiumCentre for the New Europe, BelgiumPoliticasPoliticas PublicasPublicasparapara la Libertad (POPULI), Boliviala Libertad (POPULI), BoliviaInstitutoInstituto Liberal do Rio de Janeiro, BrazilLiberal do Rio de Janeiro, BrazilInstitute for Market Economics, BulgariaInstitute for Market Economics, BulgariaLe Centre des Affaires Le Centre des Affaires HumainesHumaines(CEDAH), Burkina (CEDAH), Burkina FasoFasoThe Cambodia Institute of Development Study, The Cambodia Institute of Development Study, Cambodia Cambodia InstitutoInstituto Libertad y Libertad y DesarrolloDesarrollo, Chile, ChileCenter for China & Globalization, ChinaCenter for China & Globalization, ChinaInstitutoInstituto de de CienciaCiencia PoliticaPolitica, Colombia, ColombiaInstitutoInstituto parapara la Libertad y el la Libertad y el AnAnáálisislisis de de PolPolííticasticas, , Costa RicaCosta RicaAudaceAudaceInstitutInstitut AfriqueAfrique , Côte d, Côte d’’ IvoireIvoireThe Institute of Economics, CroatiaThe Institute of Economics, CroatiaLiberLiber áálnlníí InstitutInstitut , Czech Republic, Czech RepublicCenter for Center for PolitiskePolitiske Studier (CEPOS), DenmarkStudier (CEPOS), DenmarkFundaciFundacióónn EconomEconomííaa y y DesarrolloDesarrollo Inc, Dominican Inc, Dominican RepublicRepublicInstitutoInstituto EcuatorianoEcuatoriano de de EconomEconomííaa PolPolííticatica, Ecuador, EcuadorInstitutInstitut EconomiqueEconomiqueMolinari, FranceMolinari, FranceSociety for Disseminating Economic Knowledge: New Society for Disseminating Economic Knowledge: New Economic School, GeorgiaEconomic School, Georgia

Initiative for Public Policy Analysis, NigeriaInitiative for Public Policy Analysis, NigeriaCenter for Business and Society Incorporated (Center for Business and Society Incorporated (CivitaCivita ), ), Norway Norway International Research Foundation (IRF), OmanInternational Research Foundation (IRF), OmanAlternate Solutions Institute, PakistanAlternate Solutions Institute, PakistanPalPal--Think for Strategic Studies, PalestineThink for Strategic Studies, PalestineFundaciFundacióónn Libertad, PanamaLibertad, PanamaCentro de Centro de InvestigaciInvestigacióónn y y EstudiosEstudiosLegalesLegales(CITEL), Peru(CITEL), PeruThe Center for Research and Communication, PhilippinesThe Center for Research and Communication, PhilippinesCentrum Centrum imim. . AdamaAdama SmithaSmitha, Poland, PolandCausaCausaLiberal, PortugalLiberal, PortugalRomania Think Tank, RomaniaRomania Think Tank, RomaniaInstitute of Economic Analysis, RussiaInstitute of Economic Analysis, RussiaFree Market Center (FMC), SerbiaFree Market Center (FMC), SerbiaThe F.A. Hayek Foundation, Slovak RepublicThe F.A. Hayek Foundation, Slovak RepublicThe Free Market Foundation of Southern Africa, South The Free Market Foundation of Southern Africa, South AfricaAfricaFundacioFundacio CatalunyaCatalunya, Spain, SpainPathfinder Foundation, Sri LankaPathfinder Foundation, Sri LankaNile Institute of Economic Studies, SudanNile Institute of Economic Studies, SudanTimbroTimbro , Sweden, SwedenLiberalesLiberales InstitutInstitut , Switzerland, SwitzerlandTajikistan Free Market Centre, TajikistanTajikistan Free Market Centre, TajikistanArthur Arthur LokLok Jack Graduate School of Business, The Jack Graduate School of Business, The University of the West Indies, Trinidad and TobagoUniversity of the West Indies, Trinidad and TobagoAssociation for Liberal Thinking, TurkeyAssociation for Liberal Thinking, TurkeyThe Ukrainian Center for Independent Political Research, The Ukrainian Center for Independent Political Research, UkraineUkraineThe Institute of Economic Affairs (IEA), United Kin gdomThe Institute of Economic Affairs (IEA), United Kin gdomCATO Institute, USACATO Institute, USAThe Centre for the Dissemination of Economic Knowledge The Centre for the Dissemination of Economic Knowledge (CEDICE), Venezuela(CEDICE), VenezuelaResearch Center for Entrepreneurship Development, Research Center for Entrepreneurship Development, VietnamVietnamZambia Institute for Public Policy Analysis (ZIPPA), Zambia Institute for Public Policy Analysis (ZIPPA), ZambiaZambia

Member Institutes of Economic Freedom of The World Network

LiberalesLiberales InstitutInstitut , Germany, GermanyThe Institute of Economic Affairs, GhanaThe Institute of Economic Affairs, GhanaCentro de Centro de InvestigacionesInvestigacionesEconEconóómicasmicasNacionalesNacionales, , GuatemalaGuatemalaInafEconInafEcon--Institute of African Economics, GuineaInstitute of African Economics, GuineaInstitutInstitut de de RechercheRecherchepour la pour la LibertLibert éé EconomiqueEconomiqueet la et la ProspProspééritrit éé (IRLEP), Haiti(IRLEP), HaitiCentro de Centro de InvestigacionesInvestigacionesEconomicasEconomicasy y SocialesSociales(CIES), (CIES), HondurasHondurasHong Kong Centre for Economic Research, Hong KongHong Kong Centre for Economic Research, Hong KongSzazadvegSzazadvegFoundation, HungaryFoundation, HungaryCentre for Social and Economic Research (RSE), IcelandCentre for Social and Economic Research (RSE), IcelandCentre for Civil Society, IndiaCentre for Civil Society, IndiaThe Institute for Development of Economics and Finance, The Institute for Development of Economics and Finance, IndonesiaIndonesiaOpen Republic Institute, IrelandOpen Republic Institute, IrelandJerusalem Institute for Market Studies, IsraelJerusalem Institute for Market Studies, IsraelCentro Centro EinaudiEinaudi, Italy, ItalyYoung Entrepreneurs Association, JordanYoung Entrepreneurs Association, JordanCentral Asian Free Market Institute, KazakhstanCentral Asian Free Market Institute, KazakhstanAfrican Research Center for Public Policy and Market African Research Center for Public Policy and Market Process, KenyaProcess, KenyaCenter for Free Enterprise, KoreaCenter for Free Enterprise, KoreaGroup for Legal and Political Studies, KosovoGroup for Legal and Political Studies, KosovoEconomic Policy InstituteEconomic Policy Institute--Bishkek Consensus, Kyrgyz Bishkek Consensus, Kyrgyz RepublicRepublicLithuanian Free Market Institute, LithuaniaLithuanian Free Market Institute, LithuaniaD'LetzeburgerD'Letzeburger Land, LuxembourgLand, LuxembourgInstitute for Democracy and Economic Affairs (IDEAS), Institute for Democracy and Economic Affairs (IDEAS), MalaysiaMalaysiaCentro de Centro de InvestigaciInvestigacióónn parapara el el DesarrolloDesarrollo A.C., MexicoA.C., MexicoOpen Society Forum, MongoliaOpen Society Forum, MongoliaThe Center for Entrepreneurship and Economic The Center for Entrepreneurship and Economic Development, MontenegroDevelopment, MontenegroThe Prosperity Foundation, NepalThe Prosperity Foundation, NepalThe New Zealand Business Roundtable, New ZealandThe New Zealand Business Roundtable, New Zealand

Translations and SubTranslations and Sub --national and national and Regional IndicesRegional Indices

Economic Freedom of the Arab WorldEconomic Freedom of the Arab World

Economic Freedom of the World: SpanishEconomic Freedom of the World: Spanish

Economic Freedom of the German Economic Freedom of the German BundeslBundesl äändernndern

Marketization Index of Chinese Provinces

Economic Freedom Index of Indian States

Economic Freedom Index of Argentinean Provinces

Economic Freedom of Latin AmericaEconomic Freedom of Latin America

Economic Freedom of Economic Freedom of FrancophonieFrancophonie

Economic Freedom of North AmericaEconomic Freedom of North America

Introducing the 2011 Economic Introducing the 2011 Economic Freedom of the World Index ResultsFreedom of the World Index Results

Overall Economic Freedom Index Overall Economic Freedom Index and the Top 10and the Top 10

Source: The Fraser Institute.Source: The Fraser Institute.

0 2 4 6 8 10

Score (out of 10)

Hong Kong

Singapore

New Zealand

Switzerland

Australia

Canada

Chile

United Kingdom

Mauritius

United States

Overall Economic Freedom Overall Economic Freedom Index and the Bottom TenIndex and the Bottom Ten

0 2 4 6 8 10

Score (out of 10)

ChadBurundi

Congo, Rep. OfGuinea-Bissau

Central Afr. Rep.Congo, Dem. R.

AngolaVenezuelaMyanmar

Zimbabwe


World Average World Average Economic Freedom Over TimeEconomic Freedom Over Time

6.10 5.50

5.53

5.56

5.87

6.25

6.58

6.69

6.73

6.74

6.67

6.66

0

2

4

6

8

10

Eco

nom

ic F

reed

om S

core

1970 1975 1980 1985 1990 1995 2000 2005 2006 2007 2008 2009


Economic Freedom Closing the Gap Economic Freedom Closing the Gap with Hong Kongwith Hong Kong

0

2

4

6

8

10

Eco

nom

ic F

reed

om S

core

1970 1975 1980 1985 1990 1995 2000 2005 2006 2007 2008 2009


Average Hong Kong

Why is Economic Freedom Why is Economic Freedom Important?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

The impact on prosperityThe impact on prosperityand developmentand development

Per Capita Income and Economic Per Capita Income and Economic Freedom QuartileFreedom Quartile

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

GD

P P

er C

apita

(p

pp),

200

9

Least FreeQuartile

3rd Quartile2nd QuartileMost FreeQuartile

Sources: The Fraser Institute; The World Bank, World DevelopmenSources: The Fraser Institute; The World Bank, World Development t Indicators, Indicators, 2011.2011.

Most Free Most Free …………………………. Least Free . Least Free

Economic Freedom and Income

y = 0.5148e1.2998x

R2 = 0.478

0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

0 2 4 6 8 10

Economic Freedom, the Poor, andEconomic Freedom, the Poor, andInequalityInequality

Chart 23 Global Population Weighted Economic Freedom and Global

Population Weighted Income per capita

0

1000

2000

3000

4000

5000

6000

7000

1970 1975 1980 1985 1990 1995 2000 2005 2006 2007 2008

WT

D.

Rea

l Inc

ome

Per

Cap

ita

0

1

2

3

4

5

6

7

WT

D.

Eco

nom

ic F

reed

om

Pop wtd Per Cap income

Pop wtd EF

CHART 21 Percapita Income and Economic Freedom in China

1980 - 2008

y = 871.77x - 3987.2R2 = 0.9523

0

500

1000

1500

2000

2500

1 2 3 4 5 6 7

Economic Freedom

Per

capi

ta In

com

e $U

S19

80

Sources: The Fraser Institute; The World Bank, World DevelopmenSources: The Fraser Institute; The World Bank, World Development Indicators, t Indicators, 2010.2010.

Income Share of the Poorest 10% and Income Share of the Poorest 10% and

Economic FreedomEconomic Freedom

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Inco

me

Sha

re H

eld

by

Low

est 1

0%, 1

990-

2009

Least FreeQuartile

3rdQuartile

2ndQuartile

Most FreeQuartile



Income of the Poorest 10% and Income of the Poorest 10% and

Economic FreedomEconomic Freedom

$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000

Inco

me

of th

e Lo

wes

t 10

%, 1

990-

2009

Least FreeQuartile

3rdQuartile

2ndQuartile

Most FreeQuartile



Growth in Developing Nations Per Growth in Developing Nations Per Capita and Economic Freedom QuartileCapita and Economic Freedom Quartile

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

GD

P P

er C

apita

% G

row

th,

1990

-200

9

Least FreeQuartile




Agriculture as a Percentage of Agriculture as a Percentage of the Economy and Economic the Economy and Economic

Freedom QuartilesFreedom Quartiles

0

5

10

15

20

25

30

Yea

rs

Least FreeQuartile


Sources: The Fraser Institute; The World Bank, World DevelopmenSources: The Fraser Institute; The World Bank, World Development Indicators, t Indicators,

2009.2009.


Economic Freedom, Governance, Economic Freedom, Governance, and Democracyand Democracy

Economic Freedom and Political RightsEconomic Freedom and Political Rights

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Pol

itica

l Rig

hts

(ou

t of 7

)

Least FreeQuartile


Sources: The Fraser Institute; Freedom House, Freedom in the WoSources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, rld Country Ratings, 2009, available at http://2009, available at http://www.freedomhouse.orgwww.freedomhouse.org/./.


Economic Freedom and Civil RightsEconomic Freedom and Civil Rights

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Civ

il Li

bert

ies

(ou

t of 7

)

Least FreeQuartile


Sources: The Fraser Institute; Freedom House, Freedom in the WoSources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, rld Country Ratings, 2009, available at http://2009, available at http://www.freedomhouse.orgwww.freedomhouse.org/./.


Economic Freedom and CorruptionEconomic Freedom and Corruption

0

2

4

6

8

10

Cor

rupt

ion

Rat

ing

(out

of 1

0)

Least FreeQuartile


Sources: The Fraser Institute; Transparency International, CorrSources: The Fraser Institute; Transparency International, Corruption Perceptions Index, uption Perceptions Index, 2010 available at http://2010 available at http://www.transparency.orgwww.transparency.org..


The impact of Economic Freedom on The impact of Economic Freedom on other indicators of wellother indicators of well--beingbeing

Economic Freedom and Economic Freedom and Life SatisfactionLife Satisfaction

0.01.02.03.04.05.06.07.08.0

Life

Sat

isfa

ctio

n (o

ut o

f 10)

Least FreeQuartile


Sources: The Fraser Institute; (Sources: The Fraser Institute; (un)Happyun)HappyPlanet Index 2.0. Why good lives don't have Planet Index 2.0. Why good lives don't have to cost the Earth. 2009.to cost the Earth. 2009.


LiteracyLiteracyMale FemaleMale Female

0.5

20.5

40.5

60.5

80.5

100.5

Least FreeQuartile

3rd Quartile2nd QuartileMost Free Quartile


Sources: The Fraser Institute; United Nations Development Sources: The Fraser Institute; United Nations Development ProgrammmeProgrammme, Human , Human Development Indicators 2011, available at http://Development Indicators 2011, available at http://hdr.undp.orghdr.undp.org/./.

Life Expectancy at Birth and Life Expectancy at Birth and Economic Freedom QuartilesEconomic Freedom Quartiles

0

20

40

60

80

Yea

rs

Least FreeQuartile


Sources: The Fraser Institute; The World Bank, World DevelopmenSources: The Fraser Institute; The World Bank, World Development Indicators, t Indicators,

2011.2011.


ConclusionsConclusions

Economic Freedom

• Increases prosperity for all• Reduces poverty • Increases other freedoms• Improves quality of life

EpilogueEpilogue

Some comments on the progress of Italian Economic Freedom

Economic Freedom 1970 - 2009

4

4.5

5

5.5

6

6.5

7

7.5

8

8.5

1970

1980

1990

2000

2002

2004

2006

2008

G8ItalyCanada

Size of govenment 1970 - 2009

3

3.5

4

4.5

5

5.5

6

6.5

7

7.5

1970

1975

1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

G8ItalyCanada

Percent of Population over 65 years 1970 - 2009

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

1970

1980

1990

2000

2002

2004

2006

2008

G8ItalyCanada

Rule of Law 1970 - 2009

4

5

6

7

8

9

10

11

1970

1975

1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

G8ItalyCanada

Sound Money 1970 - 2009

4

5

6

7

8

9

10

1970

1975

1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

G8ItalyCanada

Free Trade 1970 - 2009

4

4.5

5

5.5

6

6.5

7

7.5

8

8.5

9

1970

1975

1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

G8ItalyCanada

Regulation of Product, Labour and Capital Markets 1970 - 2009

4

4.5

5

5.5

6

6.5

7

7.5

8

8.5

9

1970

1975

1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

G8ItalyCanada

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economic freedom of the world: 2011 annual report

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