Latest Economic Freedom Rankings Put Canada at Number Six in the World

Release Date: 28 January 1998

Manila, Philippines>>> Canada's Fraser Institute, in conjunction with independent institutes from 53 countries, today released the Economic Freedom of the World 1998/1999 Interim Report at the Economic Freedom Network’s annual conference, held this year in the Philippines. This comprehensive index is the most objective and accurate measure of economic freedom published to date.

The Economic Freedom Network conference focuses on the results of the index and its importance to countries as diverse as South Africa, Guatemala, India, the United States, and Canada. Former Philippine President Fidel Ramos will address delegates on the evolution of research organizations in ASEAN, indicating the growing importance of applying sound economic research to guide the fortunes of countries still reeling from the economic turmoil in Asia.

Canada hovers around sixth place, but has low rankings in several key areas.

In this year’s interim report, Canada ranks among the ten freest countries in the world, ranking as the sixth freest jurisdiction on the index, slipping marginally from fifth position in 1990. Canada scores high marks in the freedom to use alternative currencies, and the freedom to trade overseas, placing the country in the top three in both of these categories. In the key categories of legal structure related to the security of private ownership, and the size of government, Canada ranks 21st and 95th respectively.

"While Canada is generally economically free in terms of our dealings with overseas investment and trade, it is clear that Canada places an undue economic burden on our citizens and on private property," said Dr. Michael Walker, Executive Director of The Fraser Institute and co-author of the Index. "The low score in the security of ownership—and markedly low score in the size of government variable—illustrates this clearly."

The study concludes that Hong Kong continues to be the most economically free country in the world. Following Hong Kong is Singapore, New Zealand, the United States and the United Kingdom. Between 1990 and 1997, New Zealand moved into the top five and Switzerland dropped out of the top five. Latin American countries, in general, fared better in 1997 than in previous measurements.

The greatest increases in economic freedom were achieved in the Dominican Republic, Hungary, Ireland, Mauritius, Panama, Philippines, Poland, Portugal, and the Czech and Slovak republics (comparing both to a unified Czechoslovakia in 1990). Malaysia, Indonesia, and Venezuela were among those experiencing substantial declines in their rankings.

Economic freedom leads to greater prosperity.

One of the most compelling results of the study is the relationship between economic freedom and prosperity. Countries that score in the top quintile of the "most economically free" countries had an average per capita GDP of US$18,142 and an average growth rate of 1.84%. As freedom declined, so did the average per capita GDP, as well as the average growth rate. The bottom 20 percent of economically free countries had an average per capita GDP of US$1,538 and an average growth rate of -2.10%.

Data from this and other studies in the

Economic Freedom of the World

Eight new variables in the index.

To further increase the accuracy and objectivity of the index, eight new variables have been added, including: current inflation rates, ownership of banks, taxes on international trade, and risk of expropriation. (Both the 1990 and 1997 values have been calculated using these new variables. Editions previous to this are not, however, comparable.) "We feel the far superior nature of the results has warranted these changes. During 1999 a complete historical revision providing measurements back to 1970 will be published," says Dr. James Gwartney, from Florida State University, and co-author of the Index.

The seven major categories of variables included in the index are: (1) size of government: consumption, transfers, and subsidies, (2) the structure of the economy and use of markets, (3) monetary policy and price stability, (4) freedom to use alternative currencies, (5) legal structure and security of private ownership, (6) freedom of trade with foreigners, and (7) freedom of exchange in capital and financial markets.

Data on twenty-five variables was gathered for 119 countries (in 1997) and 111 (in 1990). These variables attempt to quantify the efforts of government to restrict economic freedom in a variety of areas. A score from 1 to 10 (1 being least free, 10 representing freest) was assigned statistically for each variable for each country. Principal component analysis (an advanced statistical technique) was used to assemble the component data into area ratings which ultimately combine to create a summary rating.

This report adds updated data to the fifteen-year Fraser Institute project which has become the most comprehensive index of its kind. This year’s volume, which seeks to develop an extensive and accurate measure of the differences in economic freedom across countries, is based on more complete data and the use of statistical procedures more value-free than any prior measure.

Economic Freedom Network

Co-publishers of Economic Freedom of the World: 1998-99 Interim Report

Albanian Center for Economic Research, Albania • Fundacion del Orden Social de la Libertad, Argentina • Institute of Public Affairs, Australia • Institute for Economy and Politics, Austria • The Institute for Economic Freedom, Bahamas •

MOER Making Our Economy Right, Bangladesh • Centre for The New Europe, Belgium • Fundacion Libertad Democracia y Desarrollo (FULIDED), Bolivia • Instituto Liberal - Rio de Janeiro, Brazil • Institute for Market Economics, Bulgaria • The Fraser Institute, Canada • Instituto Libertad y Desarrollo, Chile • Centro de Investigaciones Academicas – CIVILIZAR, Colombia • Institute of Economics, Croatia • Liberalni Institut, Czech Republic • Liberty Network (LINE), Denmark • Fundacion Economia y Desarrollo, Inc., Dominican Republic • Instituto Ecuatoriano de Economia Politica, Ecuador • The Institute of Economic Affairs, England • Estonian Institute for Open Society Research, Estonia • Association pour la Liberté Economique et le Progrès Social, France • Liberales Institut, Germany • The Institute of Economic Affairs, Ghana • The Centre for Research on the National Economy, Guatemala • The Hong Kong Centre for Economic Research, Hong Kong • Szazadveg-Budapest School of Politics, Hungary • Institute of Economics, University of Iceland, Iceland • Centre for Civil Society, India • The Edmund Burke Institute, Ireland • Institute for Advanced Strategic and Political Studies, Israel • Centro Luigi Einaudi, and Gruppo Giovani Imprenditori, Italy • Bureau d'Analyse d'Ingenierie et de Logiciels (Bailo), Ivory Coast • African Research Centre for Public Policy & Market Process, Kenya • The Korea Center for Free Enterprise, Korea • Lithuanian Free Market Institute, Lithuania • D'Letzeburger Land, Luxembourg • Centro de Investigaciones Sobre la Libre Empresa, AC - CISLE, Mexico • New Zealand Business Roundtable, New Zealand • APEDE - Comision de Libre Empresa, Panama • CITEL, Peru • Center for Research and Communication, Philippines • Adam Smith Research Centre, Poland • Institute of Economic Analysis, Russia • The F.A. Hayek Foundation, Slovak Republic • Institute of Macroeconomic Analysis and Development, Slovenia • The Free Market Foundation of Southern Africa, South Africa • Center for Policy Research, Sri Lanka • Timbro, Sweden • Liberales Institut, Switzerland • Association for Liberal Thinking, Turkey • Ukranian Center for Independent Political Research, Ukraine • The CATO Institute, United States • CEDICE, Venezuela •

Download the complete report and statistical charts at www.freetheworld.com

Summary Statistics — Canada

The data used to derive the ratings are in parenthesis.

Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.

For further information:

Suzanne Walters, Director of Communications,

The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca

info@fraserinstitute.ca
4th Floor, 1770 Burrard Street, Vancouver, BC, Canada, V6J 3G7
Tel: (604) 688-0221 Fax: (604) 688-8539 Book Orders: 1-800-665-3558 ext. 580

You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.