Hong Kong is the Most Economically Free Jurisdiction in the World
Canada Ranks Number Seven
Contact:
Michael Walker, Executive Director,
The Fraser Institute, (604) 714-4545 Email: michaelw@fraserinstitute.caSuzanne Walters, Director of Communications
The Fraser Institute, (604) 714-4582 Email: suzannew@fraserinstitute.caRelease Date: 11 January 2000
VANCOUVER, BC>>> BC-Hong Kong, along with Singapore, are the most economically free jurisdictions in the world, while Canada comes in at number seven, according to the Economic Freedom of the World: 2000 Annual Report, released today by The Fraser Institute at a Hong Kong press conference. The report, published by the Institute, the Hong Kong Centre for Economic Research, and the U.S.-based Cato Institute, in conjunction with independent institutes from 52 other countries, ranks 123 countries on their level of economic freedom.
"This publication is important because it provides a powerful tool for examining the role that economic freedom plays in achieving prosperity and economic development. A careful examination of the research generated from this project clearly shows the benefits-both financial and non-financial-of high levels of economic freedom," says Michael Walker, Executive Director of The Fraser Institute.
Canada's Score Moves Slightly Higher, Problems Still Remain
For the most part, Canada has enjoyed moderately high levels of economic freedom since 1970 (see Figure 1). During this period Canada has consistently ranked as one of the ten freest economies in the world. This has been due mainly to the quality of the legal structure and security of property rights, good monetary policy, the freedom to use alternative currencies, and the freedom of exchange in financial markets. Canada has also received high scores in the freedom to engage in international trade area of this index.
"Certainly this publication shows that Canadians have a lot to be proud of, but this pride should not overshadow the very real need for reform. The research shows that, comparatively speaking, Canada continues to have damagingly high levels of government spending, transfers subsidies and tax rates," notes Walker.
Canada's score is pulled downward by the large size of the government sector, and poor scores for the top marginal tax rate. In the "Size of Government" component of the index, Canada received a score of 6 out of 10, putting Canada in 96th place out of the 121 countries rated for this area. Similarly, a score of 4 out of 10 is earned on the "Top Marginal Tax Rate" component of this index. The United States, our major trading partner, garnered a score of 7 in this area.
The level of economic freedom fell between 1970 and 1975, but since then has been on a slow upward trend. Nevertheless, while the level of economic freedom has been rising in Canada, it's overall rank since 1980 has declined. This reflects the reality that other nations have been improving their level of economic freedom at a greater pace than ours.
International Rankings
Following Hong Kong and Singapore, the next freest economies are New Zealand (3rd), the United States (4th), and the United Kingdom (5th). Other countries ranking near the top of the list include Ireland (6th), Australia (7th), Netherlands (9th), Luxembourg (9th), and Switzerland (9th). The least free economies include Myanmar (123rd), Democratic Republic of Congo (122nd), Sierra Leone (121st), Rwanda (120th), Madagascar (119th), and Guinea-Bissau (118th).
In the 1990s a number of Latin American countries achieved dramatic improvements in both their ratings and rankings. Peru, Nicaragua, Argentina, El Salvador, and Dominican Republic all improved their ratings by at least 2 points. Among Eastern nations, Russia, Hungary and Poland have improved their levels of economic freedom. Countries with a decline in the level of economic freedom in the 1990s include Benin, Chad, Malaysia, Cameroon, and Senegal.
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$18,108 and an average growth rate of 1.6%. As freedom declined, so did the average per capita GDP, as well as the average growth rate. The least free 20 percent of countries had an average per capita GDP of US$1,669 and an average growth rate of -1.32%.
Data from the Economic Freedom of the World series and research studies that use the Economic Freedom of the World ratings confirm that countries with consistently high levels of economic freedom perform far better, both financially and non-financially, than those with low levels of economic freedom. (For a description of this research go to www.freetheworld.com/papers.html.)
Economic Freedom leads to greater human and social development
Economic freedom ultimately translates into greater human and social development either through the role of economic freedom itself or through its impact on economic growth and development.
Life expectancy in the top economic freedom quintile is a full twenty years longer than that found in the bottom quintile. Also, those in the freest jurisdictions experience less infant mortality, and child malnutrition, have greater access to safe water and health care, have higher literacy rates, and enjoy greater political stability than those persons in less free countries. Economically free nations also produce higher cereal yields, invest more resources into research and development, and score higher on the United Nations Human Development Index. (See Appendix 1.)
Methodology
This edition of Economic Freedom of the World presents updated figures and backdates the data to 1970 (where possible). The addition of historical data makes this the most comprehensive measure of economic freedom ever published. This wealth of data will provide researchers with an opportunity to further explore the relationships between economic freedom and other important social indicators.
The seven major categories of variables included in the index are: (1) size of government, (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-three variables was gathered for 123 countries in the most recent year. These variables attempt to quantify the restrictions on economic freedom imposed by governments in a variety of areas. A score from 0 to 10 (0 being least free, 10 representing freest) based on strictly the data was assigned for each variable for each country. Principal component analysis (an advanced statistical technique) was used to attach weights to the component data which ultimately combine to create a summary rating.
This comprehensive index, constructed under the leadership of The Fraser Institute and Nobel Laureate in Economics, Milton Friedman, is the most objective and accurate measure of economic freedom published to date by any organization.
Appendix 1. Economic Freedom and Various Indicators
Co-publishers of Economic Freedom of the World: 2000 Annual Report
Albanian Center for Economic Research Albania o Fundación Libertad Argentina o Institute of Public Affairs Australia o Institute for Economy and Politics Austria o The Institute for Economic Freedom Bahamas o Making Our Economy Right Bangladesh o Centre for the New Europe Belgium o Fundacion Libertad, Democracia y Desarrollo (FULIDED) Bolivia o Instituto Liberal - Rio de Janeiro Brazil o Institute for Market Economics Bulgaria o The Fraser Institute Canada o Libertad y Desarrollo Chile o Centro de Investigaciones Académicas - CIVILIZAR Colombia o Instituto para la Libertad y el Análisis de Políticas Costa Rica o Institute of Economics Croatia o Liberální Institut Czech Republic o Liberty Network (LINE) Denmark o Fundación Economía y Desarrollo, Inc. Dominican Republic o Instituto Ecuatoriano de Economia Politica Ecuador o The Institute of Economic Affairs England o Estonian Institute for Open Society Research Estonia o Association pour la Liberté Economique et le Progrès Social France o Liberales Institut Germany o The Institute of Economic Affairs Ghana o The Centre for Research on the National Economy Guatemala o The Hong Kong Centre for Economic Research Hong Kong o Szazadveg Institute Hungary o Institute of Economic Studies Iceland o Centre for Civil Society India o Institute for Development of Economics and Finance Indonesia o The Edmund Burke Institute Ireland o Institute for Advanced Strategic and Political Studies Israel o Gruppo Giovani Imprenditori and Centro Luigi Einaudi Italy o Bureau d'Analyse d'Ingenierie et de Logiciels (Bailo) Ivory Coast o African Research Centre for Public Policy & Market Process Kenya o The Korea Center for Free Enterprise Korea o Lithuanian Free Market Institute Lithuania o D'Letzeburger Land Luxembourg o Centro de Investigaciones Sobre la Libre Empresa, AC Mexico o New Zealand Business Roundtable New Zealand o The Free Enterprise Commission Panama o Centro de Investigacion y Estudios Legales (CITEL) Peru o Center for Research and Communication Philippines o Adam Smith Research Centre Poland o Institute of Economic Analysis Russia o The F.A. Hayek Foundation Slovak Republic o Institute of Macroeconomic Analysis and Development Slovenia o The Free Market Foundation of Southern Africa South Africa o Center for Policy Research Sri Lanka o Timbro Sweden o Liberales Institut Switzerland o Association for Liberal Thinking Turkey o Ukrainian Center for Independent Political Research Ukraine o The Cato Institute USA o The Centre for the Dissemination of Economic Knowledge (CEDICE) Venezuela
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information contact:
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.