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Transcript of 1 Economic Freedom of the World: 2005 Annual Report Fraser Institute Policy Briefing September 8,...
1
Economic Freedom of the Economic Freedom of the World: 2005 Annual ReportWorld: 2005 Annual Report
Fraser Institute
Policy Briefing September 8, 2005
2
THANK YOU FOR THANK YOU FOR COMING!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
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
20 year project Led by Professor Milton Friedman, Rose
Friedman and Michael WalkerInvolved 100 of the world’s top scholars
4
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 and Robert Lawson A compendium of 38 government policies affecting
economic freedom based on objective data or independent surveys
A ranking of 127 countries representing 93% 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 68 different countries
5
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
6
Components of The Economic Components of The Economic
Freedom of the World IndexFreedom of the World Index
Size of government and taxationPrivate property and the rule of lawSoundness of MoneyTrade regulation and tariffsRegulation of business, labour and capital
marketsBased entirely on objective or third party
data for 127 countries
7
Talk about making a difference …Talk about making a difference …
8
African Research Centre for Public African Research Centre for Public Policy Research and Analysis, KenyaPolicy Research and Analysis, KenyaAlbanian Center for Economic Albanian Center for Economic Research (ACER), AlbaniaResearch (ACER), AlbaniaAlternate Solutions Institute, Alternate Solutions Institute, PakistanPakistanAssociation for Liberal Thinking, Association for Liberal Thinking, TurkeyTurkeyAssociation pour la Liberté Association pour la Liberté Economique et le Progrès Social Economique et le Progrès Social (ALEPS), France(ALEPS), FranceBureau d'Analyse d'Ingenierie et de Bureau d'Analyse d'Ingenierie et de Logiciels (BAILO), Ivory CoastLogiciels (BAILO), Ivory CoastCATO Institute, USACATO Institute, USACausa Liberal, PortugalCausa Liberal, PortugalCenter for Economic and Political Center for Economic and Political Research, AzerbaijanResearch, AzerbaijanThe Center for Entrepreneurship and The Center for Entrepreneurship and Economic Development, MontenegroEconomic Development, MontenegroCenter for Free Enterprise, KoreaCenter for Free Enterprise, KoreaCenter for Politiske Studier, Center for Politiske Studier, DenmarkDenmarkThe Center for Research and The Center for Research and Communication, PhilippinesCommunication, PhilippinesCentre for Civil Society, IndiaCentre for Civil Society, IndiaThe Centre for the Dissemination of The Centre for the Dissemination of Economic Knowledge (CEDICE), Economic Knowledge (CEDICE), VenezuelaVenezuelaCentre for the New Europe, BelgiumCentre for the New Europe, BelgiumThe Centre for Research on the The Centre for Research on the National Economy, GuatemalaNational Economy, GuatemalaCentro de Investigación para el Centro de Investigación para el Desarrollo A.C., MexicoDesarrollo A.C., MexicoCentro de Investigación y Estudios Centro de Investigación y Estudios Legales (CITEL), PeruLegales (CITEL), PeruCentro Einaudi, ItalyCentro Einaudi, ItalyCentrum im. Adama Smitha, PolandCentrum im. Adama Smitha, PolandD'Letzeburger Land, LuxembourgD'Letzeburger Land, Luxembourg
Instituto para la Libertad y el Análisis de Políticas, Costa RicaLiberales Institut, GermanyLiberales Institut, SwitzerlandLiberální Institut, Czech RepublicLithuanian Free Market Institute, LithuaniaMaking Our Economy Right (MOER), BangladeshThe Nassau Institute, BahamasThe New Zealand Business Roundtable, New ZealandOpen Republic Institute, IrelandOpen Society Forum, MongoliaPathfinder Foundation, Sri LankaResearch Center for Entrepreneurship and Development Policies, VietnamRomania Think Tank,RomaniaScientific Research Mises Center, Scientific Research Mises Center, BelarusBelarusSociety for Disseminating Economic Society for Disseminating Economic Knowledge:“New Economic School – Knowledge:“New Economic School – Georgia”, GeorgiaGeorgia”, GeorgiaSzazadveg Policy Research Institute, Szazadveg Policy Research Institute, HungaryHungaryTIGRA®, AustriaTIGRA®, AustriaTimbro, SwedenTimbro, SwedenThe Ukrainian Center for The Ukrainian Center for Independent Political Research, Independent Political Research, UkraineUkraineZambia Institute for Public Policy Zambia Institute for Public Policy Analysis (ZIPPA), ZambiaAnalysis (ZIPPA), Zambia
Member Institutes of Economic Freedom of the World Network
Economic Policy Institute-Bishkek Economic Policy Institute-Bishkek Consensus, Kyrgyz RepublicConsensus, Kyrgyz RepublicThe Estonian Institute for Open Society The Estonian Institute for Open Society Research, EstoniaResearch, EstoniaThe F.A. Hayek Foundation, Slovak RepublicThe F.A. Hayek Foundation, Slovak RepublicFree Market Center (FMC), YugoslaviaFree Market Center (FMC), YugoslaviaThe Free Market Foundation of Southern The Free Market Foundation of Southern Africa, South AfricaAfrica, South AfricaFundación Economía y Desarrollo Inc., Fundación Economía y Desarrollo Inc., Dominican RepublicDominican RepublicFundación Libertad, ArgentinaFundación Libertad, ArgentinaFundación Libertad, PanamaFundación Libertad, PanamaFundación Libertad, Democracia y Fundación Libertad, Democracia y Desarrollo, BoliviaDesarrollo, BoliviaHong Kong Centre for Economic Research, Hong Kong Centre for Economic Research, Hong KongHong KongILP - Instituto Libertad y Progreso, ILP - Instituto Libertad y Progreso, ColombiaColombiaInstitut de Recherche pour la Liberte Institut de Recherche pour la Liberte Economique et la Prosperite (IRLEP), HaitiEconomique et la Prosperite (IRLEP), HaitiInstitute for Advanced Strategic and Institute for Advanced Strategic and Political Studies, IsraelPolitical Studies, IsraelThe Institute for Development of Economics The Institute for Development of Economics and Finance, Indonesiaand Finance, IndonesiaInstitute for Market Economics, BulgariaInstitute for Market Economics, BulgariaInstitute of Business, Trinidad and TobagoInstitute of Business, Trinidad and TobagoThe Institute of Economic Affairs, GhanaThe Institute of Economic Affairs, GhanaThe Institute of Economic Affairs, United The Institute of Economic Affairs, United KingdomKingdomInstitute of Economic Analysis, RussiaInstitute of Economic Analysis, RussiaInstitute of Economic Studies, IcelandInstitute of Economic Studies, IcelandThe Institute of Economics, CroatiaThe Institute of Economics, CroatiaInstitute of Public Affairs, AustraliaInstitute of Public Affairs, AustraliaInstitute of Public Policy Analysis, NigeriaInstitute of Public Policy Analysis, NigeriaInstituto Ecuatoriano de Economía Política, Instituto Ecuatoriano de Economía Política, EcuadorEcuador Instituto Liberal do Rio de Janeiro, BrazilInstituto Libertad y Desarrollo, Chile
9
Sample of Press Coverage forFraser Institute’ Economic Freedom of the World 2004
Agence France PressAgence France PressAl-Ahram Weekly, JordanAl-Ahram Weekly, JordanAll Africa Global MediaAll Africa Global MediaArvamus, EstoniaArvamus, EstoniaAsia Pulse, Hong KongAsia Pulse, Hong KongAsian Wall StreetAsian Wall StreetBahamas Financial Services Bahamas Financial Services BoardBoardBBCBBCBerlingske, DenmarkBerlingske, DenmarkBusiness and Finance, Business and Finance, IrelandIrelandBusiness Daily, Hong KongBusiness Daily, Hong KongBusiness Day, South AfricaBusiness Day, South AfricaBusiness Standard, IndiaBusiness Standard, IndiaCanale Italia, ItalyCanale Italia, ItalyChosun Ilbo, KoreaChosun Ilbo, KoreaCritica, Panama Critica, Panama Cronache, ItalyCronache, ItalyCTK Daily News, CTK Daily News, CzechoslovakiaCzechoslovakiaDan, MontenegroDan, Montenegro
Dominion Post, New Dominion Post, New ZealandZealandDong-a Ilbo, KoreaDong-a Ilbo, Korea
Dow Jones, GermanyDow Jones, GermanyDow Jones InternationalDow Jones InternationalEconomistEconomistEl Comercio, SpainEl Comercio, SpainEl Diario, ChileEl Diario, ChileEl Economista, SpainEl Economista, SpainEl Nuevo Dia, SpainEl Nuevo Dia, SpainExaminer, CanadaExaminer, CanadaFinancial Express, IndiaFinancial Express, IndiaForbesForbesFrankfurter Allgemeine ZeitungFrankfurter Allgemeine ZeitungHerald Sun, AustraliaHerald Sun, AustraliaHong Kong Economic JournalHong Kong Economic JournalHospodarske, Czech RepublicHospodarske, Czech RepublicIn Copertina, ItalyIn Copertina, ItalyIndependent Business Weekly, New Independent Business Weekly, New ZealandZealandIndian Business InsightIndian Business InsightInter Press, Hong KongInter Press, Hong KongInternational Herald TribuneInternational Herald TribuneInvestor's Business Daily, USInvestor's Business Daily, USIrish IndependentIrish IndependentIzvestia, RussiaIzvestia, RussiaJakarta PostJakarta PostJerusalem PostJerusalem Post
JoongAng Daily, KoreaJoongAng Daily, KoreaKorea Economic Daily Korea Economic Daily Korea TimesKorea TimesLa Estrella de PanamaLa Estrella de PanamaLa Nacion, Costa RicaLa Nacion, Costa RicaLa Prensa, Panama La Prensa, Panama L'Adige, ItalyL'Adige, ItalyLatin America News DigestLatin America News DigestLatvian News AgencyLatvian News AgencyLianhe Zaobao, SingaporeLianhe Zaobao, SingaporeNavHind TimesNavHind TimesNew Zealand HeraldNew Zealand HeraldNews AktuellNews AktuellPobjeda, MontenegroPobjeda, MontenegroPrimera, MexicoPrimera, MexicoPublika, MontenegroPublika, MontenegroSegye Times, KoreaSegye Times, KoreaSeoul Daily, KoreaSeoul Daily, KoreaSing Tao Daily News, Hong KongSing Tao Daily News, Hong KongSouth China Morning PostSouth China Morning PostSpanish News DigestSpanish News DigestSpanish WorldstreamSpanish WorldstreamStandard, Hong KongStandard, Hong KongTelegraph, IndiaTelegraph, IndiaTimes of OmanTimes of OmanWashington TimesWashington TimesXinhua News Agency, ChinaXinhua News Agency, China
10
11
Introducing the 2005 Economic Introducing the 2005 Economic Freedom of the World Index ResultsFreedom of the World Index Results
12
Overall Economic Freedom Index Overall Economic Freedom Index and the Top 12and the Top 12
0 2 4 6 8 10
Score (out of 10)
EstoniaLuxembourg
Unit. Arab Em.Australia
IrelandCanada
Average of Top 12United Kingdom
SwitzerlandUnited StatesNew Zealand
SingaporeHong Kong
Source: The Fraser Source: The Fraser Institute.Institute.
13
The top 12 and how they got thereThe top 12 and how they got there
0
20
40
60
80
100
Perc
entil
e R
anks
Australia
Canada
EstoniaHong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United KingdomUnited States
Source: The Fraser Source: The Fraser Institute.Institute.
14
Countries having significant Countries having significant improvement since 1970improvement since 1970
0
20
40
60
80
100
Perc
entil
e R
anks
Chile
Kuwait
HungaryUnited Kingdom
El Salvador
Estonia
Peru
SwedenJamaica
Uganda
Source: The Fraser Source: The Fraser Institute.Institute.
15
Countries having significant Countries having significant deteriorationdeterioration since 1970 since 1970
0
20
40
60
80
100
Perc
entil
e R
anks
Sierra Leone
Cote d'Ivoire
Malawi
Paraguay
Cameroon
Niger
Nepal
Mali
Pap. New Guinea
Venezuela
Source: The Fraser Source: The Fraser Institute.Institute.
16
Overall Economic Freedom Index Overall Economic Freedom Index and the Bottom Tenand the Bottom Ten
0 2 4 6 8 10
Score (out of 10)
Myanmar
Zimbabwe
Congo, Dem. R.
Venezuela
Guinea-Bissau
Burundi
Algeria
Congo, Rep. Of
Central Afr. Rep.
Gabon
Source: The Fraser Source: The Fraser Institute.Institute.
17
Economic Freedom Over TimeEconomic Freedom Over Time
5.75.2 5.1 5.2 5.5
5.96.3 6.4 6.4 6.4
0
2
4
6
8
10
Eco
nom
ic F
reed
om S
core
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003
Source: The Fraser Source: The Fraser Institute.Institute.
18
Economic Freedom Over Time Adjusted Economic Freedom Over Time Adjusted for Populationfor Population
5.54.9 4.8 5.0 5.1
5.66.0 6.2 6.2 6.3
0
2
4
6
8
10
Eco
nom
ic F
reed
om S
core
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003
Source: The Fraser Source: The Fraser Institute.Institute.
19
Economic Freedom and the Top 12Economic Freedom and the Top 12
20
Size of Government and the Top 12Size of Government and the Top 12
0 2 4 6 8 10
Score (out of 10)
Luxembourg
Ireland
Australia
United Kingdom
Estonia
Canada
New Zealand
Average of Top 12
Switzerland
Unit. Arab Em.
United States
Singapore
Hong Kong
Source: The Fraser Source: The Fraser Institute.Institute.
21
Size of Government and the Top 12Size of Government and the Top 12
0
2
4
6
8
101970 1975 1980 1985 1990 1995 2000 2001 2002 2003
Scor
e (o
ut o
f 10)
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
22
Size of Government and the Top 12Size of Government and the Top 12
0
20
40
60
80
100
Perc
entil
e R
anks
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
23
Legal System and Property Rights Legal System and Property Rights and the Top 12and the Top 12
0 2 4 6 8 10
Score (out of 10)
Unit. Arab Em.
Estonia
Hong Kong
United States
Singapore
Average of Top 12
Ireland
Canada
Switzerland
Luxembourg
Australia
New Zealand
United Kingdom
Source: The Fraser Source: The Fraser Institute.Institute.
24
Legal System and Property Rights Legal System and Property Rights and the Top 12and the Top 12
0
2
4
6
8
101970 1975 1980 1985 1990 1995 2000 2001 2002 2003
Scor
e (o
ut o
f 10)
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
25
Legal System and Property Rights Legal System and Property Rights and the Top 12and the Top 12
0
20
40
60
80
100
Perc
entil
e R
anks
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
26
Sound Money and the Top 12Sound Money and the Top 12
0 2 4 6 8 10
Score (out of 10)
Unit. Arab Em.
Hong Kong
Australia
United Kingdom
Average of Top 12
Canada
New Zealand
Switzerland
Ireland
Singapore
Estonia
Luxembourg
United States
Source: The Fraser Source: The Fraser Institute.Institute.
27
Sound Money and the Top 12Sound Money and the Top 12
0
2
4
6
8
101970 1975 1980 1985 1990 1995 2000 2001 2002 2003
Scor
e (o
ut o
f 10)
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
28
Sound Money and the Top 12Sound Money and the Top 12
0
20
40
60
80
100
Perc
entil
e R
anks
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
29
Freedom to Trade Internationally Freedom to Trade Internationally and the Top 12and the Top 12
0 2 4 6 8 10
Score (out of 10)
Australia
United States
Canada
Switzerland
New Zealand
United Kingdom
Unit. Arab Em.
Average of Top 12
Estonia
Ireland
Luxembourg
Singapore
Hong Kong
Source: The Fraser Source: The Fraser Institute.Institute.
30
Freedom to Trade Internationally Freedom to Trade Internationally and the Top 12and the Top 12
0
2
4
6
8
101970 1975 1980 1985 1990 1995 2000 2001 2002 2003
Scor
e (o
ut o
f 10)
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
31
Freedom to Trade Internationally Freedom to Trade Internationally and the Top 12and the Top 12
0
20
40
60
80
100
Perc
entil
e R
anks
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
32
Regulations and the Top 12Regulations and the Top 12
0 2 4 6 8 10
Score (out of 10)
Ireland
Estonia
Singapore
Switzerland
Luxembourg
Canada
Average of Top 12
Australia
United Kingdom
United States
New Zealand
Unit. Arab Em.
Hong Kong
Source: The Fraser Source: The Fraser Institute.Institute.
33
Regulations and the Top 12Regulations and the Top 12
0
2
4
6
8
101970 1975 1980 1985 1990 1995 2000 2001 2002 2003
Scor
e (o
ut o
f 10)
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
34
Regulations and the Top 12Regulations and the Top 12
0
20
40
60
80
100
Perc
entil
e R
anks
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
35
Credit Market Regulations Credit Market Regulations and the Top 12and the Top 12
0 2 4 6 8 10
Score (out of 10)
Unit. Arab Em.
Singapore
Ireland
Average of Top 12
Switzerland
Hong Kong
Canada
Estonia
Luxembourg
Australia
United Kingdom
United States
New Zealand
Source: The Fraser Source: The Fraser Institute.Institute.
36
Credit Market Regulations Credit Market Regulations and the Top 12and the Top 12
0
2
4
6
8
101970 1975 1980 1985 1990 1995 2000 2001 2002 2003
Scor
e (o
ut o
f 10)
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
37
Credit Market Regulations Credit Market Regulations and the Top 12and the Top 12
0
20
40
60
80
100
Perc
entil
e R
anks
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New ZealandSingapore
Switzerland
Unit. Arab Em.
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
38
Labor Market Regulations Labor Market Regulations and the Top 12and the Top 12
0 2 4 6 8 10
Score (out of 10)
Estonia
Ireland
Singapore
New Zealand
Switzerland
Luxembourg
Australia
Average of Top 12
Canada
United Kingdom
United States
Hong Kong
Unit. Arab Em.
Source: The Fraser Source: The Fraser Institute.Institute.
39
Labor Market Regulations Labor Market Regulations and the Top 12and the Top 12
0
2
4
6
8
101970 1975 1980 1985 1990 1995 2000 2001 2002 2003
Scor
e (o
ut o
f 10)
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New Zealand
Singapore
Switzerland
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
40
Labor Market Regulations Labor Market Regulations and the Top 12and the Top 12
0
20
40
60
80
100
Perc
entil
e R
anks
Australia
Canada
Estonia
Hong Kong
Ireland
Luxembourg
New Zealand
Singapore
Switzerland
United Kingdom
United States
Average of Top 12
Source: The Fraser Source: The Fraser Institute.Institute.
41
Business Regulations Business Regulations and the Top 12and the Top 12
0 2 4 6 8 10
Score (out of 10)
Ireland
Luxembourg
United Kingdom
Canada
Switzerland
United States
Unit. Arab Em.
Estonia
Australia
Average of Top 12
New Zealand
Singapore
Hong Kong
Source: The Fraser Source: The Fraser Institute.Institute.
42
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
43
The impact on economic The impact on economic growth and developmentgrowth and development
44
Income (per person) of the Income (per person) of the Bottom TenBottom Ten
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP per Capita, 2003 (ppp)
BurundiCongo, Dem. R.Guinea-Bissau Congo, Rep. Of
Central Afr. Rep.Rwanda
ZimbabweVenezuela
AlgeriaGabon
Sources: The Fraser Institute; The World Bank, World Development Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.Indicators CD-ROM, 2005.
45
Income (per person) of the Top 12Income (per person) of the Top 12
$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000
GDP per Capita, 2003 (ppp)
EstoniaUnit. Arab Em.
New ZealandSingapore
United KingdomHong Kong
AustraliaSwitzerland
CanadaUnited States
IrelandLuxembourg
Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.CD-ROM, 2005.
46
Per Capita Income and Economic Per Capita Income and Economic Freedom QuintileFreedom Quintile
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
GD
P P
er C
apit
a (p
pp
), 2
003
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free …………… Most FreeLeast Free …………… Most FreeSources: The Fraser Institute; The World Bank, World Development Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.Indicators CD-ROM, 2005.
47
Growth in Real GDP Per Capita Growth in Real GDP Per Capita and Economic Freedom Quintileand Economic Freedom Quintile
0.0
0.5
1.0
1.5
2.0
2.5
GD
P P
er
Ca
pit
a %
Gro
wth
,
19
94
-20
03
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free ……………..….. Most FreeLeast Free ……………..….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.CD-ROM, 2005.
48
Economic Freedom and Economic Freedom and InvestmentInvestment
$0
$1,000
$2,000
$3,000
$4,000
$5,000
Gro
ss
Inv
es
tme
nt
pe
r C
ap
ita
(c
on
sta
nt
20
00
US
$),
20
03
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free ……………..….. Most FreeLeast Free ……………..….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.CD-ROM, 2005.
49
Economic Freedom and Economic Freedom and UnemploymentUnemployment
0.0
3.0
6.0
9.0
12.0
15.0
To
tal U
ne
mp
loy
me
nt
(% o
f to
tal
lab
or
forc
e),
20
00
-20
02
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free ……………..….. Most FreeLeast Free ……………..….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.Indicators CD-ROM, 2005.
50
New research:New research: Economic Freedom and PeaceEconomic Freedom and Peace
51
Economic Freedom and Peace:Economic Freedom and Peace:1) the “democratic peace”1) the “democratic peace”
Does the concept of a “democratic peace” hold up to scrutiny?
Democracies tend not to go to war with each other but go to war about as often in general as non-democracies.
Developing democracies are as prone as non-democracies to violent conflict.
Thus, “democratic peace” fails close study.
52
Economic Freedom and Peace:Economic Freedom and Peace:2) the “capitalist peace”2) the “capitalist peace”
Stable democracies typically have high levels of economic freedom – which promotes peace.
When both are included in a statistical test, economic freedom is 50 times more potent in reducing conflict than democracy.
Nations which score below 2 in the EF index are 14 times more prone to conflict than top scoring nations.
Economically free nations fight each other less and go to war against other nations less as well.
53
Causes of the Capitalist PeaceCauses of the Capitalist Peace Wealth and power are created by markets and the efficient
production that arises from them, not by conquest of land or raw materials.
Wealth created by market economies through efficient production, unlike wealth derived from land or resources, is difficult for nations to “steal” by violent action.
Efficient production requires property rights and free decisions by market participants that cannot be effectively coordinated to the victor’s advantage.
Markets provide new methods for signaling among nations and create areas in which states can compete without having to go to war.
54Source: The Fraser Institute.Source: The Fraser Institute.
55Source: The Fraser Institute.Source: The Fraser Institute.
56
Economic Freedom and ConflictEconomic Freedom and Conflict
0.0
3.0
6.0
9.0
12.0
Nu
mb
er o
f C
onfl
icts
,
199
2-20
01
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free ……………..….. Most FreeLeast Free ……………..….. Most Free
Sources: The Fraser Institute.Sources: The Fraser Institute.
57
Policy Implications:Policy Implications:
Efforts to promote democracy may not produce peace dividend
Policy should be to promote economic freedom
Economic freedom has been shown to promote democracy over the long term (and many other good outcomes)
Therefore, promoting economic freedom will both lead to less conflict and, in the long run, to democracy.
58
Economic Freedom,the Poor, andEconomic Freedom,the Poor, andInequalityInequality
59
Human Poverty Index, 2002, and Human Poverty Index, 2002, and Economic Freedom QuintileEconomic Freedom Quintile
0
5
10
15
20
25
30
35
40
Hu
man
Po
vert
y I
nd
ex
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free …………..…. Most FreeLeast Free …………..…. Most FreeSources: The Fraser Institute; United Nations Development Programmme, Human Development Indicators 2004, available at http://hdr.undp.org/statistics/data/index_indicators.cfm (accessed on July 5, 2005).
60
Income Inequality, 1998-2002Income Inequality, 1998-2002
0
10
20
30
40
50
60
Pe
rce
nta
ge
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
TopQuintile
Poorest 20%, 1998-2002 2nd 20%, 1998-20023rd 20%, 1998-2002 4th 20%, 1998-2002Richest 20%, 1998-2002
Least Free …….. Most Free Least Free …….. Most Free
Percent of income accruing to thePercent of income accruing to the
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.ROM, 2005.
61
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 S
hare
Held
by
Lo
west
10%
, 1999-2
003
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
TopQuintile
Least Free …….. Most FreeLeast Free …….. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.ROM, 2005.
62
Per Capita Income of Poorest 10% Per Capita Income of Poorest 10% and Economic Freedomand Economic Freedom
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Bottom Quintile Fourth Quintile Third Quintile Second Quintile Top Quintile0.0
0.5
1.0
1.5
2.0
2.5
3.0
Income Level of the Poorest 10%, 1999-2003Income share of the lowest 10%, 1999-2003
Least Free …….. Most Free Least Free …….. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators
CD-ROM, 2005.CD-ROM, 2005.
63
Economic Freedom, Economic Freedom, Other Freedoms and Other Freedoms and DemocracyDemocracy
64
Economic Freedom Versus CorruptionEconomic Freedom Versus Corruption10 =highly corrupt and 0 =highly clean10 =highly corrupt and 0 =highly clean
0
2
4
6
8
10
Co
rru
pti
on
Ra
tin
g
(ou
t o
f 1
0)
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free ………….. Most FreeLeast Free ………….. Most Free Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index
2004, available at 2004, available at http://www.transparency.org/cpi/2004/cpi2004.en.html#cpi2004 (accessed on http://www.transparency.org/cpi/2004/cpi2004.en.html#cpi2004 (accessed on July 5, July 5, 2005).2005).
65
Economic Freedom and Voice and Economic Freedom and Voice and AccountabilityAccountability
-2.5 =low voice and accountability and 2.5 =high voice and -2.5 =low voice and accountability and 2.5 =high voice and accountability accountability
-1.5
-0.5
0.5
1.5
Vo
ice
an
d A
cc
ou
nta
bilit
y,
20
04
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free ………….. Most FreeLeast Free ………….. Most Free Sources: The Fraser Institute; The World Bank Group, Governance & Anti-Corruption, Sources: The Fraser Institute; The World Bank Group, Governance & Anti-Corruption,
available at http://info.worldbank.org/governance/kkz2004/tables.asp available at http://info.worldbank.org/governance/kkz2004/tables.asp (accessed on July 5, 2005).(accessed on July 5, 2005).
66
Political Stability and Economic Freedom Political Stability and Economic Freedom -2.5 =low political stability and 2.5 =high political stability-2.5 =low political stability and 2.5 =high political stability
-1.0
-0.5
0.0
0.5
1.0
1.5
Po
liti
cal
Sta
bil
ity,
2004
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
TopQuintile
Least Free ………..… Most FreeLeast Free ………..… Most Free
Sources: The Fraser Institute; The World Bank Group, Governance & Anti-Corruption, available at http://info.worldbank.org/governance/kkz2004/tables.asp
(accessed on July 5, 2005).
67
Economic Freedom and Political RightsEconomic Freedom and Political Rights ten representing the highest degree of political rights and ten representing the highest degree of political rights and
zero the lowestzero the lowest
0
2
4
6
8
10
Po
liti
ca
l R
igh
ts
(o
ut
of
10
)
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
TopQuintile
Least Free ……………. Most FreeLeast Free ……………. Most Free
Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 1972 through 2003, available at http://www.freedomhouse.org/ratings/index.htm 1972 through 2003, available at http://www.freedomhouse.org/ratings/index.htm (accessed on July 5, 2005).(accessed on July 5, 2005).
68
Economic Freedom and Civil LibertiesEconomic Freedom and Civil Libertiesten representing the highest degree of civil liberties ten representing the highest degree of civil liberties
and zero the lowestand zero the lowest
0
2
4
6
8
10
Civ
il L
iber
ties
(o
ut
of
10)
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free …….. Most FreeLeast Free …….. Most Free Sources: The Fraser Institute; Freedom House, Freedom in the World Country Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 1972 through 2003, available at Ratings, 1972 through 2003, available at http://www.freedomhouse.org/ratings/index.htm (accessed on July 5, 2005).http://www.freedomhouse.org/ratings/index.htm (accessed on July 5, 2005).
69
The impact of Economic Freedom on The impact of Economic Freedom on the UN’s Human Development Index the UN’s Human Development Index and other indicators of well-beingand other indicators of well-being
70
Human Development Index, 2002, Human Development Index, 2002, and Economic Freedom Quintilesand Economic Freedom Quintiles
0.0
0.2
0.4
0.6
0.8
1.0
Un
ited
Nat
ion
s H
um
an D
evel
op
men
t In
dex
, 200
2
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free ……………. Most FreeLeast Free ……………. Most Free
Sources: The Fraser Institute; United Nations Development Programmme, Human Sources: The Fraser Institute; United Nations Development Programmme, Human Development Indicators 2004, available at Development Indicators 2004, available at http://hdr.undp.org/statistics/data/index_indicators.cfm (accessed on July 5, 2005).http://hdr.undp.org/statistics/data/index_indicators.cfm (accessed on July 5, 2005).
71
Life Expectancy at Birth and Life Expectancy at Birth and Economic Freedom QuintilesEconomic Freedom Quintiles
0
20
40
60
80
Yea
rs
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
Top Quintile
Least Free ……………. Most FreeLeast Free ……………. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators CD-Sources: The Fraser Institute; The World Bank, World Development Indicators CD-
ROM, 2005.ROM, 2005.
72
Infant Mortality and Economic Infant Mortality and Economic Freedom QuintileFreedom Quintile
0
20
40
60
80
100
Per
1,0
00 li
ve b
irth
s, 2
003
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
TopQuintile
Least Free ………..…. Most FreeLeast Free ………..…. Most Free
Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.CD-ROM, 2005.
73
Adult Mortality (2000) and Adult Mortality (2000) and Economic Freedom QuintileEconomic Freedom Quintile
0
100
200
300
400
500
Mo
rtal
ity r
ate,
ad
ult
(per
1,
000
adu
lts)
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
TopQuintile
Least Free ………..…. Most FreeLeast Free ………..…. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators
CD-ROM, 2005.CD-ROM, 2005.
74
Economic Freedom and Labor force, Economic Freedom and Labor force, children 10-14 (% of age group)children 10-14 (% of age group)
0
5
10
15
20
25
Perc
en
tag
e o
f ch
ild
ren
10-1
4 w
ho
are
in
th
e
lab
ou
r fo
rce
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
TopQuintile
Least Free ……………. Most FreeLeast Free ……………. Most FreeSources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators
CD-ROM, 2005.CD-ROM, 2005.
75
% of Population Using Improved % of Population Using Improved Water Sources, 2002Water Sources, 2002
0
20
40
60
80
100
Per
cen
tag
e
BottomQuintile
FourthQuintile
ThirdQuintile
SecondQuintile
TopQuintile
Least Free …………….. Most FreeLeast Free …………….. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators
CD-ROM, 2005.CD-ROM, 2005.
76
ConclusionsConclusionsEconomic Freedom spurs
Increased prosperity for allPoverty reductionOther freedomsReduces Probability of WarQuality of life improvements
All this can be seen in today’s data All this can be seen in today’s data and lessons from historyand lessons from history
77
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