Cato Institute report rates economic freedom of the world
According to The Economist, study is "best attempt yet to define and measure economic freedom"

Hong Kong and Singapore are the most economically free jurisdictions in the world according to the Economic Freedom of the World: 2000 Annual Report, released concurrently today in Washington, D.C., and in Hong Kong. The report, published by the Cato Institute and Canada's Fraser Institute, in conjunction with institutes from 53 other countries, ranks 123 countries on their level of economic freedom.

This comprehensive index, constructed under the leadership of Nobel Laureate in Economics, Milton Friedman, is the most objective and accurate measure of economic freedom published by any organization. It is co-authored by James Gwartney, Professor of Economics at Florida State University, and Robert Lawson, Associate Professor of Economics at Capital University.

"This publication is important to developed and developing countries alike because it shows the critical role that economic freedom plays in achieving and maintaining prosperity," says Ian Vásquez, director of the Project on Global Economic Liberty at the Cato Institute.

The United States remains fourth freest economy in the world

The economic freedom rating of the United States has remained remarkably consistent over the last three decades, placing it fourth. The Unites States continues to benefit from a sound monetary regime that has much improved since 1980. Since 1995, however, the U.S. rating on international exchange has fallen somewhat, reflecting protectionist sentiments in the country.

Hong Kong and Singapore currently share top position as the freest jurisdictions in the world followed by New Zealand (3), the United States (4), and the United Kingdom (5). Other countries ranking near the top of the list include Ireland (6), Canada (7), Australia (7), Netherlands (9), Luxembourg (9), and Switzerland (9). The least free economies include Myanmar (123), Democratic Republic of Congo (122), Sierra Leone (121), Rwanda (120), Madagascar (119), and Guinea-Bissau (118).

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 rankings by at least 2 places. Among Eastern nations, Russia, Hungary and Poland have improved their levels of economic freedom. Countries that lost 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 economic freedom 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 bottom 20 percent of economically free countries had an average per capita GDP of US$1,669 and an average growth rate of -1.32%. Also, life expectancy in the top quintile is twenty years longer than that found in the bottom quintile.

Research based on the Economic Freedom of the World data confirms 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. The research indicates that political leadership which fosters more economic freedom creates a foundation for a higher standard of living and increased economic growth.

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 provides 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 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) was found for each variable for each country. Principal component analysis (an advanced statistical technique) was used to attach weights to the component data that were combined to create a summary rating.

Co-publishers of Economic Freedom of the World: 2000 Annual Report

Albanian Center for Economic Research Albania • Fundación Libertad Argentina • Institute of Public Affairs Australia • Institute for Economy and Politics Austria • The Institute for Economic Freedom Bahamas • 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 • Libertad y Desarrollo Chile • Centro de Investigaciones Académicas - CIVILIZAR Colombia • Instituto para la Libertad y el Análisis de Políticas Costa Rica • Institute of Economics Croatia • Liberální Institut Czech Republic • Liberty Network (LINE) Denmark • Fundación Economía 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 Institute Hungary • Institute of Economic Studies Iceland • Centre for Civil Society India • Institute for Development of Economics and Finance Indonesia • The Edmund Burke Institute Ireland • Institute for Advanced Strategic and Political Studies Israel • Gruppo Giovani Imprenditori and Centro Luigi Einaudi 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 Mexico • New Zealand Business Roundtable New Zealand • The Free Enterprise Commission Panama • Centro de Investigacion y Estudios Legales (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 • Ukrainian Center for Independent Political Research Ukraine • The Cato Institute USA • The Centre for the Dissemination of Economic Knowledge (CEDICE) Venezuela

Economic Freedom of the World: 2000 Annual Report