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September 8, 2005

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Economic Freedom Effective in Preventing War
Hong Kong ranked first in economic freedom; U.S. ties for third place

Economic Freedom Effective in Preventing War Hong Kong ranked first in economic freedom; U.S. ties for third place

WASHINGTON -- Economic freedom is almost 50 times more effective than democracy in restraining nations from going to war, according to the Economic Freedom of the World: 2005 Annual Report, released today by the Cato Institute in conjunction with the Fraser Institute of Canada.

In new research published in this year's report, Erik Gartzke, a political scientist from Columbia University, compares the impact of economic freedom on peace to that of democracy. Gartzke points out that wealth and power are created by markets and the efficient production that arises from them, not by conquest of land or raw materials. Conquest for capitalist states is unprofitable, he says.

This year's report notes that economic freedom remains on the rise. The average economic freedom score rose from 5.2 (out of 10) in 1985 to 6.4 in the most recent year for which data are available. "Of the 109 nations with scores in 1985 and which are included in the most recent index, 96 recorded improvement in their economic freedom score, seven saw a decline, and six registered changes of under 0.1 points," commented the report's co-author, Robert Lawson, Professor of Economics at Capital University, Ohio.

"The strong link between economic freedom and improvements in the whole range of human development indicators is good news for countries that wish to pull themselves out of poverty. This study shows that countries progress because of their own policies and institutions rather than as a result of external factors, such as aid or geography, that are beyond their control," says Ian Vasquez, director of the Cato Institute's Project on Global Economic Liberty.

Hong Kong retains the highest rating for economic freedom, 8.7 of 10, closely followed by Singapore at 8.5. New Zealand, Switzerland, and the United States tied for third with ratings of 8.2. The United Kingdom, Canada, and Ireland ranked 6th, 7th, and 8th, respectively. Australia, Estonia, Luxembourg, and the United Arab Emirates tied for 9th. The rankings of other large economies are Germany, 19; Japan, 30; France, 38; Italy, 54; Mexico, 59; India, 66; China, 86; Brazil, 88; and Russia, 115. Among those nations that have registered significant losses in economic freedom since 1985 are Myanmar, Venezuela, and Zimbabwe.

The first Economic Freedom of the World Report, published in 1996, was the result of a decade of research by a team which included several Nobel Laureates and over 60 other leading scholars in a broad range of fields, from economics to political science, and from law to philosophy. This is the 9th edition of Economic Freedom of the World.

Economic Freedom of the World: 2005 Annual Report