Economic Freedom of the World 2012 Annual Report

The first Economic Freedom of the World Report, published in 1996, was the result of a decade of research by a team that included several Nobel Laureates and over 60 other leading scholars in a broad range of fields, including economics, political science, law and philosophy. This is the 16th edition of Economic Freedom of the World and this year’s publication ranks 144 nations for 2010, the most recent year for which data are available.

Worldwide economic freedom has bounced back slightly since falling during the global recession, according to the 2012 Economic Freedom of the World Report. After falling for two consecutive years following a long trend of increases, the average score rose from 6.79 in 2009 to 6.83 in 2010, the most recent year for which data is available. In this year’s index, Hong Kong retains the highest rating for economic freedom with Singapore, New Zealand, Switzerland, Australia, Canada, Bahrain, Mauritius, Finland, and Chile, taking top spots on the list. Bahrain and Finland are new to the top 10 — replacing, notably, the United Kingdom (fell to 12th) and the United States (a sizable drop to 18th).

The U.S., long considered the standard bearer for economic freedom among large industrial nations, has experienced a substantial decline in economic freedom during the past decade. From 1980 to 2000, the U.S. was generally rated the third freest economy in the world, ranking behind only Hong Kong and Singapore. After increasing steadily during the period from 1980 to 2000, the chain‐​linked EFW rating of the U.S. fell from 8.65 in 2000 to 8.21 in 2005 and 7.70 in 2010. The chain‐​linked ranking of the U.S. has fallen precipitously from second in 2000 to eighth in 2005 and 19th in 2010 (unadjusted ranking of 18th).

The rankings of other large economies in this years index are Japan, 20th; Germany, 31st; France, 47th; Italy, 83rd; Mexico, 91st; Russia, 95th; Brazil, 105th; China, 107th; and India, 111th.

James Gwartney holds the Gus A. Stavros Eminent Scholar Chair at Florida State University, where he directs the Stavros Center for the Advancement of Free Enterprise and Economic Education. He is a coauthor of Economics: Private and Public Choice (Cengage/​South‐​Western Press), a widely used text on the principles of economics that is now in its twelfth edition. He is also a coauthor of an economics primer, Common Sense Economics: What Everyone Should Know about Wealth and Prosperity (St. Martin’s Press, 2005).

Robert A. Lawson holds the Jerome M. Fullinwider Endowed Centennial Chair in Economic Freedom and is director of the O’Neil Center for Global Markets and Freedom at the Southern Methodist University (SMU) Cox School of Business. Prior to SMU, he taught at Auburn University, Capital University, and Shawnee State University. Professor Lawson has numerous professional publications in journals such as Public Choice, Cato Journal, Kyklos, Journal of Labor Research, Journal of Institutional and Theoretical Economics, and European Journal of Political Economy. He has served as president of the Association of Private Enterprise Education and is a member of the Mont Pelerin Society.

Joshua Hall is the Director of the Center for Free Enterprise and an Associate Professor of Economics at West Virginia University. Prior this position, he was the Elbert H. Neese, Jr. Professor of Economics at Beloit College and an economist for the Joint Economic Committee of the US Congress. Dr. Hall has published in numerous policy studies and professional publications, his research having appeared in journals such as the Atlantic Economic Journal, Cato Journal, Journal of Economic Education, and Journal of Labor Research.

“The conclusion [of the economic freedom project] is abundantly clear: the freer the economy, the higher the growth and the richer the people. Countries that have maintained a fairly free economy for many years did especially well.”
—The Economist

“Economic freedom advances economic growth, reduces poverty and promotes other civil and political freedoms. It is also a tonic against terrorism because of the opportunities it creates. All the nations behind global terrorism lack economic freedom.”
—Milton Friedman, Nobel Laureate