Economic Freedom of the World - 2020 - Cover

2020

By James D. Gwartney, Robert A. Lawson, Ryan H. Murphy, Niclas Berggren, Fred McMahon, & Therese Nilsson

The foundations of economic freedom are personal choice, voluntary exchange, and open markets. As Adam Smith, Milton Friedman, and Friedrich Hayek have stressed, freedom of exchange and market coordination provide the fuel for economic progress. Without exchange and entrepreneurial activity coordinated through markets, modern living standards would be impossible.

Potentially advantageous exchanges do not always occur. Their realization is dependent on the presence of sound money, rule of law, and security of property rights, among other factors. Economic Freedom of the World seeks to measure the consistency of the institutions and policies of various countries with voluntary exchange and the other dimensions of economic freedom.

The report is co‐​published by the Cato Institute, the Fraser Institute in Canada and more than 70 think tanks around the world.

Hong Kong and Singapore retain the top two positions with a score of 8.94 and 8.65 out of 10, respectively. The rest of this year’s top scores are New Zealand, Switzerland, Australia, United States, Mauritius, Georgia, Canada, and Ireland.

The United States has slipped to 6th place in 2018 after having ranked 5th in the previous two years. The rankings of other large economies in this year’s index are Japan (20th), Germany (21st), Italy (51st), France (58th), Mexico (68th), Russia (89th), India (105th), Brazil (105th), and China (124th). The ten lowest‐​rated countries are: the Central African Republic, Democratic Republic of Congo, Zimbabwe, Republic of Congo, Algeria, Iran, Angola, Libya, Sudan, and, lastly, Venezuela.

Nations in the top quartile of economic freedom had an average per capita GDP of US$44,198 in 2018, compared to $5,754 for bottom quartile nations. Moreover, the average income of the poorest 10% in the most economically free nations is more than twice the average per capita income in the least free nations. Life expectancy is 80.3 years in the top quartile compared to 65.6 years in the bottom quartile.

This year’s report includes a chapter by Niclas Berggren and Therese Nilsson on how economic freedom generates social trust and tolerance.

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 24th edition of Economic Freedom of the World and this year’s publication ranks 162 countries and territories for 2018, the most recent year for which data are available.

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