There is a causal relationship between economic freedom and economic growth, according to Economic Freedom of the World: 2000 Annual Report. Published by the Cato Institute and Canada’s Fraser Institute in conjunction with market-liberal institutes from 53 other countries, the report ranks 123 countries on their level of economic freedom.
Countries with consistently high levels of economic freedom perform far better, both financially and nonfinancially, than those with low levels of economic freedom. The countries that scored in the top quintile of economic freedom had an average per capita gross domestic product of U.S.$18,108 and an average growth rate of 1.6 percent. As freedom declined, so did per capita GDP and the growth rate. Also, life expectancy in the top quintile is 20 years longer than in the bottom quintile.
The four economically freest jurisdictions in the world are Hong Kong, Singapore, New Zealand, and the United States. The least free economies are Myanmar, Democratic Republic of Congo, Sierra Leone, Rwanda, Madagas-car, and Guinea-Bissau.
The comprehensive index, constructed under the leadership of Nobel laureate in economics Milton Friedman, includes 23 components grouped in areas ranging from the size of government to freedom of exchange in capital markets. The report presents updated figures and backdates the data to 1970 (where possible). It is coauthored by James Gwartney, professor of economics at Florida State University, and Robert Lawson, associate professor of economics at Capital University.
Gary S. Becker, 1992 Nobel laureate in economics, says, “This book will be an invaluable source… for understanding the relation between economic, political, and civil freedom.”
The report drew worldwide media attention. It was especially popular in the Asia-Pacific region, home of the top-rated economies. Stories about the report appeared in Hong Kong’s Apple Daily, the Taipei Times, the South China Morning Post, the Asian Wall Street Journal, and more. Domestic and international coverage included the Financial Times, the Journal of Commerce, the Toronto Star, and papers from Turkey to Latvia. TASS, the Russian news service, attributed the study to “the Cato Institute, the bulwark of American liberalism.”
This article originally appeared in the March/April 2000 edition of Cato Policy Report.