Latest Cato Research on Economic Freedom en Human Freedom Waning in Many Countries Tanja Porčnik <p>With the rise of nationalism and hybrid forms of authoritarianism, the rights and freedoms of citizens are under assault in many corners of the globe. Unsurprisingly, among the countries with the most substantial deterioration in freedom in the last year are Angola, Venezuela and Tajikistan. The good news is that freedom has taken root in a diverse set of societies and it’s spreading in many of them.</p> <p>We recently released the fifth annual <em><a href="" target="_blank">Human Freedom Index</a></em>, the most comprehensive measure of freedom ever created for a large number of countries across the globe. The index covers 162 countries and uses 76 distinct indicators of personal and economic freedom. With the index, my co‐​author Ian Vásquez and I aim to capture the degree to which people are free to enjoy fundamental rights such as freedom of speech, religion, association and assembly, and also measure freedom of movement, women’s freedoms, crime and violence and legal discrimination against same‐​sex relationships. The report is co‐​published by the Fraser Institute, the Cato Institute in the United States and the Liberales institut in Germany.</p> <p>In this year’s index, we again rank New Zealand and Switzerland as the two freest countries in the world while we again rank Venezuela and Syria last. Canada ranks 4th on the index followed by Australia, Denmark and Luxembourg. Canada has consistently ranked among the top 10 jurisdictions since 2008, which is the earliest year we were able to gather sufficient data to create a composite scoring system to measure human freedom.</p> <p><img alt="" data-src="" class=" lozad" /></p> <p>Selected countries rank as follows: Finland and Germany (tied in 8th place), Sweden (11), United Kingdom (14), Estonia and the United States (15), Taiwan (19), Japan (25), South Korea (27), Chile (28), France (33), Poland (40), South Africa (64), Argentina (77), Kenya (79), Mexico (92), India (94), Brazil (109), Russia (114), Turkey (122), Saudi Arabia (149), Iran (154) and Egypt (157).</p> <p>This year’s index confirms that global freedom remains in retreat. At a country level, human freedom tumbles in more countries than not, with some 88 countries experiencing a decline in their freedom ratings compared to 70 countries increasing it freedom since last year.</p> <p>During this same period, we recorded the most significant declines in human freedom in Angola, Seychelles, Venezuela, Brunei Darussalam and Israel. On the positive side, countries that saw improvement in their level of human freedom most were Belarus, Timor‐​Leste, Chad, Gabon and Suriname.</p> <p>So again, freedom has not only taken root in a diverse set of societies, but it’s also spreading in numerous countries around the globe.</p> <p>Regional levels of freedom vary widely. The highest average ratings were North America (Canada and the U.S.), Western Europe and East Asia. On the other hand, the lowest ratings were in South Asia, sub‐​Saharan Africa, the Middle East and North Africa.</p> <p><img data-src="" class=" lozad" /></p> <p><em>This article originally appeared on the <em><a href="" target="_blank">Fraser Forum</a> on January 2, 2020.</em></em></p> Fri, 10 Jan 2020 15:03:57 -0500 Tanja Porčnik Croatia Now Ranks among the Freest Countries in the World Tanja Porčnik <div class="lead text-default"> <p>With the rise of populism and hybrid forms of authoritarianism, people’s rights and freedoms are under assault in many corners of the globe. Unsurprisingly, among the countries with the most substantial deterioration in freedom in the last year are Angola, Venezuela and Tajikistan. The good news is that freedom has taken root in a&nbsp;diverse set of societies and it is spreading in many of them. Among them is Croatia, which for the first time ranks among the freest countries in the world by quartile.</p> </div> , <div class="text-default"> <p>We recently released the fifth annual Human Freedom Index, the most comprehensive measure of freedom ever created for a&nbsp;large number of countries across the globe. With the index, my co‐​author Ian Vásquez and I&nbsp;cover 162 jurisdictions and use 76 distinct indicators of personal and economic freedom, applying data from 2008 to 2017, the most recent year for which sufficient data are available. Because of inherent value of human freedoms and their contribution to well‐​being, freedoms deserve the most vigorous defense. The report is co‐​published by the Fraser Institute in Canada, the Cato Institute in the United States and the Friedrich Naumann Foundation for Freedom in Germany.</p> <p>In the recently released index, we again rank New Zealand and Switzerland as the two freest countries in the world while we again rank Venezuela and Syria last. Other selected countries rank as follows: Germany (8th place), Sweden (11), United Kingdom (14), the United States (15), Japan (25), Chile (28), France (33), Poland (40), Argentina (77), Kenya (79), Mexico (92), India (94), Brazil (109), Russia (114), Turkey (122), Saudi Arabia (149) and Iran (154).</p> <p>How do the former Yugoslav republics rank? The freest country is Slovenia (35), followed by Croatia (37), Montenegro (53), Bosnia and Herzegovina (55), Serbia (58) and, the least free, North Macedonia (65).</p> <p>The index confirms that global freedom remains in retreat as the average human freedom rating for 2017 again falls. At a&nbsp;country level, human freedom tumbles in more countries than not, with some 88 countries experiencing a&nbsp;decline in their freedom ratings compared to 70 countries increasing its freedom since last year. Within the latter group, Croatia experienced the 20th highest increase in the world by increasing its level of human freedom from 7.72 (43rd rank) in 2016 to 7.86 (37th rank) in 2017. Before this significant leap on the Index, Croatia has consistently ranked in the second quartile of countries included. In the recently released report, Croatia for the first time ranks among the freest countries in the world by quartile.</p> <p>Notably, while Croatia has increased both personal and economic freedom in the last decade, it is its economic freedom that has seen flourishing recently, which resulted in the country’s jump from the 73rd position on economic freedom to 56th rank globally, with which the country surpassed Poland and Hungary and is not closely trailing Slovenia and Slovakia.</p> </div> , <figure class="figure overflow-hidden figure--default figure--no-caption"> <div class="figure__media"> <img width="677" height="250" alt="Croatia Economic Freedom Index Ranking" class="lozad component-image" data-srcset="/sites/ 1x, /sites/ 1.5x" data-src="/sites/" typeof="Image" /> </div> </figure> , <div class="text-default"> <p>So what advances did Croatia see during the first year of Prime Minister Andrej Plenković centre‐​right government to increase the country’s economic freedom? Granted, some of these strides were spillovers from 2016 when the government was led by former Prime Minister Tihomir Orešković.</p> <p>First, on regulations, Croatia decreased restrictions on the sale of real property measured in days and costs required to register and transfer ownership of property; cut financial barriers to obtain a&nbsp;construction license; maintained commitment to the implementation of a&nbsp;one‐​stop shop business registration not only to save time and cost but also can make procedural requirements more transparent and accessible; and cut the risk that businesses become more costly due to the regulatory environment, including compliance and bureaucratic inefficiency and opacity.</p> <p>Second, on the size of government, Croatia reduced the extent of government borrowing relative to borrowing by the private sector, decreased the government investment as a&nbsp;share of total investment in the country and reduced the degree to which the state owns and controls capital in the industrial, agricultural and service sectors.</p> <p>Third, on monetary parameters, in light of pursued sound monetary policy by the Croatian National Bank (Hrvatska narodna banka – HNB) and its resistance to devaluate the Croatian currency, the kuna, in order to stimulate export demand, Croatia decreased both the average annual growth of the money supply and the standard deviation of the inflation rate.</p> <p>However, not everything went in the right direction for Croatia in 2017, as the country weakened the rule of law even more than it used to be, with gaining lower scores for judicial independence, the impartiality of courts, protection of property rights and reliability of police. The inability to strengthen the rule of law is actually a&nbsp;common problem of former socialist economies in the Balkans.</p> <p>Finally, the evidence shows the importance of freedom for development. Indeed, the Human Freedom Index report finds a&nbsp;strong relationship between the level of freedom and income. The freest countries in the world by quartile enjoy much higher income per person ($40,171) compared to those in the least‐​free quartile ($15,721). Further, looking at economic freedom specifically, extensive empirical literature reveals that it is</p> <p>positively associated with not only national income but also economic growth, living standards, economic equality, alleviation of poverty and a&nbsp;variety of other desirable social and economic outcomes. That said, Croatians are projected to experience other positive trends than an increase in freedom to pursue their own opportunities and make their own choices.</p> </div> Fri, 10 Jan 2020 14:42:22 -0500 Tanja Porčnik How to Take the Shackles Off African Businesses Tanja Porčnik <div class="lead text-default"> <p>Though African nations have enhanced economic freedom since the beginning of the new millennium, most have a&nbsp;long way to go before fully embracing the rule of law and economic liberalisation, which would unquestionably spur economic growth and prosperity.</p> </div> , <div class="text-default"> <p>The Fraser Institute’s annual <a href="" rel="noopener" target="_blank">Economic Freedom of the World</a> report measures the degree to which the policies and institutions of countries support economic freedom. Essentially, the report measures economic freedom through a&nbsp;lens of personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately owned property.</p> <p>The 2019 report, which ranks 162 countries and territories, finds stark differences among African countries, with Mauritius being the freest at ninth place and Libya the least free at 161. Despite its immense wealth in mineral and natural resources, Africa is the most economically unfree continent. Indeed, seven out of 47 African countries that are included in the report are among the bottom 10 when it comes to economic freedom, and more than half of them rank in the lowest quartile. Why should these findings worry Africans?</p> <p>Economic freedom matters. According to more than 1,000 researchers in top peer‐​reviewed academic journals, people living in countries with high levels of economic freedom have higher levels of income, experience more rapid economic growth, have lower poverty rates, enjoy more political rights and civil liberties, and see lower gender and income inequalities. For example, countries in the top quartile of economic freedom had an average per capita GDP of $36,770&nbsp;in 2017, compared with $6,140 for bottom quartile nations.</p> <p>Unfortunately, 28 out of 47 scored African nations fall into this bottom quartile. In the top quartile, the average income of the poorest 10% is eight times higher than in the bottom quartile. Unsurprisingly, in the top quartile only 2% of the population live in extreme poverty, defined as living on less than $1.90 a&nbsp;day, compared with 27% in the lowest quartile.</p> <p>Indisputably, development in Africa is contingent upon the promotion of economic freedom. To achieve this end African countries need strong rule of law and secure property rights, lower and simpler regulation, the African Continental Free Trade Area (AfCFTA), openness to foreign direct investment, stable currencies and good governance.</p> <p>Africa has a&nbsp;unique problem: its informal economy accounts for as much as 80% of the region’s GDP and as much as 80% of employment. Research consistently shows that for business owners in Africa among the main factors pushing people out of the formal economy are overzealous regulatory mandates, high taxes, bureaucracy, corruption and weak rule of law. All of them are a&nbsp;reflection of low levels of economic freedom.</p> <p>Here is the reality: African economies will keep underperforming until businesses that today operate outside the legal framework opt to transfer into the formal economy. Why is this important? The path to unlocking prosperity in Africa is paved with the building blocks that formalise the economy. Registered businesses create more jobs, record higher investment, enjoy legal protection against fraud, and have access to credit and capital, which creates opportunities for higher productivity and growth.</p> </div> , <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Africa is the most economically unfree continent and that is what keeps it poor</p> </div> </div> , <div class="text-default"> <p>To attract businesses into the formal economy, African governments must increase economic freedom by doing two things: establish secure property rights and strengthen the rule of law, and scale back on regulatory mandates and taxes.</p> <p>First, with private property protections it is crucial to emphasise that formal land titles not only tackle widespread property fraud but are also a&nbsp;prerequisite for Africans to be able to leverage their assets to engage in economic activities such as borrowing money, starting a&nbsp;business or assuring their business.</p> <p>Importantly, establishing secure property rights for assets that are informally held would, as the Peruvian economist Hernando de Soto estimates, unlock $10‐​trillion of “dead capital” across the developing world, much of it in Africa. To unshackle this wealth, governments in Africa need to foster a&nbsp;more robust rule of law.</p> <p>Second, high taxes and onerous regulations, such as lengthy and costly registration requirements, licensing and inspection requirements, are discouraging entrepreneurs in African nations from starting businesses and expanding them, or even pushing them into the informal economy.</p> <p>Though economic freedom in Africa is higher than ever before, the continent has a&nbsp;long way to go before fully embracing free and open markets. Crucially, Africans need to muster the determination to stand up to their ruling elites, who generally oppose reforms towards economic liberalism. For better or worse, with these choices the future is in the hands of Africans themselves.</p> </div> Thu, 09 Jan 2020 14:32:24 -0500 Tanja Porčnik Steve H. Hanke discusses fiscal austerity on CNBC’s Squawk on the Street Thu, 26 Dec 2019 13:16:08 -0500 Steve H. Hanke Rep. Andy Barr (R‑KY) cites Cato’s Human Freedom Index on C‑SPAN Sat, 21 Dec 2019 11:11:10 -0500 Cato Institute, Ian Vásquez, Tanja Porčnik New Human Freedom Index: U.S. Is 15, New Zealand and Switzerland Freest Ian Vásquez <p>The United States ranks 15&nbsp;in the <a href="">Human Freedom Index 2019</a> released today by the Cato Institute, the Fraser Institute in Canada, and the Liberales Institut at the Friedrich Naumann Foundation for Freedom in Germany. The five freest jurisdictions are New Zealand, Switzerland, Hong Kong, Canada, and Australia.</p> <p>The annual Index uses 76 indicators of personal, civil, and economic freedom in 162 countries for 2017, the most recent year for which sufficient, globally comparable data are available. The report finds that global freedom has declined slightly since 2008, with more countries (79) seeing a&nbsp;fall in their levels of freedom than seeing an improvement (61).</p> <p>Other selected countries rank as follow: United Kingdom (14), Taiwan (19), Chile (28), France (33), Mauritius (50), South Africa (64), India (94), Russia (114), China (126), Saudi Arabia (149) and Venezuela (161).</p> <p>My coauthor <a href="">Tanja Porcnik</a> and I&nbsp;also find a&nbsp;strong relationship between economic and personal freedom, suggesting that if you want to live in a&nbsp;country that has high levels of personal freedom, you should choose a&nbsp;place with relatively high levels of economic freedom. Overall freedom is also correlated with significantly higher incomes per capita ($40,171 for the top quartile countries vs. $15,721 for the bottom quartile) and with democracy (see graph below).</p> <div data-embed-button="embed" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="f1539262-2026-449f-aa34-be545cf7bfc4" data-langcode="en" class="embedded-entity"> <div class="embed embed--infogram js-embed js-embed--infogram"> <div class="infogram-embed" data-id="3a0e0392-361b-405e-a94e-857bbe6eed57" data-type="interactive" data-title="Human Freedom and Democracy, 2017"></div> </div> </div> <p>The index allows you to examine regional and country trends. Compared to other free countries, for example, the United States has a&nbsp;low rating for the rule of law, which has experienced a&nbsp;slight deterioration in recent years. Those are worrisome developments given the fundamental role that the rule of law plays in upholding liberty. The effects of populism and especially authoritarian populism on freedom around the globe can be seen in the report. For example, Turkey under Recep Tayyip Erdogan’s increasingly autocratic leadership has seen a&nbsp;notable decline in liberty this decade (see graph). Among ten regions in the world, the largest drop in freedom since 2008 has occurred in the Middle East and North Africa, also the region with the least freedom.</p> <div data-embed-button="embed" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="e1eddf97-d5cc-4b1c-9ca9-aa4c12730965" data-langcode="en" class="embedded-entity"> <div class="embed embed--infogram js-embed js-embed--infogram"> <div class="infogram-embed" data-id="8e902614-2410-4cba-8815-28488fc79d7d" data-type="interactive" data-title="Turkey, Ranking over Time"></div> </div> </div> <p>Read more about how your country rates, about global freedom trends, and why it matters <a href="">here</a>.</p> Wed, 18 Dec 2019 11:03:17 -0500 Ian Vásquez The Baltics Are Clear Overachievers but Serious Challenges Loom Ahead Tanja Porčnik <div class="lead text-default"> <p>After revolutions swept across Eastern Europe three decades ago, communism was counting its final days in more than two dozen countries on the verge of leaving socialism behind and welcoming a&nbsp;market economy. The former socialist economies, which varied considerably in their development process and economic growth before the fall of the Iron Curtain, elected different paths out of the dim past — some moving swiftly to reform and liberalize economies, others only mustering slow transitional strides in the years and decades to come. The Baltic states of Estonia, Latvia and Lithuania unreservedly embraced economic freedom since the collapse of the Soviet Union.</p> </div> , <div class="text-default"> <p>As a&nbsp;quantitative assessment of the degree of market liberalism in the Economic Freedom of the World (EFW) index shows, the highest levels of economic freedom in Eastern Europe in 2017, the most recent year of available data, were in Estonia, Lithuania, the Czech Republic and Latvia, while the lowest levels of economic freedom were in Ukraine, Belarus and Moldova.</p> <p>The Baltic states have made a&nbsp;significant leap on the EFW index with Estonia increasing its level of economic freedom from 6.38 (53rd rank) in 1995 to 7.89 (13th rank) in 2017, Latvia from 5.59 (77th rank) in 1995 to 7.73 (24th rank) in 2017and Lithuania from 5.49 (82nd rank) in 1995 to 7.88 (16th rank) in 2017. Notably, though all three countries visibly increased their economic freedom level before the early 2000s, Estonia by 2004 already ranked 13th on the EFW index. By contrast, Lithuania and Latvia waited until 2013 to address business and labour regulations that were not only stifling economic activity but also providing fertile ground for special interests to become interlocked with political processes.</p> <p>Subsequently, we saw sizeable amounts of foreign investment (Latvia — 8.0 per cent of GDP in 2007, Lithuania — 6.8 per cent of GDP in 2007 and Estonia — 15.4 per cent of GDP in 2007), the highest economic growth rate in Europe (Latvia — 11.9 per cent in 2006, Lithuania — 11.1 per cent in 2007 and Estonia — 10.6 per cent in 2000) and a&nbsp;substantial decrease in unemployment rates (Latvia from 14.5 per cent in 2000 to 6.1&nbsp;in 2007, Lithuania from 15.9 per cent in 2000 to 4.2 per cent in 2007, and Estonia from 10.4 per cent in 1997 to 4.6 per cent in 2007) for all three “Baltic Tigers.” These findings make sense, as extensive empirical literature reveals that economic freedom is positively associated with national income, economic growth, living standards, economic equality and a&nbsp;variety of other desirable social and economic outcomes.</p> <p>Following the economic boom, the Baltic economies fell to their knees as the global financial and economic crisis struck in 2008, experiencing one of the deepest recessions not just in Europe but the world, before rapidly rebounding in 2011 to stage the quickest economic recoveries in the European Union.</p> <p>Today, public policies and political institutions of the Baltic states support high levels of economic freedom through open and competitive markets, protection of people and their private property, and free trade. Consequently, all three Baltic states have a&nbsp;favourable business environment, robust economic activity, a&nbsp;resilient financial system</p> <p>and stable government finances. In fact, in the World Bank’s Doing Business 2020 index, Lithuania scores 81.6 out of 100 points (ranks 11th out of 190 countries), Estonia scores 80.6 (ranks 18th) and Latvia scores 80.3 (ranks 19th).</p> <p>However, challenges remain, including declining population, skills shortages, the shadow economy and corruption. In many areas, the Baltic countries face the same challenges.</p> <p>First, the population in these countries is shrinking. Since 1990, the population in Latvia has fallen by 29 per cent, in Lithuania by 26 per cent and in Estonia by 15 per cent. The main reason for the decline is high emigration. Net emigration in Latvia continues even though its pace has slowed recently. On a&nbsp;positive note, Estonia began observing net immigration in 2015 and Lithuania is projected to have done the same in 2019.</p> <p>Second, the Baltic economies are rapidly catching up with the rest of the European Union, primarily due to robust private consumption and an increase in investment, which places the countries in good standing to address challenges and ensure long‐​term growth.</p> <p>Third, the labour markets in Baltics are tightening fast with the unemployment rate in 2019 dropping in Lithuania to 6.3 per cent, in Latvia to 7.0 per cent and 5.0 per cent in Estonia. Nevertheless, job vacancies in these markets continue to grow as the population keeps declining. For example, Latvia experienced the deepest plunge in the working‐​age population (aged 15 – 64&nbsp;years) in the 2000 – 2017 period among OECD countries, which is one of the reasons for the increasing shortages of skilled labour. Unfortunately, this trend is expected to continue to at least until 2030.</p> <p>Fourth, skills shortages and underinvestment in research impose a&nbsp;cap on productivity gains for the economy. And skills shortages on the rise across the region. The education systems have limited capacity to respond to the demands of the labour market. Crucially, without labour productivity growth, which will catch up with wage growth, the region will not be able to maintain competitiveness.</p> <p>Finally, while Estonia manages to control corruption better than any other emerging country in Europe, according to recent research from the World Bank, undocumented extra payments or bribes aimed at influencing government policies, laws or regulations are a&nbsp;major obstacle to business and citizen economic activity in Latvia and Lithuania. Recently, however, both countries have shown some progress in their fight against corruption. For example, in February 2019, 26 people — including eight top judges in Lithuania — were detained under suspicion of receiving bribes ranging from 1,000 euros to 100,000 euros. Furthermore, in October of the same year, five people were detailed in Kaunas, Lithuania’s second‐​largest city, after police carried out an international investigation into police corruption related to international fraud, money laundering and smuggling.</p> <p>Latvia also struggles with corruption, financial crime and integrity in the public sector, even after the liquidation of its third largest bank ABLV for money laundering.</p> <p>On the positive side, the outgoing Latvian parliament, the Saeima, adopted a&nbsp;whistleblower protection law in October 2019 and the country’s anti‐​corruption authority KNAB has recently uncovered several high‐​profile corruption cases. For</p> <p>example, Latvia’s central bank governor Ilmārs Rimšēvičs is accused of accepting a&nbsp;500,000-euro bribe, taking a&nbsp;paid holiday in Russia and money laundering. Thee public procurement process in Latvia is also perceived to be highly susceptible to corruption, and government decision‐​makers are perceived to be influenced by favouritism through bribery. It also doesn’t help that there are delays in the implementation of the anti‐​corruption strategy. Time will tell whether or not Lithuanian Prime Minister Saulius Skvernelis’s prediction that, “The times of untouchables are over,” will come true.</p> <p>For greater improvement in the incomes and wellbeing of their citizens, the Baltic states should boost productivity, output growth and competitiveness. To achieve these goals, they must strengthen skills, reduce skill “mismatches,” decrease the share of state‐​owned enterprises (SOEs), tailor education to labour‐​market needs, encourage cooperation between businesses and researchers, simplify conditions for work permits of skilled workers, emphasize high‐​quality transportation infrastructure, keep enhancing automated customs data management systems and reduce the size of the shadow economy. Tigers do not just know what they want; they also never give up trying to obtain it.</p> </div> Mon, 16 Dec 2019 14:54:14 -0500 Tanja Porčnik Human Freedom Index is cited on CNBC Mon, 16 Dec 2019 13:10:14 -0500 Cato Institute, Ian Vásquez, Tanja Porčnik Michael Munger discusses the importance of capitalism in human betterment on Power Trading Radio’s The John O’Donnell Show Mon, 16 Dec 2019 12:00:31 -0500 Michael Munger The Freedom to Prosper <div class="lead text-default"> <p>The 2019 edition of <em>Economic Freedom of the World</em>, a&nbsp;joint project of the Cato Institute and the Fraser Institute, has been released with good news for the United States, which rose from sixth to fifth place.</p> </div> , <div class="text-default"> <p><img data-src="" class=" lozad" />As the authors explain, “The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately owned property.” Forty‐​two data points are used to construct a summary index and to measure the degree of economic freedom in five broad areas, which are then used to produce a score for each nation on a scale of 1 to 10.</p> <p>Hong Kong and Singapore retain the top two positions, with a score of 8.91 and 8.71, respectively. The rest of this year’s top scoring countries are New Zealand, Switzerland, the United States, Ireland, the United Kingdom, Canada, Australia, and Mauritius.</p> <p>The United States returns to the top five after having ranked in 12th place as recently as 2014. The rankings of other large economies in this year’s index include Japan (17th), Germany (20th), Italy (46th), France (50th), Mexico (76th), India (79th), Russia (85th), China (113th), and Brazil (120th). The 10 lowest‐​rated countries are Iraq, the Republic of Congo, Egypt, Syria, the Democratic Republic of Congo, Angola, Algeria, Sudan, Libya, and lastly, Venezuela. (Insufficient data was available to score North Korea, along with a handful of war‐​torn countries including Afghanistan and Somalia).</p> <p>The first <em>Economic Freedom of the World</em> report, published in 1996, was the result of a decade of research by a team that included several Nobel laureates and more than 60 leading scholars in a broad range of fields, including economics, political science, law, and philosophy. This years report is the 23rd edition of <em>Economic Freedom of the World</em>; it ranks 162 countries and territories for 2017, the most recent year for which data are available. This years report was written by James Gwartney, Robert Lawson, Joshua Hall, and Ryan Murphy, with Daniel L. Bennett, Rosemarie Fike, Fred McMahon, and Boris Nikolaev.</p> <p>The report not only examines the current trends in global economic freedom, but also uses historical data to compile rankings for nations through the 1950s and 1960s. This enables new historical comparisons to be made and expands the horizon of correlations that can be found between economic freedom and human well‐​being throughout the mid‐​20th century.</p> </div> Mon, 02 Dec 2019 15:30:00 -0500 Alberto Benegas Lynch, Jr. discusses the Unrestricted Life Project on Libertario Mon, 02 Dec 2019 12:23:50 -0500 Alberto Benegas Lynch, Jr. Tanja Porčnik discusses why African countries rank poorly in economic freedom indices on African Liberty Sat, 30 Nov 2019 10:27:05 -0500 Tanja Porčnik Doing Business North America Stephen Slivinski, Caleb O. Brown <p>A new data‐​driven project aims to help researchers find out how easy it is to do business in American cities, and why some cities outperform others. Stephen Slivinski directs the <a href="">Doing Business North America</a> project.</p> Wed, 27 Nov 2019 15:55:33 -0500 Stephen Slivinski, Caleb O. Brown “Mini Schengen” — Western Balkans’ Embrace of the Market Tanja Porčnik <div class="lead text-default"> <p>French President Emmanuel Macron’s spearheaded opposition to block European Union accession talks with Albania and North Macedonia during the European Council’s recent meeting in October. By doing so, he is not only dangerously and severely undermining the credibility of the EU accession process. He is also indicating to the non‐​EU countries in the Western Balkans and elsewhere that their future lies solely in their hands, as that they cannot rely on the European Union to support them in their efforts to strengthen institutions, reform public policies and further liberalize economies.</p> </div> , <div class="text-default"> <p>As shocking this political development has been for many, the Western Balkans should not waste any sleep over what&nbsp;<a href="" rel="noopener noreferrer external" target="_blank">outgoing European Commission chief Jean‐​Claude Juncker sees as a “major historic mistake</a>”. The EU Council President Donald Tusk also feels “really embarrassed” by what happened. The Western Balkan countries already have plans for bold and deep institutional reforms that will not only liberalize and deliver a&nbsp;boost to their economies, but will also, most importantly, significantly improve the level of freedom enjoyed by the people in the region. In this context, six non‐​EU Western Balkan countries have been in talks since July 2018 to create a&nbsp;single market of 20 million people, with the aim&nbsp;<a href="" rel="noopener noreferrer external" target="_blank">to increase freedom of movement and freedom to trade internationally</a>. The European Bank of Reconstruction and Development, which has so far invested 10 billion euros in the region,&nbsp;<a href="" rel="noopener noreferrer external" target="_blank">has publicly endorsed the creation of a&nbsp;regional economic area in the Western Balkans</a>.</p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Openness and regional economic integration in the Western Balkans are bound to spur economic activity, investment, trade, create jobs and increase participation in global value chains, which will boost productivity, enhance economic growth and reduce poverty.</p> </div> </div> </aside> , <div class="text-default"> <p>Last month, three Western Balkan countries, Albania, North Macedonia and Serbia announced that they will be moving ahead with a&nbsp;so‐​called “mini Schengen,” and keep the door open for three remaining Western Balkan countries, which have been hesitant to join, primarily due to unresolved political issues. At a&nbsp;time when protectionism and nationalism are emerging across the world — this was perhaps the motive behind President Macron’s decision to veto the EU accession talks — the Western Balkans must continue to pursue liberal reforms to promote and enhance economic freedom.</p> <p>In the end, no one can stop the Western Balkan countries, apart from themselves, from upholding freedom above all else, which is a&nbsp;far cry from where they stood not long ago.</p> <p>The key obstacle to a&nbsp;higher level of economic freedom in the Western Balkan countries is their inability to strengthen the rule of law (<a href="" target="_blank">a common problem of former socialist economies</a>). To achieve that, countries need to place considerable institutional emphasis on judicial independence, impartiality of the courts, protection of property rights and reliability of police.</p> <p>Strengthening the rule of law may be a&nbsp;too hard nut to crack at the moment. Yet, the next best move for the governments in the Western Balkans is to reduce, simplify or harmonize compliance and regulatory trade barriers to lower the cost of exporting and importing and time spent at the borders, and remove travel restrictions within the region. For example, the World Bank estimates that trucks lose over 26 million hours a&nbsp;year at border crossing points while going through the region. Due to time spent at the border crossings, the average number of trucks and drivers needed in a&nbsp;Western Balkan country is approximately five times greater than the average number needed in an EU country. For these reasons also, the share of exports in GDP is only 40 percent in the Western Balkans. It could be much higher.</p> <p>Openness and regional economic integration in the Western Balkans are bound to spur economic activity, investment, trade, create jobs and increase participation in global value chains, which will boost productivity, enhance economic growth and reduce poverty.</p> <p>Clearly, establishing a&nbsp;common market with free movement of people, goods, services and capital in the Western Balkans is a&nbsp;step in the right direction. Hopefully, Bosnia and Herzegovina, Montenegro and Kosovo will sooner or later join the initiative. There is no reason or necessity to wait for the EU membership to observe an increase in the level of freedom in these countries. After all, the goal is not to enter the European Union; the goal is for the citizens of these countries to enjoy freedom, prosperity and wellbeing.</p> <p>To conclude, as long as the leaders in the Western Balkans are pursuing liberal reforms to increase the level of freedom of their citizens, they are not on the path to a&nbsp;new Yugoslavia, as many critics of “mini Schengen” are trying to portray the project. Instead, the realization of this initiative would be yet another step away from repression and socialism toward freedom and the markets.</p> </div> Wed, 20 Nov 2019 08:26:55 -0500 Tanja Porčnik Human Freedom Index is cited on Bloomberg’s What’d You Miss Tue, 19 Nov 2019 11:36:33 -0500 Cato Institute, Ian Vásquez, Tanja Porčnik Has the Free Market Failed Chile? Cato Institute <p>Critics cite mass protests in Chile as a&nbsp;rejection of the country’s free‐​market model that has produced growing inequality and benefitted the few.</p> <p>That interpretation is simplistic and wrong.</p> Fri, 15 Nov 2019 14:00:00 -0500 Cato Institute Ian Vásquez discusses Chile and constitutional reform on NTN24’s Cuestión de Poder Fri, 15 Nov 2019 11:34:46 -0500 Ian Vásquez The Strategic Effects of Trademark Protection Davidson Heath, Christopher Mace <div class="lead text-default"> <p>As the U.S. economy shifts toward service‐ and technology‐​based industries, firm value is increasingly accounted for by intangible capital such as intellectual property. We examine a&nbsp;basic class of intellectual‐​property assets — trademarks — and present evidence on the effects of trademark protection on firm profits and strategy. Trademarks grant the holder a&nbsp;monopoly over a&nbsp;particular brand. The efficiency rationale for trademark protection is that it incentivizes firms to invest in product quality and development. On the other hand, stronger trademark protection inevitably insulates incumbents from competition. Whether the quality‐​incentive or monopoly‐​rent effect dominates is an empirical question with significant policy implications. </p> </div> , <div class="text-default"> <p>To study the causal effects of varying trademark protection, we exploit the Federal Trademark Dilution Act (FTDA) of 1995, which granted additional legal protection to “famous” trademarks until its key provision was nullified in 2003 by a U.S. Supreme Court decision. We find that the act raised treated firms’ operating return on assets by an average of 1.7 percentage points, equal to 12 percent of their average pre-FTDA profits. The passage of the act was followed by a sharp increase in trademark lawsuits under the new provision and by reduced entry and turnover in affected goods and service classes, consistent with our hypothesis that the FTDA raised the expected cost of entry into affected product markets.</p> <p>We next examine the FTDA’s effects on product quality and innovation and product-market strategy. In theory, trademark protection incentivizes firms to produce high-quality products and prevents a race to the bottom. Alternatively, trademark protection insulates incumbents from competition, in which case stronger protection may lead to more exploitative behavior. We find that stronger trademark protection decreased product quality, as firms that were granted additional trademark protection had increased frequency and dollar value of recalls of unsafe products and were less likely to launch a recall voluntarily.</p> <p>This theory also predicts that trademark protection affects innovation. First, some inventions cannot be patented or are better protected via secrecy instead of disclosure. Second, patents expire whereas trademarks do not: pharmaceutical firms often continue to sell the branded drug at a premium after their patent expires. Third, trademark protection is a determinant of market power, which is a primary incentive for innovation. We find that treated firms reduced research and development (R&amp;D) spending, patenting activity, and new product introductions—suggesting that stronger trademark protection led to lower competition and less innovation. We also find that treated firms altered their product-market strategy by introducing brand-extending products in new product categories. At the same time, these firms created fewer new products in their legacy-product categories. Taken together, our results suggest that firms responded to stronger trademark protection by pursuing a more exploitative and less innovative product-market strategy, at the same time extending their brands into all-new product markets.</p> <p>The main challenge for our research design is that the FTDA neglected to define the term “famous,” which has been previously decided in court on a case-by-case basis. Thus, there is no objective rule whether any given trademark qualifies as famous.</p> <p>There are two aspects of our research design that help mitigate this problem. First, the key question for the FTDA’s effects on firm behavior is whether the firm and its competitors believed a trademark would qualify. Guided by the legal literature, we explore three independent approaches to assigning treatment status as of 1995 and find similar results for all three. Second, in our research design, mistakes in assigning treatment status attenuate the estimates of the law’s impact toward zero. With this caveat, our results can be seen as a lower bound on the law’s true effects.</p> <p>Our analysis lets us identify the effects of the treatment on the treated—that is, the effects of granting additional antidilution protection to incumbent firms. Thus, our results do not speak directly to the effects of protection against infringement, which is the fundamental right associated with a trademark. However, our results are informative about changes to trademark policy at the margin in an environment (the United States) of strong intellectual-property enforcement. Interestingly, our results on product quality are consistent with those of economist Yi Qian in a very different setting: Qian finds that name-brand Chinese shoe companies responded to weaker protection against counterfeits by producing higher-quality products.</p> <p>Our findings that the FTDA was followed by lower product quality and innovation add to recent studies on the potential downside of intellectual-property protection and suggest that strengthening trademark protection may not deliver what is promised on the label.</p> <p><strong>NOTE:</strong><br>This research brief is based on Davidson Heath and Christopher Mace, “The Strategic Effects of Trademark Protection,” <em>Review of Financial Studies</em> (May 2, 2019), <a href="" target="_blank"></a>.</p> </div> Wed, 13 Nov 2019 03:00:00 -0500 Davidson Heath, Christopher Mace Three Decades After the Fall of the Berlin Wall Tanja Porčnik <div class="lead text-default"> <p>The fall of the Berlin Wall on 9&nbsp;November 1989 was not only the beginning of the reunification of the Germans as the people of Berlin brought down a&nbsp;monstrous physical barrier that cut through their city since 1961, it was also one of several events that in the months and years to come would have more than 100 million people turn their back to communism, also because of their fortitude to steer their economies out of socialism toward the market, writes Tanja Porčnik is a&nbsp;Senior Fellow of the Fraser Institute specialising in economic and human freedom studies.</p> </div> , <div class="text-default"> <p>Prior to the fall of the Iron Curtain, the former socialist economies — to the East of the now infamous barrier dividing Europe — varied considerably in their degree of openness, soundness of their institutions, economic growth and the development process. Similarly, these countries opted for different paths of market liberalisation, some of them moving rapidly and with great strides to reform and liberalise their economies, while others were only undertaking gradual and few transitional steps.</p> <p>Today, thirty years later, unsurprisingly, public policies and political institutions of the former socialist economies do not equally support economic freedom. However, notably, they support it to a&nbsp;greater extent than they did before the 1990s.</p> </div> , <h3 class="heading"> A&nbsp;high pace of economic liberalisation </h3> , <div class="text-default"> <p>Providing a&nbsp;quantitative assessment of the degree of market liberalism, the Fraser Institute Economic Freedom of the World index displays that the highest levels of economic freedom in Eastern Europe, Caucasus and Central Asia in 2017, the most recent data available, were in Georgia, Estonia, Lithuania, the Czech Republic and Latvia, while the lowest levels of economic freedom were in Ukraine, Tajikistan, Azerbaijan, Belarus and Moldova.</p> </div> , <figure class="figure overflow-hidden figure--default figure--no-caption"> <div class="figure__media"> <img width="700" height="544" alt="estonian-world-img.jpg" class="lozad component-image" data-srcset="/sites/ 1x, /sites/ 1.5x" data-src="/sites/" typeof="Image" /> </div> </figure> , <div class="text-default"> <p>As the data show, all the former socialist economies in Eastern Europe, Caucasus and Central Asia have strengthened their market features since the fall of the Iron Curtain. This sizeable and wide‐​spread transformation reflects the region’s wholehearted embrace of private property, the rule of law, entrepreneurship, free trade, foreign direct investment and globalisation.</p> <p>Actually, in the last few decades, economic liberalisation has spread across the former socialist region at a&nbsp;higher pace than in the world, with the average degree of market liberalism in the former socialist economies increasing from 5.47&nbsp;in 1995 to 7.20&nbsp;in 2017, while the average level of economic freedom in the world went from 6.06&nbsp;in 1995 to 6.59&nbsp;in 2017.</p> <p>The notable transition of the former socialist economies is also reflected in the fact that while in 1995 none of them ranked in the top economic freedom quartile, when in 2017 ten of them (Georgia, Estonia, Lithuania, the Czech Republic, Latvia, Armenia, Romania, Albania, Bulgaria and the Slovak Republic) were in the top quartile. By contrast, only two countries (Tajikistan and Ukraine) rank in the fourth quartile of economic freedom, while in 1995, six (Romania, Albania, Bulgaria, Croatia, Tajikistan and Ukraine) out of fourteen former socialist countries ranked in the fourth quartile.</p> </div> , <h3 class="heading"> Continue to reform and liberalise </h3> , <div class="text-default"> <p>Several of the former socialist economies, such as Georgia and Estonia, have embraced the economic freedom to such an extent and with such a&nbsp;robustness that they have become world‐​known success stories of market liberalisation by way of opening their markets, decreasing barriers to trade, lowering tax burden, stabilising the monetary system, engaging in deregulation and strengthening the legal system.</p> <p>By contrast, other former socialist economies have been reserved to a&nbsp;change, finding it challenging or unwilling to increase their level of economic freedom. As an example, Hungary observed the smallest move from socialism toward the markets during the 1995 – 2017 period; however, it still increased the economic freedom score by 0.90.</p> <p>At a&nbsp;time when nationalism and protectionism are emerging in many countries across the world, which only adds to downward pressure on the global economy, countries in Eastern Europe, Caucasus and Central Asia should draw from their own experience and continue to reform and liberalise their economies, which shall not only have positive impact on economic growth, foreign direct investment and wellbeing of the citizens, but will also reduce poverty levels and economic inequalities more successfully than any other economic system.</p> </div> Sat, 09 Nov 2019 15:45:51 -0500 Tanja Porčnik How Does Your Country Rank in Economic Freedom? Cato Institute <p>Hong Kong, Singapore, New Zealand, Switzerland, and the United States have the most free economies in the world according to new data from this year’s Economic Freedom of the World Index. This is measured by the size of government, property rights, sound money, freedom to trade internationally, and regulations of 162 countries. Angola, Algeria, Sudan, Libya, and Venezuela rank the least free.</p> <p>Economic freedom in the United States has increased since 2013, but then leveled off in the last two years of the index. The level of U.S. economic freedom is still notably below what it was in the year 2000, when it began a&nbsp;long‐​term decline. Prosperity, longevity, political freedom, and a&nbsp;whole range of indicators of human well‐​being are strongly associated with economic freedom. The average income of the poorest 10% in the most economically free nations is two‐​thirds higher than the average per‐​capita income in the least‐​free nations. Economic freedom is a&nbsp;fundamental condition for prosperity.</p> <p>Check out the full ranking at <a href="">cato​.org/efw</a></p> Wed, 06 Nov 2019 18:00:00 -0500 Cato Institute Tom G. Palmer gives a lecture, “Trade Wars Are Not Good & They Are Not Winnable,” hosted by The Freedom Foundation Africa Tue, 05 Nov 2019 10:30:47 -0500 Tom G. Palmer Tom G. Palmer discusses liberty and economic freedom on Free Enterprise 자유기업원 Wed, 30 Oct 2019 10:39:28 -0400 Tom G. Palmer NBA Controversy Highlights China’s Bullying Tactics Tanja Porčnik, Visio Institut <div class="lead text-default"> <p><strong>Even though Hong Kong operates under separate laws within the ‘one country, two systems’ model, the invisible hand of mainland China is becoming increasingly visible in the territory. In response, mass protests have been ongoing for four months in Hong Kong.</strong></p> </div> , <div class="text-default"> <p>This political crisis in Hong Kong represents one of the major challenges to Communist Party authority since the Tiananmen Square protest three decades ago.</p> <p>People around the world have been expressing support of Hongkongers in their fight for human rights and democratic political institutions. One of them, Daryl Morey, the Houston Rockets general manager, tweeted an image that stated: “Fight for Freedom. Stand with Hong Kong.”</p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Free societies should lead with free speech values and speak out in defense of freedom.</p> </div> </div> </aside> , <div class="text-default"> <p>His tweet drew immediate and fierce condemnation in China (ironically, Twitter is banned in China) followed by <strong>substantial retaliation from several key partners, such as the Chinese Basketball Association, China&rsquo;s state-run television network CCTV</strong>, Chinese Internet giant Tencent Sports, and Alibaba, biggest online retailer in China.</p> <p>In response to their wrath, Morey deleted the tweet and the league&rsquo;s commissioner, Adam Silver, defended freedom of expression of players, coaches, and team owners. LeBron James said Morey was &ldquo;misinformed.&rdquo;</p> <p>After the NBA&rsquo;s decades-long push to develop China into its largest overseas market, the financial consequences of a conflict with China will amount to billions of dollars. <strong>While some may not like it, the NBA has a prerogative to act in its own interest, whatever that might be, even if that interest is based solely on making money</strong>. After all, the United States upholds the economic freedom.</p> <p>The same applies to the coaches and players in the NBA. Not just their pecuniary interest, they might not be prepared to put their careers on the line to speak out against human rights violations. They might also be selective about which causes they support publicly.</p> <p>After all, <strong>it is their freedom to lead their lives as they wish, just like it is their right to publicly express their opinion</strong>, or not, if they wish.</p> <p>International companies doing business in the Chinese 1.4 billion people market may decide to directly or indirectly express support for pro-freedom, pro-democracy protests in Hong Kong. If their support causes &ldquo;hurt feelings of the Chinese people,&rdquo; the international companies have a choice to respond, or not, to their condemnation.</p> <p>Many international firms including <strong>Tiffany &amp; Co., Givenchy, Mercedes, Coach, Versace, Marriott, and Blizzard have opted to play by Beijing rules</strong>. One prominent exception are South Park creators Trey Parker and Matt Stone who, after recent episode got the show censored in China, issued a fake apology mocking China&rsquo;s president Xi Jinping and the NBA.</p> <p>In placating the authoritarian regime in the name of economic opportunity, these companies may eventually face customers back home and beyond who are increasingly knowledgeable about such corporate practices. Appeasing Beijing can come with financial and reputational costs.</p> <p>And to be sure, personal freedoms are increasingly under threat in Hong Kong. Specifically, <strong>under attack are aspects of personal liberty associated with democracy and political rights, such as freedom of the press</strong>, as well as freedom of association and freedom of assembly.</p> <p>For instance, in 2011 the Hong Kong government updated security rules that further restrict the ability of journalists to interact with lawmakers while reporting on the legislature. <strong>The extent to which reporters are hindered from doing their work is worrisome</strong>. Their safety is at stake too.</p> <p>In late 2015, five staff members of Causeway Bay Books from Hong Kong, that sold material banned in the Chinese mainland, disappeared.</p> <p>Earlier that year, <strong>masked assailants threw firebombs at the headquarters of Hong Kong-based media company Next Media, as well as at the home of its founder, Jimmy Lai</strong>; a known supporter of Hong Kong&rsquo;s pro-democracy movement. An identical incident on Lai&rsquo;s home occurred in September 2019.</p> <p>In the <a href="" target="_blank">Human Freedom Index</a>, my coauthor Ian V&accute;squez and I use a composite scoring system to measure personal freedom. Hong Kong has plunged from 17th to 32nd place among 162 countries and territories since 2008. By comparison, mainland China ranks 141st and the United States 28th.</p> <p><strong>Free societies should lead with free speech values and speak out in defense of freedom</strong>. Their public officials should acknowledge China&rsquo;s use of its economic power to silence critics abroad, be it through self-censorship or contractual obligations, and not allow their citizens to be bullied by an authoritarian government.</p> </div> Mon, 28 Oct 2019 15:08:50 -0400 Tanja Porčnik, Visio Institut John A. Allison discusses the merits of capitalism and the challenges of interventions into capital markets on Power Trading Radio Fri, 25 Oct 2019 10:40:08 -0400 John A. Allison The Narrow Corridor: States, Societies, and the Fate of Liberty Daron Acemoglu, John V. C. Nye, Ian Vásquez <p>What does it take for liberty to emerge and to flourish? Daron Acemoglu will explain how, from antiquity to the modern age, the strong have tended to dominate the weak because states are too strong and despotic or because violence and lawlessness arise in their absence. Achieving liberty requires a&nbsp;constant struggle between the state and society that strikes a&nbsp;balance between the elite and citizens, and between institutions and norms. Acemoglu will draw from history to discuss how and under what conditions societies have gained freedoms, maintained them, or lost them. John Nye will critique Acemoglu’s views on the emergence and continuance of liberty.</p> Fri, 25 Oct 2019 10:09:10 -0400 Daron Acemoglu, John V. C. Nye, Ian Vásquez