1 Economic Freedom of the World: 2005 Annual Report Fraser Institute Policy Briefing September 8, 2005

1

Economic Freedom of the Economic Freedom of the World: 2005 Annual ReportWorld: 2005 Annual Report

Fraser Institute

Policy Briefing September 8, 2005

2

THANK YOU FOR THANK YOU FOR COMING!COMING!

The key to changing policy in the world is changing the climate of opinion about what works and what does not work in encouraging world development

The key to changing the climate of opinion is providing the widest possible audience with good information about the causes of development and under-development

3

Economic Freedom of the Economic Freedom of the World ProjectWorld Project

Objective: find a way to measure economic freedom and explore the connection between it and other variables

20 year project Led by Professor Milton Friedman, Rose

Friedman and Michael WalkerInvolved 100 of the world’s top scholars

4

What is The Economic What is The Economic Freedom of the World Index?Freedom of the World Index?

An annual compilation of data representing factors which make a country economically free

Authors: James Gwartney and Robert Lawson A compendium of 38 government policies affecting

economic freedom based on objective data or independent surveys

A ranking of 127 countries representing 93% of the world’s population according to the extent to which they permit their citizens to be economically free

Now a collaboration of Institutes in 68 different countries

5

What is Economic FreedomWhat is Economic Freedom

Individuals have economic freedom when property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. An index of economic freedom should measure the extent to which rightly acquired property is protected and individuals are engaged in voluntary transactions.

James Gwartney et al. 1996

6

Components of The Economic Components of The Economic

Freedom of the World IndexFreedom of the World Index

Size of government and taxationPrivate property and the rule of lawSoundness of MoneyTrade regulation and tariffsRegulation of business, labour and capital

marketsBased entirely on objective or third party

data for 127 countries

7

Talk about making a difference …Talk about making a difference …

8

African Research Centre for Public African Research Centre for Public Policy Research and Analysis, KenyaPolicy Research and Analysis, KenyaAlbanian Center for Economic Albanian Center for Economic Research (ACER), AlbaniaResearch (ACER), AlbaniaAlternate Solutions Institute, Alternate Solutions Institute, PakistanPakistanAssociation for Liberal Thinking, Association for Liberal Thinking, TurkeyTurkeyAssociation pour la Liberté Association pour la Liberté Economique et le Progrès Social Economique et le Progrès Social (ALEPS), France(ALEPS), FranceBureau d'Analyse d'Ingenierie et de Bureau d'Analyse d'Ingenierie et de Logiciels (BAILO), Ivory CoastLogiciels (BAILO), Ivory CoastCATO Institute, USACATO Institute, USACausa Liberal, PortugalCausa Liberal, PortugalCenter for Economic and Political Center for Economic and Political Research, AzerbaijanResearch, AzerbaijanThe Center for Entrepreneurship and The Center for Entrepreneurship and Economic Development, MontenegroEconomic Development, MontenegroCenter for Free Enterprise, KoreaCenter for Free Enterprise, KoreaCenter for Politiske Studier, Center for Politiske Studier, DenmarkDenmarkThe Center for Research and The Center for Research and Communication, PhilippinesCommunication, PhilippinesCentre for Civil Society, IndiaCentre for Civil Society, IndiaThe Centre for the Dissemination of The Centre for the Dissemination of Economic Knowledge (CEDICE), Economic Knowledge (CEDICE), VenezuelaVenezuelaCentre for the New Europe, BelgiumCentre for the New Europe, BelgiumThe Centre for Research on the The Centre for Research on the National Economy, GuatemalaNational Economy, GuatemalaCentro de Investigación para el Centro de Investigación para el Desarrollo A.C., MexicoDesarrollo A.C., MexicoCentro de Investigación y Estudios Centro de Investigación y Estudios Legales (CITEL), PeruLegales (CITEL), PeruCentro Einaudi, ItalyCentro Einaudi, ItalyCentrum im. Adama Smitha, PolandCentrum im. Adama Smitha, PolandD'Letzeburger Land, LuxembourgD'Letzeburger Land, Luxembourg

Instituto para la Libertad y el Análisis de Políticas, Costa RicaLiberales Institut, GermanyLiberales Institut, SwitzerlandLiberální Institut, Czech RepublicLithuanian Free Market Institute, LithuaniaMaking Our Economy Right (MOER), BangladeshThe Nassau Institute, BahamasThe New Zealand Business Roundtable, New ZealandOpen Republic Institute, IrelandOpen Society Forum, MongoliaPathfinder Foundation, Sri LankaResearch Center for Entrepreneurship and Development Policies, VietnamRomania Think Tank,RomaniaScientific Research Mises Center, Scientific Research Mises Center, BelarusBelarusSociety for Disseminating Economic Society for Disseminating Economic Knowledge:“New Economic School – Knowledge:“New Economic School – Georgia”, GeorgiaGeorgia”, GeorgiaSzazadveg Policy Research Institute, Szazadveg Policy Research Institute, HungaryHungaryTIGRA®, AustriaTIGRA®, AustriaTimbro, SwedenTimbro, SwedenThe Ukrainian Center for The Ukrainian Center for Independent Political Research, Independent Political Research, UkraineUkraineZambia Institute for Public Policy Zambia Institute for Public Policy Analysis (ZIPPA), ZambiaAnalysis (ZIPPA), Zambia

Member Institutes of Economic Freedom of the World Network

Economic Policy Institute-Bishkek Economic Policy Institute-Bishkek Consensus, Kyrgyz RepublicConsensus, Kyrgyz RepublicThe Estonian Institute for Open Society The Estonian Institute for Open Society Research, EstoniaResearch, EstoniaThe F.A. Hayek Foundation, Slovak RepublicThe F.A. Hayek Foundation, Slovak RepublicFree Market Center (FMC), YugoslaviaFree Market Center (FMC), YugoslaviaThe Free Market Foundation of Southern The Free Market Foundation of Southern Africa, South AfricaAfrica, South AfricaFundación Economía y Desarrollo Inc., Fundación Economía y Desarrollo Inc., Dominican RepublicDominican RepublicFundación Libertad, ArgentinaFundación Libertad, ArgentinaFundación Libertad, PanamaFundación Libertad, PanamaFundación Libertad, Democracia y Fundación Libertad, Democracia y Desarrollo, BoliviaDesarrollo, BoliviaHong Kong Centre for Economic Research, Hong Kong Centre for Economic Research, Hong KongHong KongILP - Instituto Libertad y Progreso, ILP - Instituto Libertad y Progreso, ColombiaColombiaInstitut de Recherche pour la Liberte Institut de Recherche pour la Liberte Economique et la Prosperite (IRLEP), HaitiEconomique et la Prosperite (IRLEP), HaitiInstitute for Advanced Strategic and Institute for Advanced Strategic and Political Studies, IsraelPolitical Studies, IsraelThe Institute for Development of Economics The Institute for Development of Economics and Finance, Indonesiaand Finance, IndonesiaInstitute for Market Economics, BulgariaInstitute for Market Economics, BulgariaInstitute of Business, Trinidad and TobagoInstitute of Business, Trinidad and TobagoThe Institute of Economic Affairs, GhanaThe Institute of Economic Affairs, GhanaThe Institute of Economic Affairs, United The Institute of Economic Affairs, United KingdomKingdomInstitute of Economic Analysis, RussiaInstitute of Economic Analysis, RussiaInstitute of Economic Studies, IcelandInstitute of Economic Studies, IcelandThe Institute of Economics, CroatiaThe Institute of Economics, CroatiaInstitute of Public Affairs, AustraliaInstitute of Public Affairs, AustraliaInstitute of Public Policy Analysis, NigeriaInstitute of Public Policy Analysis, NigeriaInstituto Ecuatoriano de Economía Política, Instituto Ecuatoriano de Economía Política, EcuadorEcuador Instituto Liberal do Rio de Janeiro, BrazilInstituto Libertad y Desarrollo, Chile

9

Sample of Press Coverage forFraser Institute’ Economic Freedom of the World 2004

Agence France PressAgence France PressAl-Ahram Weekly, JordanAl-Ahram Weekly, JordanAll Africa Global MediaAll Africa Global MediaArvamus, EstoniaArvamus, EstoniaAsia Pulse, Hong KongAsia Pulse, Hong KongAsian Wall StreetAsian Wall StreetBahamas Financial Services Bahamas Financial Services BoardBoardBBCBBCBerlingske, DenmarkBerlingske, DenmarkBusiness and Finance, Business and Finance, IrelandIrelandBusiness Daily, Hong KongBusiness Daily, Hong KongBusiness Day, South AfricaBusiness Day, South AfricaBusiness Standard, IndiaBusiness Standard, IndiaCanale Italia, ItalyCanale Italia, ItalyChosun Ilbo, KoreaChosun Ilbo, KoreaCritica, Panama Critica, Panama Cronache, ItalyCronache, ItalyCTK Daily News, CTK Daily News, CzechoslovakiaCzechoslovakiaDan, MontenegroDan, Montenegro

Dominion Post, New Dominion Post, New ZealandZealandDong-a Ilbo, KoreaDong-a Ilbo, Korea

Dow Jones, GermanyDow Jones, GermanyDow Jones InternationalDow Jones InternationalEconomistEconomistEl Comercio, SpainEl Comercio, SpainEl Diario, ChileEl Diario, ChileEl Economista, SpainEl Economista, SpainEl Nuevo Dia, SpainEl Nuevo Dia, SpainExaminer, CanadaExaminer, CanadaFinancial Express, IndiaFinancial Express, IndiaForbesForbesFrankfurter Allgemeine ZeitungFrankfurter Allgemeine ZeitungHerald Sun, AustraliaHerald Sun, AustraliaHong Kong Economic JournalHong Kong Economic JournalHospodarske, Czech RepublicHospodarske, Czech RepublicIn Copertina, ItalyIn Copertina, ItalyIndependent Business Weekly, New Independent Business Weekly, New ZealandZealandIndian Business InsightIndian Business InsightInter Press, Hong KongInter Press, Hong KongInternational Herald TribuneInternational Herald TribuneInvestor's Business Daily, USInvestor's Business Daily, USIrish IndependentIrish IndependentIzvestia, RussiaIzvestia, RussiaJakarta PostJakarta PostJerusalem PostJerusalem Post

JoongAng Daily, KoreaJoongAng Daily, KoreaKorea Economic Daily Korea Economic Daily Korea TimesKorea TimesLa Estrella de PanamaLa Estrella de PanamaLa Nacion, Costa RicaLa Nacion, Costa RicaLa Prensa, Panama La Prensa, Panama L'Adige, ItalyL'Adige, ItalyLatin America News DigestLatin America News DigestLatvian News AgencyLatvian News AgencyLianhe Zaobao, SingaporeLianhe Zaobao, SingaporeNavHind TimesNavHind TimesNew Zealand HeraldNew Zealand HeraldNews AktuellNews AktuellPobjeda, MontenegroPobjeda, MontenegroPrimera, MexicoPrimera, MexicoPublika, MontenegroPublika, MontenegroSegye Times, KoreaSegye Times, KoreaSeoul Daily, KoreaSeoul Daily, KoreaSing Tao Daily News, Hong KongSing Tao Daily News, Hong KongSouth China Morning PostSouth China Morning PostSpanish News DigestSpanish News DigestSpanish WorldstreamSpanish WorldstreamStandard, Hong KongStandard, Hong KongTelegraph, IndiaTelegraph, IndiaTimes of OmanTimes of OmanWashington TimesWashington TimesXinhua News Agency, ChinaXinhua News Agency, China

10

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Introducing the 2005 Economic Introducing the 2005 Economic Freedom of the World Index ResultsFreedom of the World Index Results

12

Overall Economic Freedom Index Overall Economic Freedom Index and the Top 12and the Top 12

0 2 4 6 8 10

Score (out of 10)

EstoniaLuxembourg

Unit. Arab Em.Australia

IrelandCanada

Average of Top 12United Kingdom

SwitzerlandUnited StatesNew Zealand

SingaporeHong Kong

Source: The Fraser Source: The Fraser Institute.Institute.

13

The top 12 and how they got thereThe top 12 and how they got there

0

20

40

60

80

100

Perc

entil

e R

anks

Australia

Canada

EstoniaHong Kong

Ireland

Luxembourg

New ZealandSingapore

Switzerland

Unit. Arab Em.

United KingdomUnited States


14

Countries having significant Countries having significant improvement since 1970improvement since 1970

0

20

40

60

80

100

Perc

entil

e R

anks

Chile

Kuwait

HungaryUnited Kingdom

El Salvador

Estonia

Peru

SwedenJamaica

Uganda


15

Countries having significant Countries having significant deteriorationdeterioration since 1970 since 1970

0

20

40

60

80

100

Perc

entil

e R

anks

Sierra Leone

Cote d'Ivoire

Malawi

Paraguay

Cameroon

Niger

Nepal

Mali

Pap. New Guinea

Venezuela


16

Overall Economic Freedom Index Overall Economic Freedom Index and the Bottom Tenand the Bottom Ten

0 2 4 6 8 10

Score (out of 10)

Myanmar

Zimbabwe

Congo, Dem. R.

Venezuela

Guinea-Bissau

Burundi

Algeria

Congo, Rep. Of

Central Afr. Rep.

Gabon


17

Economic Freedom Over TimeEconomic Freedom Over Time

5.75.2 5.1 5.2 5.5

5.96.3 6.4 6.4 6.4

0

2

4

6

8

10

Eco

nom

ic F

reed

om S

core

1970 1975 1980 1985 1990 1995 2000 2001 2002 2003


18

Economic Freedom Over Time Adjusted Economic Freedom Over Time Adjusted for Populationfor Population

5.54.9 4.8 5.0 5.1

5.66.0 6.2 6.2 6.3

0

2

4

6

8

10

Eco

nom

ic F

reed

om S

core

1970 1975 1980 1985 1990 1995 2000 2001 2002 2003


19

Economic Freedom and the Top 12Economic Freedom and the Top 12

20

Size of Government and the Top 12Size of Government and the Top 12

0 2 4 6 8 10

Score (out of 10)

Luxembourg

Ireland

Australia

United Kingdom

Estonia

Canada

New Zealand

Average of Top 12

Switzerland

Unit. Arab Em.

United States

Singapore

Hong Kong


21


0

2

4

6

8

101970 1975 1980 1985 1990 1995 2000 2001 2002 2003

Scor

e (o

ut o

f 10)

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


22


0

20

40

60

80

100

Perc

entil

e R

anks

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


23

Legal System and Property Rights Legal System and Property Rights and the Top 12and the Top 12

0 2 4 6 8 10

Score (out of 10)

Unit. Arab Em.

Estonia

Hong Kong

United States

Singapore

Average of Top 12

Ireland

Canada

Switzerland

Luxembourg

Australia

New Zealand

United Kingdom


24


0

2

4

6

8

101970 1975 1980 1985 1990 1995 2000 2001 2002 2003

Scor

e (o

ut o

f 10)

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


25


0

20

40

60

80

100

Perc

entil

e R

anks

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


26

Sound Money and the Top 12Sound Money and the Top 12

0 2 4 6 8 10

Score (out of 10)

Unit. Arab Em.

Hong Kong

Australia

United Kingdom

Average of Top 12

Canada

New Zealand

Switzerland

Ireland

Singapore

Estonia

Luxembourg

United States


27


0

2

4

6

8

101970 1975 1980 1985 1990 1995 2000 2001 2002 2003

Scor

e (o

ut o

f 10)

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


28


0

20

40

60

80

100

Perc

entil

e R

anks

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


29

Freedom to Trade Internationally Freedom to Trade Internationally and the Top 12and the Top 12

0 2 4 6 8 10

Score (out of 10)

Australia

United States

Canada

Switzerland

New Zealand

United Kingdom

Unit. Arab Em.

Average of Top 12

Estonia

Ireland

Luxembourg

Singapore

Hong Kong


30


0

2

4

6

8

101970 1975 1980 1985 1990 1995 2000 2001 2002 2003

Scor

e (o

ut o

f 10)

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


31


0

20

40

60

80

100

Perc

entil

e R

anks

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


32

Regulations and the Top 12Regulations and the Top 12

0 2 4 6 8 10

Score (out of 10)

Ireland

Estonia

Singapore

Switzerland

Luxembourg

Canada

Average of Top 12

Australia

United Kingdom

United States

New Zealand

Unit. Arab Em.

Hong Kong


33


0

2

4

6

8

101970 1975 1980 1985 1990 1995 2000 2001 2002 2003

Scor

e (o

ut o

f 10)

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


34


0

20

40

60

80

100

Perc

entil

e R

anks

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


35

Credit Market Regulations Credit Market Regulations and the Top 12and the Top 12

0 2 4 6 8 10

Score (out of 10)

Unit. Arab Em.

Singapore

Ireland

Average of Top 12

Switzerland

Hong Kong

Canada

Estonia

Luxembourg

Australia

United Kingdom

United States

New Zealand


36


0

2

4

6

8

101970 1975 1980 1985 1990 1995 2000 2001 2002 2003

Scor

e (o

ut o

f 10)

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


37


0

20

40

60

80

100

Perc

entil

e R

anks

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg


Switzerland

Unit. Arab Em.

United Kingdom

United States

Average of Top 12


38

Labor Market Regulations Labor Market Regulations and the Top 12and the Top 12

0 2 4 6 8 10

Score (out of 10)

Estonia

Ireland

Singapore

New Zealand

Switzerland

Luxembourg

Australia

Average of Top 12

Canada

United Kingdom

United States

Hong Kong

Unit. Arab Em.


39


0

2

4

6

8

101970 1975 1980 1985 1990 1995 2000 2001 2002 2003

Scor

e (o

ut o

f 10)

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg

New Zealand

Singapore

Switzerland

United Kingdom

United States

Average of Top 12


40


0

20

40

60

80

100

Perc

entil

e R

anks

Australia

Canada

Estonia

Hong Kong

Ireland

Luxembourg

New Zealand

Singapore

Switzerland

United Kingdom

United States

Average of Top 12


41

Business Regulations Business Regulations and the Top 12and the Top 12

0 2 4 6 8 10

Score (out of 10)

Ireland

Luxembourg

United Kingdom

Canada

Switzerland

United States

Unit. Arab Em.

Estonia

Australia

Average of Top 12

New Zealand

Singapore

Hong Kong


42

Why is Economic Freedom Why is Economic Freedom Important?Important?

Economic rights are fundamental rights in the sense that without them there can be no political freedom or civil freedoms

They are a prerequisite for growth and development

They are a prerequisite for broader human development

43

The impact on economic The impact on economic growth and developmentgrowth and development

44

Income (per person) of the Income (per person) of the Bottom TenBottom Ten

0 10,000 20,000 30,000 40,000 50,000 60,000

GDP per Capita, 2003 (ppp)

BurundiCongo, Dem. R.Guinea-Bissau Congo, Rep. Of

Central Afr. Rep.Rwanda

ZimbabweVenezuela

AlgeriaGabon

Sources: The Fraser Institute; The World Bank, World Development Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.Indicators CD-ROM, 2005.

45

Income (per person) of the Top 12Income (per person) of the Top 12

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

GDP per Capita, 2003 (ppp)

EstoniaUnit. Arab Em.


United KingdomHong Kong

AustraliaSwitzerland

CanadaUnited States

IrelandLuxembourg

Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.CD-ROM, 2005.

46

Per Capita Income and Economic Per Capita Income and Economic Freedom QuintileFreedom Quintile

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

GD

P P

er C

apit

a (p

pp

), 2

003

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile

Least Free …………… Most FreeLeast Free …………… Most FreeSources: The Fraser Institute; The World Bank, World Development Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.Indicators CD-ROM, 2005.

47

Growth in Real GDP Per Capita Growth in Real GDP Per Capita and Economic Freedom Quintileand Economic Freedom Quintile

0.0

0.5

1.0

1.5

2.0

2.5

GD

P P

er

Ca

pit

a %

Gro

wth

,

19

94

-20

03

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile

Least Free ……………..….. Most FreeLeast Free ……………..….. Most Free


48

Economic Freedom and Economic Freedom and InvestmentInvestment

$0

$1,000

$2,000

$3,000

$4,000

$5,000

Gro

ss

Inv

es

tme

nt

pe

r C

ap

ita

(c

on

sta

nt

20

00

US

$),

20

03

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile



49

Economic Freedom and Economic Freedom and UnemploymentUnemployment

0.0

3.0

6.0

9.0

12.0

15.0

To

tal U

ne

mp

loy

me

nt

(% o

f to

tal

lab

or

forc

e),

20

00

-20

02

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile


Sources: The Fraser Institute; The World Bank, World Development Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.Indicators CD-ROM, 2005.

50

New research:New research: Economic Freedom and PeaceEconomic Freedom and Peace

51

Economic Freedom and Peace:Economic Freedom and Peace:1) the “democratic peace”1) the “democratic peace”

Does the concept of a “democratic peace” hold up to scrutiny?

Democracies tend not to go to war with each other but go to war about as often in general as non-democracies.

Developing democracies are as prone as non-democracies to violent conflict.

Thus, “democratic peace” fails close study.

52

Economic Freedom and Peace:Economic Freedom and Peace:2) the “capitalist peace”2) the “capitalist peace”

Stable democracies typically have high levels of economic freedom – which promotes peace.

When both are included in a statistical test, economic freedom is 50 times more potent in reducing conflict than democracy.

Nations which score below 2 in the EF index are 14 times more prone to conflict than top scoring nations.

Economically free nations fight each other less and go to war against other nations less as well.

53

Causes of the Capitalist PeaceCauses of the Capitalist Peace Wealth and power are created by markets and the efficient

production that arises from them, not by conquest of land or raw materials.

Wealth created by market economies through efficient production, unlike wealth derived from land or resources, is difficult for nations to “steal” by violent action.

Efficient production requires property rights and free decisions by market participants that cannot be effectively coordinated to the victor’s advantage.

Markets provide new methods for signaling among nations and create areas in which states can compete without having to go to war.

54Source: The Fraser Institute.Source: The Fraser Institute.

55Source: The Fraser Institute.Source: The Fraser Institute.

56

Economic Freedom and ConflictEconomic Freedom and Conflict

0.0

3.0

6.0

9.0

12.0

Nu

mb

er o

f C

onfl

icts

,

199

2-20

01

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile


Sources: The Fraser Institute.Sources: The Fraser Institute.

57

Policy Implications:Policy Implications:

Efforts to promote democracy may not produce peace dividend

Policy should be to promote economic freedom

Economic freedom has been shown to promote democracy over the long term (and many other good outcomes)

Therefore, promoting economic freedom will both lead to less conflict and, in the long run, to democracy.

58

Economic Freedom,the Poor, andEconomic Freedom,the Poor, andInequalityInequality

59

Human Poverty Index, 2002, and Human Poverty Index, 2002, and Economic Freedom QuintileEconomic Freedom Quintile

0

5

10

15

20

25

30

35

40

Hu

man

Po

vert

y I

nd

ex

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile

Least Free …………..…. Most FreeLeast Free …………..…. Most FreeSources: The Fraser Institute; United Nations Development Programmme, Human Development Indicators 2004, available at http://hdr.undp.org/statistics/data/index_indicators.cfm (accessed on July 5, 2005).

60

Income Inequality, 1998-2002Income Inequality, 1998-2002

0

10

20

30

40

50

60

Pe

rce

nta

ge

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

TopQuintile

Poorest 20%, 1998-2002 2nd 20%, 1998-20023rd 20%, 1998-2002 4th 20%, 1998-2002Richest 20%, 1998-2002

Least Free …….. Most Free Least Free …….. Most Free

Percent of income accruing to thePercent of income accruing to the

Sources: The Fraser Institute; The World Bank, World Development Indicators CD-Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.ROM, 2005.

61

Income Share of the Poorest 10% and Income Share of the Poorest 10% and

Economic FreedomEconomic Freedom

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Inco

me S

hare

Held

by

Lo

west

10%

, 1999-2

003

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

TopQuintile

Least Free …….. Most FreeLeast Free …….. Most Free

Sources: The Fraser Institute; The World Bank, World Development Indicators CD-Sources: The Fraser Institute; The World Bank, World Development Indicators CD-ROM, 2005.ROM, 2005.

62

Per Capita Income of Poorest 10% Per Capita Income of Poorest 10% and Economic Freedomand Economic Freedom

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Bottom Quintile Fourth Quintile Third Quintile Second Quintile Top Quintile0.0

0.5

1.0

1.5

2.0

2.5

3.0

Income Level of the Poorest 10%, 1999-2003Income share of the lowest 10%, 1999-2003

Least Free …….. Most Free Least Free …….. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators

CD-ROM, 2005.CD-ROM, 2005.

63

Economic Freedom, Economic Freedom, Other Freedoms and Other Freedoms and DemocracyDemocracy

64

Economic Freedom Versus CorruptionEconomic Freedom Versus Corruption10 =highly corrupt and 0 =highly clean10 =highly corrupt and 0 =highly clean

0

2

4

6

8

10

Co

rru

pti

on

Ra

tin

g

(ou

t o

f 1

0)

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile

Least Free ………….. Most FreeLeast Free ………….. Most Free Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index

2004, available at 2004, available at http://www.transparency.org/cpi/2004/cpi2004.en.html#cpi2004 (accessed on http://www.transparency.org/cpi/2004/cpi2004.en.html#cpi2004 (accessed on July 5, July 5, 2005).2005).

65

Economic Freedom and Voice and Economic Freedom and Voice and AccountabilityAccountability

-2.5 =low voice and accountability and 2.5 =high voice and -2.5 =low voice and accountability and 2.5 =high voice and accountability accountability

-1.5

-0.5

0.5

1.5

Vo

ice

an

d A

cc

ou

nta

bilit

y,

20

04

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile

Least Free ………….. Most FreeLeast Free ………….. Most Free Sources: The Fraser Institute; The World Bank Group, Governance & Anti-Corruption, Sources: The Fraser Institute; The World Bank Group, Governance & Anti-Corruption,

available at http://info.worldbank.org/governance/kkz2004/tables.asp available at http://info.worldbank.org/governance/kkz2004/tables.asp (accessed on July 5, 2005).(accessed on July 5, 2005).

66

Political Stability and Economic Freedom Political Stability and Economic Freedom -2.5 =low political stability and 2.5 =high political stability-2.5 =low political stability and 2.5 =high political stability

-1.0

-0.5

0.0

0.5

1.0

1.5

Po

liti

cal

Sta

bil

ity,

2004

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

TopQuintile

Least Free ………..… Most FreeLeast Free ………..… Most Free

Sources: The Fraser Institute; The World Bank Group, Governance & Anti-Corruption, available at http://info.worldbank.org/governance/kkz2004/tables.asp

(accessed on July 5, 2005).

67

Economic Freedom and Political RightsEconomic Freedom and Political Rights ten representing the highest degree of political rights and ten representing the highest degree of political rights and

zero the lowestzero the lowest

0

2

4

6

8

10

Po

liti

ca

l R

igh

ts

(o

ut

of

10

)

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

TopQuintile

Least Free ……………. Most FreeLeast Free ……………. Most Free

Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 1972 through 2003, available at http://www.freedomhouse.org/ratings/index.htm 1972 through 2003, available at http://www.freedomhouse.org/ratings/index.htm (accessed on July 5, 2005).(accessed on July 5, 2005).

68

Economic Freedom and Civil LibertiesEconomic Freedom and Civil Libertiesten representing the highest degree of civil liberties ten representing the highest degree of civil liberties

and zero the lowestand zero the lowest

0

2

4

6

8

10

Civ

il L

iber

ties

(o

ut

of

10)

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile

Least Free …….. Most FreeLeast Free …….. Most Free Sources: The Fraser Institute; Freedom House, Freedom in the World Country Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 1972 through 2003, available at Ratings, 1972 through 2003, available at http://www.freedomhouse.org/ratings/index.htm (accessed on July 5, 2005).http://www.freedomhouse.org/ratings/index.htm (accessed on July 5, 2005).

69

The impact of Economic Freedom on The impact of Economic Freedom on the UN’s Human Development Index the UN’s Human Development Index and other indicators of well-beingand other indicators of well-being

70

Human Development Index, 2002, Human Development Index, 2002, and Economic Freedom Quintilesand Economic Freedom Quintiles

0.0

0.2

0.4

0.6

0.8

1.0

Un

ited

Nat

ion

s H

um

an D

evel

op

men

t In

dex

, 200

2

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile


Sources: The Fraser Institute; United Nations Development Programmme, Human Sources: The Fraser Institute; United Nations Development Programmme, Human Development Indicators 2004, available at Development Indicators 2004, available at http://hdr.undp.org/statistics/data/index_indicators.cfm (accessed on July 5, 2005).http://hdr.undp.org/statistics/data/index_indicators.cfm (accessed on July 5, 2005).

71

Life Expectancy at Birth and Life Expectancy at Birth and Economic Freedom QuintilesEconomic Freedom Quintiles

0

20

40

60

80

Yea

rs

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

Top Quintile


Sources: The Fraser Institute; The World Bank, World Development Indicators CD-Sources: The Fraser Institute; The World Bank, World Development Indicators CD-

ROM, 2005.ROM, 2005.

72

Infant Mortality and Economic Infant Mortality and Economic Freedom QuintileFreedom Quintile

0

20

40

60

80

100

Per

1,0

00 li

ve b

irth

s, 2

003

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

TopQuintile

Least Free ………..…. Most FreeLeast Free ………..…. Most Free


73

Adult Mortality (2000) and Adult Mortality (2000) and Economic Freedom QuintileEconomic Freedom Quintile

0

100

200

300

400

500

Mo

rtal

ity r

ate,

ad

ult

(per

1,

000

adu

lts)

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

TopQuintile

Least Free ………..…. Most FreeLeast Free ………..…. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators

CD-ROM, 2005.CD-ROM, 2005.

74

Economic Freedom and Labor force, Economic Freedom and Labor force, children 10-14 (% of age group)children 10-14 (% of age group)

0

5

10

15

20

25

Perc

en

tag

e o

f ch

ild

ren

10-1

4 w

ho

are

in

th

e

lab

ou

r fo

rce

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

TopQuintile

Least Free ……………. Most FreeLeast Free ……………. Most FreeSources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators

CD-ROM, 2005.CD-ROM, 2005.

75

% of Population Using Improved % of Population Using Improved Water Sources, 2002Water Sources, 2002

0

20

40

60

80

100

Per

cen

tag

e

BottomQuintile

FourthQuintile

ThirdQuintile

SecondQuintile

TopQuintile

Least Free …………….. Most FreeLeast Free …………….. Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators Sources: The Fraser Institute; The World Bank, World Development Indicators

CD-ROM, 2005.CD-ROM, 2005.

76

ConclusionsConclusionsEconomic Freedom spurs

Increased prosperity for allPoverty reductionOther freedomsReduces Probability of WarQuality of life improvements

All this can be seen in today’s data All this can be seen in today’s data and lessons from historyand lessons from history

77

www.freetheworld.comwww.freetheworld.com

www.fraserinstitute.cawww.fraserinstitute.ca

Documents

1 Economic Freedom of the World: 2005 Annual Report Fraser Institute Policy Briefing September 8, 2005