THE FREEDOM INDEX – OF THE WORLD AND OUR STATES

The Economic Freedom of the World: 2017 Annual Report, co-published by the Fraser and Cato Institutes, features a wealth of new data on economic freedom worldwide—and for the first time, the report adjusts for inequality in economic freedom in countries that do not afford equal rights to men and women.  Since restrictions on the economic freedom of women significantly limit the size of that country’s markets and its potential growth.

While many countries were not affected by this adjustment, some countries, such as Qatar, Saudi Arabia, Bahrain, and the United Arab Emirates, saw their ranking drop by more than 20 places.  The index’s authors based their adjustment on World Bank data on gender disparity, which considers questions such as whether men and women have equal property rights and equal inheritance rights and whether married women can open bank accounts, get jobs, and sign contracts in the same way as married men.  The report also reviews the trends in gender disparity since 1970—gender equality has been on the rise in the past few decades, and they find a positive relationship between economic freedom and gender equality.

The United States ranked 11th in this year’s report—up a bit from last year’s 13th (when adjusted for gender disparity), but still far below its 2000 ranking, when it stood in 4th place.  Hong Kong and Singapore remained the top two most economically free countries, followed by New Zealand, Switzerland, Ireland, the United Kingdom, Mauritius, Georgia, Australia, and Estonia.

The report also features a timely chapter on the relationship between economic freedom and support for anti-immigrant populist parties.  Many believe that the success of these parties follows from high immigration levels, or from increased economic liberalism, which creates more competition and gives rise to nativist sentiments.  But the authors do not find support for these theories.  Instead they find that countries with less economic freedom and high welfare spending are more likely to support nativist, populist parties.

The Economic Freedom of the World report continues to demonstrate the clear connection between economic freedom and other types of freedom and prosperity.  The income of the poorest 10 percent of a country’s population is much higher in economically free countries, for example, and greater economic freedom is associated with more political rights and civil liberties.

Here in the United States we’re often surprised, as our rank in economic freedom slid from #2 in 1980 to #16 in 2013.  A bipartisan effort!  But this obscures the fact that over that same time period, the world’s average economic freedom score has jumped almost 20%.  To put that in perspective, in 2013 a score of 5.31 would place a country as the 149th most economically free (just ahead of the Central African Republic), while a score of 6.86 would place 87th (right behind Iceland).  Thus, the encouraging trend of the last 200+ years continues in dramatic fashion:  the world is becoming more free.

The foundations of the freedom index are personal choice, voluntary exchange and open markets.  Freedom of exchange and market coordination provides the fuel for economic growth and prosperity.

Here is a sample ranking of the Freedom Index in our states.

The top five include New Hampshire, Oklahoma, Indiana, North Dakota and Alaska.  The bottom five include New York, California, Hawaii, New Jersey and Connecticut.

The overall rankings by the authors are compendium of personal and economic freedoms.  They scored each of the states on 200 policies encompassing fiscal and regulatory policies.  In addition to personal freedom, they weighted public policies according to the estimated costs that government restrictions impose on their citizens’ freedoms.

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