The foundational tenets of economic freedom are personal choice, voluntary exchange, and open markets. The United States once boasted the title of standard bearer for economic freedom among large industrial nations, but according to just about every index measuring global economic freedom, has experienced a dramatic decline in economic freedom during the past decade.
From 1980 to 2000, the United States was, on average, rated the third freest economy in the world. The U.S. ranked behind the usual economic winners, Hong Kong and Singapore. After increasing steadily during the period from 1980 to 2000, the chain linked Economic Freedom of the World U.S. rating, as conducted by CATO Institute, fell from 8.65 in 2000 to 8.21 in 2005 and 7.74 in 2011. The chain-linked ranking of the United States has precipitated from 2nd in 2000, to 8th in 2005, to 19th in 2011 (unadjusted rating of 17th).
Freedom of exchange and market coordination provides the fuel for economic progress, but absent exchange and entrepreneurial activity efficiently coordinated through free markets, modern living standards are simply impossible. You can read the full report below in its entirety or in sections, but they are preceded by a brief summary just below. On the report, CATO explains:
Potentially advantageous exchanges do not always occur. Their realization is dependent on the presence of sound money, rule of law, and security of property rights, among other factors. Economic Freedom of the World seeks to measure the consistency of the institutions and policies of various countries with voluntary exchange and the other dimensions of economic freedom. The report is copublished by the Cato Institute, the Fraser Institute in Canada and more than 70 think tanks around the world.
Global economic freedom, as a whole, increased modestly in this latest report, although it remains below its peak level of 6.92 in 2007. Following a global average drop from 2007 and 2009, the average score rose to 6.87 in 2011. In this year’s index, Hong Kong retains the highest rating for economic freedom, 8.97 out of 10. The rest of this year’s top scores are unsurprising to those who follow economic freedom index measurements; Singapore, 8.73; New Zealand, 8.49; Switzerland, 8.30; United Arab Emirates, 8.07; Mauritius, 8.01; Finland, 7.98; Bahrain, 7.93; Canada, 7.93; and Australia, 7.88.
The rankings (and scores) of other large economies in this year’s index are the United Kingdom, 12th (7.85); Germany, 19th (7.68); Japan, 33rd (7.50); France, 40th (7.38); Italy, 83rd (6.85); Mexico, 94th (6.64); Russia, 101st (6.55); Brazil, 102nd (6.51); India, 111th (6.34); and China, who ranked 123rd (6.22).
Nations in the top quartile of economic freedom had an average per-capita GDP of $36,446 in 2011, compared to $4,382 for nations in the bottom quartile in 2011 current international dollars. In the top quartile, the average income of the poorest 10% was $10,556, compared to $932 in the bottom quartile in 2011 current international dollars. Interestingly, the average income of the poorest 10% in the most economically free nations is more than twice the overall average income in the least free nations. Life expectancy is 79.2 years in nations in the top quartile compared to 60.2 years in those in the bottom quartile, and political and civil liberties are considerably higher in economically free nations than in unfree nations.
The first Economic Freedom of the World Report, published in 1996, was the result of a decade of research by a team which included several Nobel Laureates and over 60 other leading scholars in a broad range of fields, from economics to political science, and from law to philosophy. This is the 17th edition of Economic Freedom of the World and this year’s publication ranks 152 nations for 2011, the most recent year for which data are available.
Below is the Executive Summary, which I would suggest you read if you want to take on the entire study. It is incredibly interesting, but the summary can provide you with context and familiarize you with certain terminology. If you would like to read the entire report, then click here.