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Recession caused global decrease in economic freedom; Britain rated 10th overall

The latest Economic Freedom of the World: 2010 Annual Report, released today by the Fraser Institute in association with the Institute of Economic Affairs, ranks Britain as 10th in the index. Economic freedom in Britain has been on retreat since 2000 and Britain’s score fell again in this year’s report (though Britain’s ranking remained the same).

Economic freedom is now on retreat around the world too. This year’s report shows that global economic freedom experienced its first global downturn in a quarter of a century, with the average score falling to 6.67 in 2008 (the most recent year for which data is available) from 6.74 in 2007. Of the 123 countries with economic freedom rankings dating back to 1980, 88 (71.5 per cent) saw their rankings decrease while only 35 (28.5 per cent) recorded increases.

Commenting on the report, Prof Philip Booth, Editorial Director of the Institute of Economic Affairs, said:

“Economic freedom is a prerequisite for prosperity. Britain needs to make sure that it keeps this vital principle at the heart of its policy-making. Coming out of the recession we need less red tape, lower government spending and government interference in the economy. If the private sector is to grow and provide employment for those who move out of the public sector businesses need freedom.”

The report ranks Hong Kong number one, followed by Singapore and New Zealand. Zimbabwe once again has the lowest level of economic freedom among the 141 jurisdictions included in the study, followed by Myanmar, Angola, and Venezuela.

Research shows that individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity, greater individual freedoms, and longer life spans. This year’s report also contains new research showing the impact of the economic freedom on rates of unemployment and homicide.

The full report is available
here.

UK scores in key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom):

• Size of government: changed to 6.02 from 6.29 in the last year’s report
• Legal structures and security of property rights: changed to 8.11 from 8.02
• Access to sound money: changed to 9.41 from 9.44
• Freedom to trade internationally: stayed constant at 7.63
• Regulation of credit, labour and business: changed to 7.76 from 7.82

It looks certain that our level of freedom, as measured by the index, will decrease for at least the next two years – whatever the coalition does.

International Rankings

Hong Kong maintains the highest level of economic freedom worldwide, with a score of 9.05 out of 10. The other top scorers are Singapore (8.70), New Zealand (8.27), Switzerland (8.08), Chile (8.03), the United States (7.96), Canada (7.95), Australia (7.90), Mauritius (7.82), and the United Kingdom (7.81).

The rankings and scores of other large economies include Taiwan, 22nd (7.48); Germany, tied with Japan and Kuwait in 24th (7.46); France, 35th (7.32); South Korea, tied with Sweden in 37th (7.28); Spain, tied with Iceland and Honduras in 39th (7.26); Italy, tied with Montenegro and Poland in 66th (6.90); Mexico, 69th (6.89); China, tied with South Africa in 82nd (6.65); Russia, 84th (6.62); India, tied with Croatia and Moldova in 87th (6.51); Brazil, tied with Madagascar in 102nd (6.18); and Argentina, 114th (5.59).

This year’s report includes new research examining the impact of economic freedom on rates of unemployment. The results suggest that high levels of economic freedom lead to reduced joblessness. Denmark, for example, increased its economic freedom score to 7.8 in 2007 from 6.5 in 1980; there was a marked improvement in the Danish labour market and an estimated reduction in unemployment rate between 1.0 and 1.3 percentage points over the period.

To arrange an interview with Philip Booth, Editorial Director of the IEA, please contact Ruth Porter, Communications Manager, 07751 717 781, 020 7799 8900, rporter@iea.org.uk.

Notes to editors

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.

About the Economic Freedom Index

The annual peer-reviewed Economic Freedom of the World report is produced by the Fraser Institute, Canada’s leading public policy think-tank, in cooperation with independent institutes in 80 nations and territories.

Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The 2010 report was prepared by James Gwartney, Gus A. Stavros Eminent Scholar Chair at Florida State University; Robert A. Lawson, Auburn University; and Joshua Hall, Beloit College.

The report uses 42 different measures to create an index ranking countries around the world based on policies that encourage economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property. Economic freedom is measured in five different areas: (1) size of government, (2) legal structure and security of property rights, (3) access to sound money, (4) freedom to trade internationally, and (5) regulation of credit, labor, and business.

This year’s publication ranks 141 nations representing 95% of the world’s population for 2008, the most recent year for which data is available. The report also updates data in earlier reports in instances where data have been revised.

For more information on the Economic Freedom Network, data sets, and previous Economic Freedom of the World reports, visit
http://www.iea.org.uk/www.freetheworld.com.

Prof Philip Booth comments on the Economic Freedom of the World: 2010 Annual Report

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