The road to further development and progress
The 20th edition of the Index of Economic Freedom shows that economic freedom is once again booming score peaked in the 20 year history of the index . Behind this record there are stories of human progress and achievement of countries and their citizens, literally billions of people around the world whose lives have improved measurably. Like previous editions of the Index have been documented, it is clear and strong link between economic freedom and long-term development. The results of the index , when compared with data measuring the economic and social situation in countries around the world, provide strong evidence of the success of the free market system in promoting prosperity and human development.
The index has shown that the most important for sustaining the wealth of nations variable, as well as the most effective means to eliminate poverty, is economic freedom. For some countries obtain scores that reflect even moderate levels of economic freedom (60 or more), the relationship between economic freedom and per capita GDP is extremely significant.
These higher levels of economic freedom have had an enormously positive impact on poverty levels over the past decade. The intensity of poverty, as measured by the Multidimensional Poverty Index of the United Nations Program for Development (UNDP), which calculates the nature and severity of the deficiencies at the individual level in education, health care and living standards has an average much lower in countries with high levels of economic freedom. The intensity of poverty in countries whose economies are considered to be mostly free and moderately free is only about a quarter of the level it has in countries classified as less free.
In many respects, the last 20 years during which the index has been reflecting the advancement of economic freedom have been the most prosperous in the history of mankind. There are more people living in better conditions than ever.
The free market system, which has its roots in economic freedom, has spurred unprecedented economic growth worldwide. During the last two decades, in which the global economy has moved towards greater economic freedom, reaching an overall average of “moderately free”, the world economy has achieved a real GDP growth of around 70%, lifting millions people out of poverty.
Thanks to the boom in global economic freedom, the world has experienced significant economic growth and global poverty rate has halved. By opening the doors of prosperity to more people on the planet, economic freedom has made the world a vastly better place.
THE IMPORTANCE OF A GROWING ECONOMIC FREEDOM
Any debate on the defense of economic freedom is primarily a matter of personal empowerment. Strengthen and promote freedom increases the chances of each individual to achieve their goals and to possess and enjoy the value of what each person has created. People crave escape poverty and crave the dignity of free will. By reducing barriers to access to these basic concepts, the strength of economic freedom creates a work environment in which people can realize their dreams of success.
In this regard, one of the most important objectives of economic policy in almost all countries of the world is increasing the rate of economic growth. The global data firmly support the idea that increasing economic freedom is a major factor in this growth rate. The main drivers of this economic growth and poverty reduction are high levels of flexibility and strength that come with economic freedom.
The dynamic and sustainable economic growth occurs when governments set up regulations that increase economic freedom and empower people to have more choices and more opportunities. There is a strong relationship between improved economic freedom and greater economic growth per capita. Whether long-term (20 years), medium term (10 years) or short term (5 years), the relationship between changes in economic freedom and changes in economic growth shows a consistently positive nature (See Figure 3).
It is undeniable that countries moving toward greater economic freedom tend to achieve higher rates of growth in GDP per capita over time. In each of the three specific periods examined in these 20 years of data from the index , the average annual rates of per capita economic growth in countries that have grown in economic freedom is at least 50% higher than in those countries where freedom has stagnated or been reduced. And what is even more positive, encouraging economic freedom produces a dynamic and inclusive growth to ordinary people in a society. Economic freedom, cultivated by the rule of law, limited government, regulatory efficiency and open markets, has proved crucial to generate broader economic growth that creates opportunities in all sectors of society.
The debate on the complex interaction between economic freedom and political freedom or democracy has been renewed and intensified over the past three years, especially in the Middle East and North Africa, where he has lived a challenging period, although the positive relationship between the two is undeniable (see Figure 4).
By empowering people to exercise greater control over their daily lives, basically stimulates economic freedom while political reform that makes it possible for individuals to obtain the necessary financial resources to stand up to vested interests or to compete for political power , thus stimulating the creation of pluralistic societies.
The search for greater economic freedom thus becomes a springboard to democracy. Empowers the poor and middle class forged. It is a philosophy that encourages the entrepreneurial spirit and dispersed economic power and decision-making at all levels of the economy.
Equally remarkable in every country in the world so, economic freedom has been shown to enhance the ability of countries to innovate and improve its overall environmental performance.
The positive link between economic freedom and higher levels of innovation supports greater economic dynamism to tackling the various challenges of development, and that the most significant improvements in the use of clean energy and energy efficiency in recent decades have occurred not as a result of government regulations, but rather thanks to advances in economic freedom and freer trade, which have triggered greater economic opportunities and generated a virtuous cycle of investment, innovation (including cleaner technologies) and dynamic growth economical.
THE CONTENTS BEYOND 20
Increase and maintain economic freedom has proven to be the way to generate positive cycles of economic growth and lasting prosperity. Economies that have promoted economic freedom have achieved levels higher than those achieved by countries where economic freedoms have been restricted by the heavy hand of the state’s overall growth. No other system has been tested has approached him in the aspect of providing broad prosperity. The countries that have not joined the march of freedom have made its citizens left behind and even, in the worst case, stuck in poverty or destitution.
Such failures are inexcusable. And most importantly, they are preventable. It’s too soon to know how the coming years will evolve as the Index of Economic Freedom enters its third decade. However, it is encouraging to know that economic freedom is moving back to a time that we can predict without fear that countries will find the will and political wisdom to promote economic freedom as citizens will thrive in the coming years.
Highlights Index 2014
The 2014 Index of Economic Freedom covers 186 countries divided into six regions. The average overall score of economic freedom has reached 60.3, the highest ever recorded in the 20 year history of the index . Global economic freedom has improved by 0.7 points from last year and 2.7 points since 1995 Much of the impetus toward greater economic freedom, which is lost during the last five years, has reappeared. Of the 178 economies ranked numerically in the 2014 index , six have earned the designation of “free”, with scores above 80 28 The following countries, with scores between 70 and 80, are considered “mostly free.” These 34 economies maintain and provide the institutional environment in which private individuals and companies enjoy a substantial degree of economic freedom in their search for more opportunities and greater prosperity.
Most of the countries evaluated (117 economies) have economic freedom scores ranging from 50 to 70 Of these, 56 economies are considered “moderately free” (scores between 60 and 70) and 61 as “mostly unfree” ( scores between 50 and 60). Twenty-seven countries have economies “repressed” with scores below 50.
Despite overall progress during the past two decades and held more dramatically in the 10 years from 1998 to 2007, the number of people living in economically “repressed” is still very high: 4,500 million, or that is, 65% of the world population. Certainly the path to prosperity is very difficult for these people. More than half of them live in two countries, China and India, where the development towards greater economic freedom has been uneven at best.
DIVERGENT PATHS TO ECONOMIC FREEDOM
The advancement of the global economic freedom to its highest level in the 2014 Index is an especially welcome news, since this significant increase has been driven by emerging and developing economies around the world.
· 114 countries, most of which are less developed, contributed to the increase in economic freedom over the past year; 43 countries, including Singapore, Sweden, Colombia, Poland, Turkey and Cape Verde, made in the 2014 index the most economic freedom score to date.
· The improved score of 17 countries, 16 of which are less developed, it was significant enough to imply an improvement of the status of economic freedom in those countries in the index . Prominently, Colombia became first a “mostly free” economy. Seven developing countries, including the Philippines and Zambia, have advanced to the level of “moderately free”, while eight countries have left behind the status of economies “repressed”.
· A decline in economic freedom in 59 countries were warned, including nine advanced economies such as the USA, France, Spain and Cyprus. On the other hand, four countries were unchanged score.
· The progress among the so-called BRIC nations has stalled. Brazil 14 places in the ranking sank to 114th, now having a rating in the Index of “mostly unfree”. The classification of the other BRIC countries (Russia, India and China) fell slightly to 140 positions, 120 ° and 137 °, respectively.
· Liberia and Sierra Leone, two countries in post-conflict, their scores have risen and their economies are no longer considered as “repressed.” It is noteworthy that six of the 11 countries that reported improvements in rank of 10 or more positions are sub-Saharan Africa.
· Four emerging economies have made significant improvements in their scores over the last five years: Colombia, Poland, United Arab Emirates and Indonesia. With a total of more than five points in their averages over these five years, increasing these countries have experienced five years of sustained growth in economic freedom, successfully weathering the global economic uncertainty and transforming what could have been a setback in a opportunity to modernize their economic systems.
· In a manner completely opposite, the United States has followed the opposite path as the only country which recorded a loss of economic freedom for seven consecutive years, from 2008 to 2014 Your score fell to 75.5 tackles, the second lowest score I never would have registered this country in the 20 year history of the index . America has fallen to 12th place, matching his lowest ranking since the birth of index two decades. Now considered simply as a “mostly free” economy, the United States has earned the dubious distinction of having recorded one of the longest in terms of economic freedom of any country in the history of declines Index , just behind Argentina.
Scores assessing property rights in twelve countries have fallen and some governments have sought to justify the expropriation and nationalization based on the global economic storm. The average overall score of freedom from corruption continues to lag behind the rest of the components of economic freedom. The populations of some countries have responded to the economic policy of their repressive governments sometimes demonstrations have turned violent.
The average maximum tax rate on personal income from all countries is 28%, while the average maximum corporate tax rate is 24.1%. The average overall tax burden as a percentage of GDP is 22.3%. The average level of public spending as a percentage of GDP is 34.2%. And the average level of gross public debt to GDP ratio in advanced economies has exceeded 70%.
Many economies have continued streamlining and modernizing their business models. Globally, starting a business it takes seven procedures and 25 days while completing the requirements for obtaining a license are required 175 days. At the world level, there has been progress in reforming the labor market. In addition, the 2014 Index recorded a continuous improvement of the monetary freedom as a result of the reduction in inflationary pressures.
Business freedom globally has stalled in neutral. Although progress was uneven, investment freedom advanced in the 2014 Index . Overall, the average score of financial freedom remained basically unchanged since last year. And despite some progress towards stability, the global financial system has been under continuous tension and uncertainty largely due to the constant turmoil around the European sovereign debt.
COMPOSITION OF 10 LARGEST FREE WORLD ECONOMIES
The 10 most free economies are a group of countries with high economic performance has shown a consistent commitment to the rule of law, limited government, regulatory efficiency and open markets, both in good and bad times. The 2014 Index has registered remarkable achievements and some repositioning within this select group.
The competition for the top spot in the rankings of the index has increased. Hong Kong maintained its status as the world’s freest economy, a distinction it has achieved remarkable consecutively for 20 years. Singapore, the second freest economy has closed the gap with Hong Kong just 0.7 points, the second narrowest difference in the history of the index .
Australia, Switzerland, New Zealand and Canada accompanied Hong Kong and Singapore as the only economies with consideration of “free”, with economic freedom scores above 80 on the scale of 0 to 100 Index .
Chile (7th) and Mauritius (8), but with two small reformist spirit economies are developing countries with the highest positions in the index .
Besides Switzerland, two other European countries are among the top 10. Ireland recorded a small improvement in your score, ending half a decade of decline in economic freedom and returning to the top 10 after a year of absence. Denmark the designation of being the 10th freest economy in the world won.
DETERIORATION OF THE RULE OF LAW
When measuring economic freedom, the Index analyzes the countries’ commitment to the rule of law, principles of limited government, regulatory efficiency and open markets. To judge by these criteria, the global economy as a whole has reached the level of “moderately free.” The scores improved in 8 of the 10 economic freedoms, as summarized in the following page on Top 10 economic freedoms: U na global perspective . Investment freedom has gained an impressive 3.3 points on average, while scores of public spending and labor freedom had a higher average of one point or more. The mean scores fell in the appearance of the rule of law, besides losing property rights and freedom from corruption 0.3 points each.
Each of the six regions of the index continues to be represented by at least one country ranked among the top 20 freest economies in the 2014 Index . Half economies are leading the ranking of Europe, led by Switzerland and Ireland. Five of the 20 economies with better performance are in the Asia-Pacific region, with Taiwan further advancing among qualified as “mostly free” economies. Canada and the United States represent North America in the top 20 positions. The other regions are each represented by a country among the 20 freest economies: Chile (South and Central America / Caribbean), Mauritius (SSA) and Bahrain (Middle East and North Africa).
Although these countries differ greatly in their history, political systems and economic profiles, however share some key features. These economies such high performance in the index are not necessarily representative of long or blessed with rich natural resources countries. Many economies have managed to expand opportunities for its citizens to improve their economic vitality and dynamism with high levels of economic freedom.
Although the overall average score for the 2014 Index has increased markedly, this progress has not been uniform in all regions. On average, economic freedom made no progress in North America actually declined in the Middle East / North Africa. In the other four regions, economic freedom did improve. The Asia-Pacific region achieved the highest score and increase their countries earned an average of more than one point. Sub-Saharan Africa had the second largest increase in average economic freedom: 0.9 points. Europe and the region of South and Central America / Caribbean also saw improvements in their average scores of 0.5 and 0.3 points respectively.
Average levels of economic freedom vary significantly between regions. North America and Europe continue to record higher average economic freedom scores among the six regions: 74.1 and 67.1, respectively. Middle East and North Africa as a whole achieved an average score of over 60 economic freedom The average economic freedom in the regions of South and Central America / Caribbean, Asia-Pacific and sub-Saharan Africa continue to be scores below 60.
A message from Jim DeMint ,
president of the Heritage Foundation
The 20 years of data now support the analysis of the Index of Economic Freedom have proven to be an invaluable tool for policy makers, researchers and academics. However, I think it may be even more important for those who continue the struggle to promote freedom, especially economic freedom worldwide. People do not fight for freedom unless he understands the value and think you are in danger. For defenders of freedom, the Index provides an objective measure of the progress of their country, or lack thereof, in promoting an environment free genius and energy of the people and by the “invisible hand” free market, promote the welfare of all search through their own personal goals.
For Americans like me who have benefited from the legacy of a society rightly called the “land of the free”, the 2014 Index presents a disturbing image. The progress of the world in general in promoting economic freedom is a source of both pride and satisfaction, given the historical trajectory of America in promoting and defending freedom. And yet, the recent record of the United States in the index , with seven consecutive years of declining economic freedom is a serious cause for alarm. Families, businesses and community organizations across the United States, to which the eighteenth-century philosopher Edmund Burke called the “little platoons” of society, are being crushed by government attacks on our economic freedom. As a result, we have fewer ways to access individual and collective success.
As they say Ed Feulner, my predecessor as president of the Heritage Foundation, “There are no permanent victories.” In fact, the struggle for freedom is a fight that each generation should resume. Now that the Index of Economic Freedom celebrates its twentieth anniversary, it is time for a new generation of Americans and freedom-loving people throughout the world to join the struggle for economic freedom.
|The 2013 Index of Economic Freedom was edited by Ambassador Terry Miller, director of the Center for International Trade and Economics at The Heritage Foundation; Dr. Kim Holmes, a distinguished member of the Heritage Foundation; and Dr. Edwin J. Feulner, President of The Heritage Foundation. The version in book format (494 pages, each copy costs $ 24.95) can be ordered www.heritage.org/index or by calling 800-975-8625. The complete English version of the index is freely available online and includes interactive charts and graphs. In Spanish, visit www.libertad.org/indice .|
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