Paul L. Caron
Dean



Friday, February 2, 2007

2007 Index of Economic Freedom

Economic_freedom The Heritage Foundation has published the 2007 Index of Economic Freedom, measures and ranks 161 countries across 10 specific freedoms, including tax rates and property rights [a description of the 10 freedoms is below the fold].

The 10 Most Free Countries (and their freedom scores) are:

  1. Hong Kong (89.3%)
  2. Singapore (85.7%)
  3. Australia (82.7%)
  4. United States (82.0%)
  5. New Zealand (81.6%)
  6. United Kingdom (81.6%)
  7. Ireland (81.3%)
  8. Luxembourg (79.3%)
  9. Switzerland (79.1%)
  10. Canada (78.7%)

The three highest scores for the U.S. are:

  • Business Freedom (94.5%)
  • Labor Freedom (92.1%)
  • Property Rights (90.0%)

The three lowest scores for the U.S. are:

  • Freedom from Government (67.5%)
  • Freedom from Corruption (76.0%)
  • Trade Freedom (76.6%)

The 10 Economic Freedoms. Overall economic freedom, defined by multiple rights and liberties, can be quantified as an index of less abstract components. The index we conceive uses 10 specific freedoms, some as composites of even further detailed and quantifiable components.

  • Business freedom is the ability to create, operate, and close an enterprise quickly and easily. Burdensome, redundant regulatory rules are the most harmful barriers to business freedom.
  • Trade freedom is a composite measure of the absence of tariff and non-tariff barriers that affect imports and exports of goods and services.
  • Monetary freedom combines a measure of price stability with an assessment of price controls. Both inflation and price controls distort market activity. Price stability without microeconomic intervention is the ideal state for the free market.
  • Freedom from government is defined to include all government expenditures—including consumption and transfers—and state-owned enterprises. Ideally, the state will provide only true public goods, with an absolute minimum of expenditure.
  • Fiscal freedom is a measure of the burden of government from the revenue side. It includes both the tax burden in terms of the top tax rate on income (individual and corporate separately) and the overall amount of tax revenue as portion of GDP.
  • Property rights is an assessment of the ability of individuals to accumulate private property, secured by clear laws that are fully enforced by the state.
  • Investment freedom is an assessment of the free flow of capital, especially foreign capital.
  • Financial freedom is a measure of banking security as well as independence from government control. State ownership of banks and other financial institutions such as insurer and capital markets is an inefficient burden, and political favoritism has no place in a free capital market.
  • Freedom from corruption is based on quantitative data that assess the perception of corruption in the business environment, including levels of governmental legal, judicial, and administrative corruption.
  • Labor freedom is a composite measure of the ability of workers and businesses to interact without restriction by the state.

https://taxprof.typepad.com/taxprof_blog/2007/02/2007_index_of_e.html

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Comments

Isn't it interesting that, aside from Switzerland and Luxembourg, each of the top ten countries was, at one time, part of the British Empire?

Posted by: Joel | Feb 2, 2007 12:08:47 PM

Where does the right to bear arms come in?
I mean how much property rights can one have if its so easy to steal and the owner gets prosecuted when protecting the property?
Or being attacked when out for a walk?

Posted by: Terry | Feb 2, 2007 12:28:33 PM

I'd like to see the breakdown for Hong Kong actually, but I have to admit the Chinese have been surprising lighthanded economically there so as not to kill the goose that lays the golden eggs. Political freedom in another matter entirely, but looks like its outside the scope of this meansurement.

Posted by: Ryan Frank | Feb 2, 2007 12:29:40 PM

I would like to see them include something on governmental social regulations/restrictions that affect business freedom. The existance of bans on items or actions that can have a negaitive impact on businesses is a very real problem for me and can cause a mess for people. For instance Singapore's bans on chewing gum and pornography or the growing regulations on smoking in private businesses throughout the globe. These things restrict one's ability to run their economic opportunities as they see fit.

Posted by: MikeJ | Feb 2, 2007 1:00:10 PM

I would like to see them include something on governmental social regulations/restrictions that affect business freedom. The existance of bans on items or actions that can have a negaitive impact on businesses is a very real problem for me and can cause a mess for people. For instance Singapore's bans on chewing gum and pornography or the growing regulations on smoking in private businesses throughout the globe. These things restrict one's ability to run their economic opportunities as they see fit.

Posted by: MikeJ | Feb 2, 2007 1:00:51 PM

Joel,

It is VERY interesting that the "Imperialistic" British helped to create World economic powerhouses (and freedom loving). Although I'm sure many would say they had nothing to do with it. Seems like the evidence is too strong to ignore.

I hate to think what the world will be like in the future when England aligns herself (economically, socially and militarily) much more with the EU than with us.

Posted by: Ken | Feb 2, 2007 2:02:43 PM

Where are France and Germany?

Posted by: Tom | Feb 2, 2007 4:47:27 PM

Germany : 19
France : 45

Posted by: Vince P | Feb 3, 2007 1:44:41 AM

Germany's 19th and France is 45th, here's the page listing all
countries and their rankings:
http://www.heritage.org/research/features/index/countries.cfm

Posted by: YogSothoth | Feb 3, 2007 5:51:26 AM

Singapore? I'm afraid "economic freedom" is too narrow a prism. This is a country where it is (or was in 1989 when I was there) illegal for a cab driver to say anything bad about the government.

OK, I was a New Yorker at the time. It seemed a stretch.

Give me liberty, absolutely, but give it to me with free speech and personal firearms and all the rest.

Posted by: Michael | Feb 3, 2007 5:58:41 PM

Michael,

Singapore's government is democratically elected. Singaporeans have choosen to forego "free speech and personal firearms and all the rest" to sustain high levels of wealth - and yes, a tradeoff exists for reasons that are complex to explain.

(I love New York btw, but it was too expensive for me to live there).

Posted by: Hal Itosis | Feb 4, 2007 5:30:05 AM

Tax Prof -
Thanks for the mention! I am actually in Sweden right now promoting the book with our friends at TIMBRO. Amazing story here: a woman who opened a salad bar with two employees was harassed by trade unions (despite the fact that her employees were better paid and happy) until she gave up. Big news locally that maybe the Nordic model of "protecting" workers is causing the high unemployment rates.
Cheers,
Tim Kane

Posted by: Tim Kane | Feb 7, 2007 9:23:04 AM