NCPA - National Center for Policy Analysis

Freest Countries Are The Most Prosperous

January 22, 1999

Canada's Fraser Institute recently released a 1998-99 interim report on the "Economic Freedom of the World."

Economists James Gwartney and Robert Lawson used 25 variables to rate the economic freedom of 119 countries as of 1997 and compare their status to 1990. Countries were rated on a 1 to 10 scale -- with 10 being the freest -- in such areas as the size of government, the security of private property, freedom of trade and the openness of capital markets. They also ranked the countries from most-to-least free.

  • The study concludes that Hong Kong (with a 9.6 weighted score) continues to be the most economically free country in the world, followed by Singapore, New Zealand, the United States and the United Kingdom.
  • Other countries ranking in the top 10 were Canada, Argentina, Australia, Ireland, Luxembourg, Netherlands and Panama -- with the latter five tied.
  • Between 1990 and 1997, Japan's ranking fell from seventh to fourteenth, and Switzerland's ranking fell from fourth to thirteenth.

The greatest increases in economic freedom were achieved in the Dominican Republic, Hungary, Ireland, Mauritius, Panama, Philippines, Poland, Portugal, and the Czech and Slovak republics (comparing both to Czechoslovakia in 1990).

The least free economies in 1997 were Myanmar, Democratic Republic of Congo (formerly Zaire), Guinea-Bissau, Rwanda, Albania, Sierra Leone, Malawi, Ukraine, Algeria, Central African Republic, Madagascar and Romania.

The study also found a relationship between economic freedom and prosperity.

Thus countries scoring in the top fifth of "most economically free" countries had an average per capita gross domestic product of $18,142 and an average growth rate of 1.84 percent.

By contrast, countries in the bottom fifth had an average per capita GDP of only $1,538 and an average growth rate of -2.10 percent -- indicating output fell.

Source: James Gwartney (Florida State University) and Robert Lawson (Capital University), "Economic Freedom of the World 1998/1999 Interim Report," November 6, 1998, Fraser Institute, 4th Floor, 1770 Burrard Street, Vancouver, BC V6J 3G7, Canada, (604) 688-0221.


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