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Economic Freedom of the World - The Role of Government in the Modern Growth Economy • Presentation to • Institute X • LOCATION • DATE • PRESENTER • PRESENTING Institute
The crucial questions for economic management • What causes Economic Success? • What are the practices of economically successful countries and regions? • How can countries and provinces achieve success and avoid failure • What are the implications of successful strategies?
A Tale of Two Countries • Hong Kong and Venezuela • From poor to rich • From rich to poor
What differences caused Hong Kong to become Rich and Venezuela to become Poor? • Population - evidently not • Natural Resources - not likely • Ability to afford infrastructure - certainly not • Policy differences - a possible source of the difference
The story of Hong Kong and Venezuela is repeated around the globe • Motivated the creation of the Economic Freedom of the World Project to examine whether there were empirical regularities that could be found between economic freedom and other characteristics of societies including economic growth and development
Economic Freedom of the World Project • 15 year project examining policies of successful and unsuccessful regions • Led by Professor Milton Friedman, Rose Friedman and Michael Walker • Involved 60 of the worlds top economists, four of whom received the Nobel Prize • Objective: find a way to measure economic freedom and explore the connection between it and other attributes
What does Economic FreedomMean? • The right to pursue voluntary acts of trade and exchange without interference by government or others via force or fraud • The ability to access an impartial judiciary for the enforcement of property rights • The right of citizens to keep the majority of the income they earn
What is the Index of Economic Freedom? • An attempt to identify the factors which make a country economically free • A compendium of 21 freedom factors based on objective data or independent surveys • A ranking of 123 countries according to the extent to which they are free • Now a collaboration of 55 Institutes in 55 different countries
The Index measures 21 factors which are practical indicators of the extent to which consenting adults can engage in Capitalist Acts. It is the broadest, most objective measure of economic freedom ever constructed.
The components of The Economic Freedom Index • Size of Government • Structure of the Economy • Monetary and Price Stability • Freedom to Use Alternative Currencies • Legal Structure and Property Rights • International Exchange • Freedom of Exchange in Capital Markets
How does Canada’s level of Economic Freedom compare with the ten most free countries and with NAFTA trading partners?
World Average: Economic Freedom, adjusted for population Countries with ranks in 1970
Countries which have increased or decreased the level of Economic Freedom
The Race Toward Capitalism in the Eastern and Former Soviet Transitional Economies
Why is Economic Freedom Important? • Economic rights are fundamental rights in the sense that without them there can be no political freedom or civil freedoms • They are a prerequisite for growth and development • They are a prerequisite for broader human development
Growth of Real Per Capita Output in the 1990s of Countries That Improved the Most Since 1980.