Rewards of Economic Freedom

The world’s most successful countries generally achieve high and stable economic growth, sound legal systems, security of persons and their property, sound money, freedom to trade, low rates of unemployment, minimum levels of crime and violence, an absence of poverty, high average incomes, low taxes, open opportunity, political and civil liberties, and peace. Without fail, the countries that rank highest for providing their citizens with these desirable conditions also rank highest on the indices of economic freedom.

Building a successful, wealthy, and peaceful nation requires patience, courage, tenacity, and above all, policies based on well-founded and proven fundamental principles of law and economics.

The Index of Economic Freedom published by the Wall Street Journal and the Heritage Foundation, USA, and Economic Freedom of the World (EFW) published annually by the Fraser Institute, Canada, in co-operation with the Economic Freedom Network, are the best known measures of economic freedom.

Nations in the top quartile of the index had an average per-capita GDP of $32,744 in 2007, compared to $3,858 for those nations in the bottom quartile measured in constant 2005 international dollars.

Moreover, the average income of the poorest 10 per cent of the population in the most-free quartile was $8,474 compared to $910 for those in the least-free quartile measured in constant 2005 international dollars. Contrary to popular opinion, the poor get richer fastest in economically free countries. People in nations in the most-free quartile also report a much higher level of life satisfaction of 7.5 out of 10 as opposed to people in the least free economies who report a life satisfaction of 4.7 out of 10.

Without voluntary exchange and entrepreneurial activity coordinated through markets, modern living standards would be impossible. A trend towards greater economic freedom results in increased economic growth while the reverse trend reduces growth.

AUTHORS Eustace Davie is a director and Jasson Urbach is an economist with the Free Market Foundation. This article is an excerpt from the book Nationalisation published by the FMF and may be published without prior consent but with acknowledgement to the authors. The views expressed in the article are the authors’ and are not necessarily shared by the members of the Foundation.

FMF Policy Bulletin / 01 May 2012

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