Magazine article Insight on the News

Freedom Rings in New Report: United States Ranked Third on Scale of Economic Liberty. (Economics)

Magazine article Insight on the News

Freedom Rings in New Report: United States Ranked Third on Scale of Economic Liberty. (Economics)

Article excerpt

Despite the continuing drumbeat of short-term bad news about the U.S. economy, its prospects actually are better than ever because economic freedom continues to flourish around the world, according to an influential Washington think tank.

The libertarian Cato Institute, in conjunction with Canada's Fraser Institute, has released these findings in the sixth annual Economic Freedom of the World report.

The study, which rates 123 countries, measures how consistent a nation's policies and institutions are with the factors that create economic freedom. The report was written by a team of authors and includes a preface by Nobel laureate economist Milton Friedman.

The report defines the key elements of economic freedom as personal choice, voluntary exchange, the freedom to compete and protection of persons and property. It qualifies nations as having policies consistent with these elements when they provide an infrastructure for voluntary exchange and protect people and their property from seizure by individuals or institutions through violence, coercion or fraud.

Another key element of economic freedom is that a government provides a legal structure and law-enforcement system that protects owners' property rights and enforces contracts even-handedly.

The report translates these principles into five indicators of economic freedom: the size of government (expenditures, taxes and enterprises), legal structure and security of property rights, availability of sound money, freedom to trade with foreigners and regulation of credit, labor and business. Based on these indicators, the study rates individual countries and gives an overall global rating of economic freedom.

This edition of the report includes a number of new variables--there now are 37--to broaden and deepen its analysis. These factors include per capita income, protection of intellectual property, tax laws and overall government regulation.

Based on the index's 10-point scale rating, the average economic freedom rating was 6.39 for the year 2000, up from 5.99 in 1995. This increase represents a consistent trend toward greater economic liberty; after a decrease in the 1970s, when the rating dropped from 5.98 to 5.32, the index has improved steadily since 1980. This increase correlates with efforts in the 1980s and 1990s by communist countries such as the former Soviet Union and China to liberalize their economies.

The United States ranked third overall, with a score of 8.5, which put it just ahead of Great Britain, which had a score of 8.4. Despite the 1997 takeover by China, Hong Kong retained first place with a rating of 8. …

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