And the Winner Is?Hong Kong
New Cato Institute report ranks 123 nations based on economic freedom
WASHINGTON, DC - 07/23/04 - Hong Kong has retained its position as the world's most free economy, according to the results of a survey conducted by the Washington, DC-based Cato Institute in its "Economic Freedom of the World: 2004 Annual Report."
Hong Kong is closely followed by Singapore, with the US tied for third place with New Zealand, Switzerland and the United Kingdom.
Other nations in the top 10 are Australia, Canada, Ireland, and Luxembourg.
The annual report - first published in 1996 and produced in conjunction with the Fraser Institute of Canada and more than 50 other public policy research institutes around the world - ranked 123 nations for 2002, the most recent year for which data are available.
The survey does not rank all the countries in the world because sufficient data for some - such as Cuba and North Korea - is not readily available.
The report updates data in previous reports, said the Institute, adding the survey index contains 38 variables, including 18 survey-based variables such as personal choice, voluntary exchange, freedom to compete, and the protection of individuals and property obtained from survey data published in the International Country Risk Guide and the Global Competitiveness Report.
"Many economists have long argued that economic growth and poverty reduction require an economic policy that encourages economic freedom. This report provides plenty of empirical evidence of that," said US Treasury Undersecretary for International Affairs John Taylor at the news conference announcing the release of the report.
He said countries with the lowest levels of economic freedom actually had negative growth, "a shocking statistic during a period in world history of relative calm and prosperity."
Most of the nations ranking as the bottom five in the survey list were in Africa or Latin America - Venezuela, the Central African Republic, Congo, Zimbabwe, and Myanmar.
"Astoundingly, Venezuela's rating in the 'chain-linked' index has declined by over two full points since 1980," the report said.
Botswana's ranking at 18th is the best among sub-Saharan African nations, while Chile, with the best record in Latin America, was tied at 22nd with four other nations, including Germany.
The rankings of other large economies are: Japan and Italy, 36th; France, 44th; Mexico, 58th; India, 68th; Brazil, 74th; China 90th; and Russia, 114th.
Nations in the top fifth of economic freedom have an average per capita income of $26,100 compared to $2,800 for nations in the bottom fifth, the survey said.
New research in the report finds that economically free nations attract nearly $11,000 of investment per worker, 12 times more than the $845 investment per worker in restricted economies.
"Institutions and policies are consistent with economic freedom when they provide an infrastructure for voluntary exchange and protect individuals and their property from aggressors seeking to use violence and coercion and fraud to seize things that do not belong to them," the report said.
It said governments play an important role in economic freedom when they facilitate access to sound money, "but economic freedom requires government to refrain from many activities," such as interfering with freedom to enter and compete in labor and product markets.
"Moreover, the productivity of investment is 70 percent greater in economically free nations than in un-free nations," said the authors of the report, James Gwartney, professor of economics at Florida State University and Robert Lawson, professor of economics at Ohio's Capital University.
The entire "Economic Freedom of the World: 2004 Annual Report" is accessible at www.cato.org/economicfreedom.
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