Economic freedom in Britain continues to fall; UK now ranked 8th

Prof Philip Booth comments on the Economic Freedom of the World: 2011 Annual Report

The latest Economic Freedom of the World: 2011 Annual Report, released today by the Fraser Institute in association with the Institute of Economic Affairs, ranks Britain as 8th in the index. Economic freedom in Britain has been on retreat since 2000 and Britain’s score fell again in this year’s report (though Britain’s overall ranking actually rose from 10th last year).

Overall, levels of economic freedom decreased around the globe. This year’s report shows that the average economic freedom score fell to 6.64 in 2009 (the latest year for which figures are available), the lowest in nearly three decades, from 6.67 in 2008.

Commenting on the report, Prof Philip Booth, Editorial Director of the Institute of Economic Affairs, said:

“In response to the American and European debt crises, governments around the world are embracing perverse regulations and this has huge, negative implications for economic freedom and financial recovery.

“The link between economic freedom and prosperity is undeniable: the countries that score highly in terms of economic freedom also offer their people the best quality of life. It is no coincidence that the US is finding itself with European levels of unemployment with economic freedom dropping so rapidly there. The UK must deregulate to increase economic freedom and growth.”

The report ranks Hong Kong number one, followed by Singapore and New Zealand – the same rankings as last year. Zimbabwe once again has the lowest level of economic freedom among the 141 jurisdictions included in the study, followed by Myanmar, Venezuela and Angola.

The United States experienced one of the largest drops in economic freedom, falling to 10th place overall from sixth in 2010. Much of this decline is a result of higher spending and borrowing on the part of the U.S. government, and lower scores for legal structure and property rights.

Research shows that individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity, greater individual freedoms, and longer life spans. Nations in the top quartile of economic freedom had an average growth in per-capita GDP between 1990 and 2009 of 3.07%, compared to 1.18% for those nations in the bottom quartile, in constant 2005 international dollars. Life expectancy is 79.4 years in the top quartile compared to 60.7 years in the bottom quartile.

The full report is available at www.freetheworld.com

UK scores in key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom):

  • Size of government: changed to 5.68 from 6.02 in the last year’s report
  • Legal structures and security of property rights: changed to 8.20 from 8.11
  • Access to sound money: changed to 9.58 from 9.41
  • Freedom to trade internationally: changed to 7.68 from 7.63
  • Regulation of credit, labour and business: changed to 7.40 from 7.76

International Rankings

Hong Kong retains the highest rating for economic freedom worldwide, with a score of 9.01 out of 10. The other top scorers are Singapore (8.68); New Zealand (8.20); Switzerland (8.03); Australia (7.98); Canada (7.81); Chile (7.77); United Kingdom (7.71); Mauritius (7.67); and the United States (7.60).

The rankings (and scores) of other large economies are Germany, 21st (7.45); Japan, 22nd (7.44); France, 42nd (7.16); Italy, 70th (6.81); Mexico, 75th (6.74); Russia, 81st (6.55); China, 92nd (6.43); India, 94th (6.40); and Brazil, 102nd (6.19).

The bottom 10 nations are: Zimbabwe (4.08); Myanmar (4.16); Venezuela (4.28); Angola (4.76); Democratic Republic of Congo (4.84); Central African Republic (4.88); Guinea-Bissau (5.03); Republic of Congo (5.04); Burundi (5.12); and Chad (5.32).

 

To arrange an interview with Philip Booth, Editorial Director of the IEA, please contact Nick Hayns, Communications Officer, 020 7799 8900, nhayns@iea.org.uk

 

NOTES TO EDITORS

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.

About the Economic Freedom Index

The annual peer-reviewed Economic Freedom of the World report is produced by the Fraser Institute, Canada’s leading public policy think-tank, in cooperation with independent institutes in 85 nations and territories.

Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The 2011 report was prepared by James Gwartney, Gus A. Stavros Eminent Scholar Chair at Florida State University; Robert A. Lawson, Southern Methodist University; and Joshua Hall, Beloit College.

The Economic Freedom of the World report uses 42 different measures to create an index ranking countries around the world based on policies that encourage economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property. Economic freedom is measured in five different areas: (1) size of government, (2) legal structure and security of property rights, (3) access to sound money, (4) freedom to trade internationally, and (5) regulation of credit, labor, and business.

This year’s publication ranks 141 nations representing 95% of the world’s population for 2009, the most recent year for which data is available. The report also updates data in earlier reports in instances where data have been revised.

For more information on the Economic Freedom Network, data sets, and previous Economic Freedom of the World reports, visit www.freetheworld.com.