Economic freedom a proven path to prosperity

On a scale of 1 to 10, Canada earns a grade of 8.1 in this year’s Economic Freedom of the World (EFW) report card, putting us into a three-way tie for fifth place out of 140 contender countries - one of our best performances since 1970. We got our lowest grade (7.1) in 1975, the year in which former Liberal prime minister Pierre Trudeau imposed wage and price controls. But the 2007 edition of the EFW report card makes it clear that Canada is still struggling with one of the course prerequisites.

Judged solely on the size of government (measured by public sector consumption of GDP and by tax rates), Canada ranks an embarrassing 47th. The EFW report is compiled and published by the Cato Institute in the US, by the Fraser Institute in Canada and by another 70 think tanks around the world. It grades countries on a number of economic and political attributes - on people’s freedom to make personal economic choices and to engage in cross-border trade, on property rights, on integrity of a country's currency, on relative size of government.

Using 42 separate sets of ‘data points,’ assembled from the statistical resources of the World Bank and the International Monetary Fund, the EFW concludes that the Top 10 most-free economies are: Hong Kong (8.9); Singapore (8.8); New Zealand (8.5); Switzerland (8.3); Canada, the US and the UK (all 8.1); Estonia (8.0); Australia (7.9); and Ireland (7.8). Germany (7.6) finished in 18th place, Japan (7.5) in 22nd place and Mexico (7.1) in 44th place.
France and Italy (7.0) tied for 52nd place. India (6.9), in 69th place, predictably scored better than China (6.3) in 86th place. But China got a higher score than either of two developing-country competitors. Brazil (6.0) finished in 101st place; Russia (5.8) in distant 112th place. Canada’s got its best score, by the way, in the soundness of its currency, scoring an almost perfect 9.7 - but still ranked, in this measurement, in 5th place.

Slowly but surely, it appears, the world is making progress - by extending the freedoms that permit economic progress. Of the 102 countries measured in the EFW’s 1980 report, 90 have increased their scores.

Five countries increased their grade by three full points or more: Hungary (3 points); Peru (3 points); Uganda (3.2 points); Ghana (3.6 points); and Israel (3.7 points). Although an academic exercise in statistical analysis, these grades represent authentic life-and-death realities. In the 35 countries that rank highest in economic freedom, average per-capita income is $26,013 (US) a year. In the 35 countries that rank lowest, it is $3,305. The average rate of economic growth in the most-free countries, from 1980 through 2005, was 2.25 per cent a year. In the least-free countries, it was 0.35 per cent. In the most-free countries, life expectancy is 78.7 years. In the least-free, it is 56.7 years. (Read more)