Cato Institute Keeps Hong Kong As Freest Economy

Tax-News.com, Washington

28 June 2002

Hong Kong is still the world's freest economy, says the Cato Institute's Economic Freedom of the World: 2002 Annual Report with Singapore coming in a close second. But the United States has climbed from fifth to third position, according to the study, which is a comprehensive rating of 123 of the world's economies.

The Economic Freedom of the World Report is an annual project started with the help of Nobel laureate Milton Friedman. The report uses 37 objective criteria to produce an economic freedom index of the world, published by the Cato Institute, Canada's Fraser Institute and institutes from 54 other countries.

As the G8 summit begins in Kananaskis, Canada, says the prestigious Institute, it needs to focus on promoting economic freedom if it is serious about fighting global poverty and terrorism. Said Friedman. "Economic freedom advances economic growth, reduces poverty and promotes other civil and political freedoms. It is also a tonic against terrorism because of the opportunity it creates. All of the nations behind global terrorism lack economic freedom."

The report, written by James Gwartney and Robert Lawson, examines the relationship between economic freedom and wealth. It shows a strong correlation between economic freedom and per capita income, economic growth, and life expectancy.

That's because economically free societies are more productive, the authors say. The report demonstrates that added productivity translates into higher incomes for everyone. Significantly, the distribution of income is no more unequal in countries with market-oriented economies than in those that are economically repressive.

"Economic freedom is unambiguously good for the poor," said Ian Vásquez, director of the Cato Institute's Project on Global Economic Liberty. "The recent emphasis on increasing foreign aid is misplaced. In the worst cases, such as sub-Saharan Africa, foreign aid has retarded economic freedom."

The rankings of other major economies include the United Kingdom (4th), Canada (8th), Germany (15th), Japan (24th), Taiwan (30th), France (38th), Mexico (66th), and India (73rd).

Most of the lowest ranking nations are in Africa and Latin America. Botswana has the best record for an African nation, tied at 38th with six other nations including France and South Korea. Chile, with the best record in Latin America, was tied with three other nations at 15th.

Three former communist countries are in the bottom 10: Russia (116th), Ukraine (119th), and Romania (114th) all did worse than communist China (101st). Data for North Korea and Cuba are not available.

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