The 2008 edition of the Economic Freedom of the World report includes new research, examining the role of economic freedom in eliminating poverty with a particular focus on sub-Saharan Africa. Numerous studies have shown that countries with more economic freedom grow more rapidly and achieve higher per-capita income levels than those that are less free; therefore, it would seem that this growth should also help reduce poverty.
Economic Freedom Report 2008: Pakistan ranks 104 out of 141 countries
Judicial independence and integrity of legal system declines
Government spending and inflation increases
Rule of law and property rights weaker in Islamic nations
India inches up from 6.55 to 6.59; Hong Kong and Singapore rated best for economic freedom, Angola and Zimbabwe rank worst
Lahore September 25, 2008: The report ranks Hong Kong number one, followed by Singapore then New Zealand. Zimbabwe once again has the lowest level of economic freedom followed by Angola and Myanmar, according to the Economic Freedom of the World: 2008 Annual Report, released today by Pakistan’s first free market think tank, Alternate Solutions Institute.
“Weakness in the rule of law and property rights is particularly pronounced in sub-Saharan Africa, among Islamic nations, and for many nations that were part of the former Soviet bloc,” said James Gwartney, lead author of the report and professor of economics at Florida State University.
Pakistan ranked 104 out of 141 countries this year, after ranking 102 (out of 141 countries) in the last year’s report. In 2007 Report Pakistan scored 6.08 points out of 10; while this year its scored fell to 6.05. The areas that caused a decline in Pakistan’s overall performance are: size of government; legal structure and security of property rights; and, access to sound money. The areas in which Pakistan improved are: freedom to trade internationally; and, regulation of credit, labor, and business.
The annual peer-reviewed 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. The report is produced by Canada’s Fraser Institute in cooperation with independent institutes in 76 nations and territories including the Alternate Solutions Institute in Pakistan.
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. This year’s report also contains new research showing the impact of economic freedom on poverty reduction.
“Economic freedom is one of the key building blocks of the most prosperous nations around the world. Countries with high levels of economic freedom are those in which people enjoy high standards of living and personal freedoms. Countries at the bottom of the index face the opposite situation; their citizens are often mired in poverty, are governed by totalitarian regimes and have few if any, individual rights or freedoms,” said Alternate Solutions Institutes’ Executive Director, Dr. Khalil Ahmad.
The full report is available here.
Pakistan 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 7.01 from 7.26 in
the last year’s report
• Legal structures and security of property rights:
changed to 4.31 from 4.35
• Access to sound money: changed to 6.45 from 6.50
• Freedom to trade internationally: changed to 5.91
• Regulation of credit, labour and business: changed
to 6.56 from 6.49
Economic Freedom and World Poverty
The 2008 edition of the Economic Freedom of the World report includes new research from Gwartney and Seth W. Norton, professor of business at Wheaton College, examining the role of economic freedom in eliminating poverty with a particular focus on sub-Saharan Africa. They point out that numerous studies have shown that countries with more economic freedom grow more rapidly and achieve higher per-capita income levels than those that are less free; therefore, it would seem that this growth should also help reduce poverty.
Gwartney and Norton note that since economic growth is the driving force underlying reductions in poverty, countries such as Chile, Peru, Thailand, Malaysia, South Korea, China, and India have seen their poverty rates decrease in recent decades because these countries have achieved rapid economic growth.
“If a country adopts reforms supportive of economic freedom, will the wellbeing of the poor improve? Theory indicates that the answer to this question is “yes,” but substantial reductions in poverty are likely to take some time,” Norton said.
“It will take time for the new policy direction to acquire credibility, investors and other decision-makers to respond to the more attractive environment, and the rate of growth to increase. As the higher level of economic freedom is sustained and the more rapid growth persists, poverty rates will fall, and they will fall by larger amounts with the passage of time.”
The authors conclude that the institutions and policies of most sub-Saharan African nations are highly inconsistent with economic growth. The failure of the legal system to protect property rights, the roadblocks imposed by trade restrictions, and the heavy regulation and administrative costs imposed on business undermine economic growth because they stifle the gains from trade, entrepreneurship, and investment. Given that most of the sub-Saharan countries are relatively small, the high trade barriers are particularly damaging.
In order to encourage economic growth in Africa, Norton and Gwartney recommend that African nations reduce and eliminate trade barriers and business regulations; improve their legal system; and develop an interstate highway system through Africa.
About the Economic Freedom Index
This year’s publication ranks 141 nations representing 95% of the world’s population for 2006, the most recent year for which data are available. The report also updates data in earlier reports in instances where data have been revised.
To download the data sets, and previous Economic Freedom of the World reports, visit http://freetheworld.com
For more information, contact the Alternate Solutions Institute at