11

The 10 Economic Freedoms

1. Business Freedom

2. Trade Freedom

3. Fiscal Freedom

4. Government Size

5. Monetary Freedom

6. Investment Freedom

7. Financial Freedom

8. Property Rights

9. Freedom From Corruption

10. Labor Freedom

2

Index Users

• Millennium Challenge Corporation – Trade Freedom factor• International Organizations – World Bank, IMF, Inter- American

Development Bank, etc. (Overall Score, Property Rights, Investment Freedom, Freedom from Corruption factors)

• Investment Firms – Emerging Market Investment • News Media (domestic and foreign)• Policy Makers (domestic and foreign) • Colleges and Universities around the World• Textbook publishers

3

The Index Cited in “The Economist”(January 24, 2008)

4

Guest Chapters in the 2008 Index

• Chapter 2 – Carl Schramm, President and CEO of the Ewing Marion Kauffman

Foundation, highlights entrepreneurship and the importance of “economic fluidity” that fosters innovation and as a crucial element of economic freedom.

• Chapter 3 – Professor Stephen Parente, the University of Illinois at Urbana-

Champaign, documents the vital necessity of dismantling barriers to economic catching-up so that all economies can have the chance to flourish in the 21st century.

• Chapter 4 – Guy Sorman, a French journalist and author, reminds us of six

major characteristics of globalization that we enjoy today and potential threats to them that should not be taken lightly.

5

Economic Freedom and Prosperity

Sources: World Bank, World Development Indicators Online, at publications.worldbank.org/subscriptions/WDI (subscription required); Central Intelligence Agency, The World Factbook 2007, at www.cia.gov/cia/publications/factbook/index.html; International Monetary Fund, World Economic Outlook database at www.imf.org/external/pubs/ft/weo/2007/01/data/index.htm; and Kim R. Holmes, Edwin J. Feulner, and Mary Anastasia O’Grady, 2008 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2008), at www.heritage.org/index.

$33,579

$26,630

$12,830

$4,316 $3,813

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Free Mostly Free Moderately Free Mostly Unfree Repressed

Economic Freedom

GD

P p

er

Ca

pit

a (

PP

P)

6

Economic Freedom Increases GDP Per Capita

Sources: World Bank, World Development Indicators Online, at publications.worldbank.org/subscriptions/WDI (subscription required); Central Intelligence Agency at www.cia.gov/cia/publications/factbook/index.html; International Monetary Fund, World Economic Outlook database, 2007, at www.imf.org/external/pubs/ft/weo/2007/01/data/index.htm; and Kim R. Holmes, Edwin J. Feulner, and Mary Anastasia O’Grady, 2008 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2008), at www.heritage.org/index.

$-

$15,000

$30,000

$45,000

20 35 50 65 80 95

2008 Economic Freedom Score

GDP per Capita in Purchasing Power Parity

7

Global Economic Freedom Distribution

7 Countries

23 Countries

51 Countries52 Countries

24 Countries

0

15

30

45

60

80–100.070–79.960–69.950–59.90–49.9

Cou

ntr

ies*

2008 Economic Freedom Score* A total of 157 countries were graded.

Source: Edwin J. Feulner, Kim R. Holmes, and Mary Anastasia O’Grady, 2008 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2007), at www.heritage.org/index.

FreeMostly FreeModerately FreeMostly UnfreeRepressed

(15.3%)

(33.1%)(32.5%)

(14.6%)

(4.5%)

8

2008 Index of Economic Freedom Highlights

• In pursuing sustainable prosperity, both the direction of policy and the commitment to economic freedom are important.

Score Changes

• Top 3: Most Improved Economic Freedom Scores– Egypt – business and trade environment, stable money, and financial

freedom – Mauritius – accelerating tax reform, reducing corruption, improving

business climate– Mongolia – implementing tax cuts and reducing government spending

• Bottom 3: Most Severe Reduction in Economic Freedom Scores– Guyana – dramatic increase in government spending – Bangladesh – deteriorated property rights and labor freedom– Venezuela – significantly reduced property rights and trade freedom

99

Which Countries Enjoy Economic Freedom?Top 10

1. Hong Kong 2. Singapore3. Ireland4. Australia5. United States6. New Zealand7. Canada8. Chile

9. Switzerland10. United Kingdom

Bottom 10

157. North Korea

156. Cuba 155. Zimbabwe154. Libya153. Burma152.

Turkmenistan151. Iran150. Belarus149. Bangladesh148. Venezuela

10

Countries at the Crossroads(Economic Freedom Scores between 60 and 65)

• Costa Rica (64.8) (FTA)• Panama (FTA)• Malaysia• Uganda• Portugal• Thailand• Peru (FTA)• Albania• South Africa• Jordan• Bulgaria• Saudi Arabia• Belize• Mongolia• United Arab Emirates• Italy• Madagascar

• Italy• Madagascar• Qatar• Colombia (FTA)• Romania• Fiji• Kyrgyz Republic• Macedonia• Namibia• Lebanon• Turkey• Slovenia• Kazakhstan• Paraguay• Guatemala (FTA)• Honduras (FTA)• Greece (60.1)

11

Crossroads for Critical Policy Decisions That Will Increase GDP Per Capita

Sources: World Bank, World Development Indicators Online, at publications.worldbank.org/subscriptions/WDI (subscription required); Central Intelligence Agency at www.cia.gov/cia/publications/factbook/index.html; International Monetary Fund, World Economic Outlook database, 2007, at www.imf.org/external/pubs/ft/weo/2007/01/data/index.htm; and Kim R. Holmes, Edwin J. Feulner, and Mary Anastasia O’Grady, 2008 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2008), at www.heritage.org/index.

$-

$15,000

$30,000

$45,000

20 35 50 65 80 95

2008 Economic Freedom Score

GDP per Capita in Purchasing Power Parity Critical Junction

12

Who is Up? Who is Down?(1995 Index score = 100)

Sources: Kim R. Holmes, Edwin J. Feulner, and Mary Anastasia O’Grady, 2008 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2008), at www,heritage.org; Human Development Report 2007/2008, United Nations Development Program, available at http://hdr.undp.org/en/

60

70

80

90

100

110

120

130

140

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Argentina Brazil Chile

El Salvador Mexico Venezuela

13

Western Hemisphere: Divergence in Economic Freedom

Sources: Kim R. Holmes, Edwin J. Feulner, and Mary Anastasia O’Grady, 2008 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2008), at www,heritage.org; Human Development Report 2007/2008, United Nations Development Program, available at http://hdr.undp.org/en/ *Note: NAFTA Countries (the U.S., Canada, and Mexico)

50.0

60.0

70.0

80.0

20082007200620052004200320022001200019991998199719961995

Index of Economic Freedom

North America Latin America

Aftermath of the

Mexican Peso Crisis

Hugo Boss?

*

14

Hugo Boss?

15

Regional Performance in the 2008 Index • Global average economic freedom score is 60.3. (median: 60.2)• Europe has the highest average economic freedom score, while Sub-

Saharan Africa has the lowest score.

58.7

66.8

61.5

58.7

54.5

60.27

58.6

66.4

61.9

58.2

54.8

60.24

50.0

60.0

70.0

Asia–Pacific Europe Americas Middle East/NorthAfrica

Sub-SaharanAfrica

World

2008 Index 2007 Index

Source: Edwin J. Feulner, Kim R. Holmes, and Mary Anastasia O’Grady, 2008 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2008), at www.heritage.org/index.

*

*Note: Including NAFTA countries (the U.S., Canada, and Mexico)

16

Economic Freedom Matters in Every Region

Sources: Kim R. Holmes, Edwin J. Feulner, and Mary Anastasia O’Grady, 2008 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2008), at www,heritage.org;

$31,365$30,511

$19,297

$7,718$9,316

$3,381$4,669

$6,257

$1,432

$24,888 (Without the US and

Canada $13,806)

$0

$7,000

$14,000

$21,000

$28,000

EUROPE ASIA AMERICAS NA AND ME SUB-SAHARA

Average GDP per Capita

(PPP US$)

5 FREEST 5 LEAST FREEMOST FREE

17

North America vs. Latin America?

Sources: Kim R. Holmes, Edwin J. Feulner, and Mary Anastasia O’Grady, 2008 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2008), at www,heritage.org; Human Development Report 2007/2008, United Nations Development Program, available at http://hdr.undp.org/en/ Property Rights and Corruption: low scores in Latin America

25 50 75 100

2008 Score

Business

Trade

Fiscal

Gov't Size

Monetary

Investment

Financial

Property Rights

Corruption

Labor

North America (U.S., Canada, and Mexico) Latin America

18

Economic Freedom in the Americas

Country Overall Business Trade Fiscal Gov't Monetary Investment FinancialProperty Rights

Corruption Labor

United States 80.6 91.7 86.8 68.3 59.8 83.7 80 80 90 73 92.3Canada 80.2 96.7 87 75.5 53.7 81.0 70 80 90 85 82.9Mexico 66.4 82.6 79 83.4 83.7 77.7 50 60 50 33 64.3Chile 79.8 67.5 82.2 78.1 88.2 78.8 80 70 90 73 90.0

Barbados 71.3 90.0 58.8 71.3 62.2 74.0 60 60 90 67 80.0Bahamas, The 71.1 80.0 32 96.2 86.4 76.3 40 70 80 70 80.0

Trinidad and Tobago 70.2 64.1 79 81.0 81.7 72.6 70 70 65 32 86.9El Salvador 69.2 58.6 76.6 83.4 88.7 76.8 70 70 50 40 78.0

Uruguay 68.1 59.8 83 85.9 76.6 74.2 60 30 70 64 77.3Jamaica 66.2 82.0 70.4 74.9 59.6 74.3 80 60 50 37 73.3

Costa Rica 64.8 59.7 81.8 82.9 87.4 67.9 70 40 50 41 66.8Panama 64.7 72.8 76.2 83.0 89.1 80.2 70 70 30 31 44.4

Peru 63.5 64.5 73.4 80.2 91.8 85.9 60 60 40 33 45.8Belize 62.8 76.3 64.6 69.3 74.8 77.3 50 50 50 35 80.9

Colombia 61.9 72.5 70.8 72.8 71.2 71.4 60 60 40 39 61.4Paraguay 60.5 57.6 78.4 96.6 90.8 76.6 50 60 35 26 34.2

Guatemala 60.5 54.1 78.4 79.9 95.9 72.9 50 50 30 26 67.9Honduras 60.2 59.5 78 84.5 82.6 73.7 50 60 30 25 59.0Nicaragua 60.0 56.4 79.2 79.0 77.6 70.6 70 50 25 26 65.7

Dominican Republic 58.5 62.2 73 80.4 88.8 69.3 50 40 30 28 63.6Brazil 55.9 53.6 70.8 68.6 55.5 75.7 50 40 50 33 61.9

Ecuador 55.4 58.1 67.6 86.4 82.3 74.1 40 50 30 23 42.4Argentina 55.1 63.2 69.6 70.5 80.9 65.0 50 40 30 29 52.9Suriname 53.9 41.7 65 68.0 72.8 69.2 30 30 50 30 82.1

Bolivia 53.2 58.6 79 87.8 68.1 76.5 20 60 25 27 30.5Guyana 49.4 56.4 65.8 67.3 16.0 73.9 40 40 40 25 69.1

Haiti 48.9 35.7 67 77.8 93.3 65.3 30 30 10 18 62.4Venezuela 45.0 51.4 59.6 74.5 79.7 60.6 20 40 10 23 35.8

Cuba 27.5 10 60.8 54.8 0 64.6 10 10 10 35 20AVERAGE 61.5 63.4 72.2 78.0 73.8 73.8 52.8 52.8 46.2 38.9 63.9

19

Argentina’s Performance in the Index

Argentina’s Economic Freedom Score is 55.1

20

Brazil’s Performance in the Index

Brazil’s Economic Freedom Score is 55.9

21

Chile’s Performance in the Index

Chile’s Economic Freedom Score is 79.8

22

El Salvador’s Performance in the Index

El Salvador’s Economic Freedom Score is 69.2

23

Mexico’s Performance in the Index

Mexico’s Economic Freedom Score is 66.4

24

Venezuela’s Performance in the Index

Venezuela’s Economic Freedom Score is 45

2525

For Growth and Prosperity Around the World

Any Questions/Comments Will be Welcomed!

Economic Freedom