Path to Prosperity
Here's an annual international report card that
once again ranks Canada, against exceptionally stiff competition, near the
top of the class.
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 U.S., 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
U.S. and the U.K. (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 (U.S.) 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.
In the most-free and the least-free economies,
poor people earn almost exactly the same percentage of national incomes -
2.5 per cent in the most-free, 2.2 per cent in the least-free. (In this
reference, "poor people" are the poorest 10 per cent of a
country's population.) In dollars and cents, however, the poorest people
in the most-free countries earn $7,334 a year; the poorest people in the
least-free countries earn $905 a year.
In 1980, the average overall score was 5.4. In
2007, it's 6.6. In a companion essay to this year's report, U.S.
economists Russell Sobel and Peter Leeson assert that economic freedom is
indeed contagious - which explains, in part, the rising scores. Economic
freedom, they say, expands and spreads most effectively either through
geographical proximity or through international trade. When one country
expands its economic freedom, they calculate, neighbouring countries
"catch" 20 per cent of it.
And it doesn't matter whether the neighbouring
countries are democratic or not.
Countries can have very little democracy, they
say, and still have substantial economic freedom - citing Hong Kong as an
example. Or they can have a full democracy and severely restrict economic
freedom - citing India and Israel, between 1960 and 1990, as examples. In
the end, they say, economic freedom needs constitutional protection in the
same way that civil liberties need protection from the arbitrary
"rule of the majority."
Throughout the Cold War, the Western democracies
lived in fear that communism would slowly strangle economic and political
freedoms everywhere - causing countries, in U.S. President Dwight
Eisenhower's memorable 1954 phrase, to fall like dominoes. In the end,
these vulnerable freedoms have not only survived but flourished.
Capitalism has proven highly contagious. - GLOBE
& MAIL 2007 September 7
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