Economic Freedom

Economic Freedom is the amount of freedom someone has over their ability to work and earn a living.

It is the the freedom to choose how to produce, sell, and use your own resources, while respecting others’ rights to do the same.

A photo of Hong Kong while discussing Economic Freedom

Above: Hong Kong is ranked 1st in both the Economic Freedom of the World and Index of Economic Freedom.

Temba Nolutshungu states that “the degree to which governments allow individuals to exercise economic freedom will determine their economic outcome”.

Countries with low levels of Economic Freedom impose complex regulations and policies that make it difficult for entrepreneurs to start and grow new businesses. This results in fewer jobs and less wealth for the society.

Countries with high levels of Economic Freedom make it easy for entrepreneurs to start businesses, businesses to grow, and for employers to hire new staff. Therefore they generally have more wealth, more jobs and more opportunities for their citizens.

Economic Freedom is also strongly correlated with a country’s levels of wealth and prosperity. Generally speaking, the higher the level of a country’s economic freedom, the wealthier its citizens are are.

Why Economic Freedom matters to Entrepreneurs

Countries with high levels of economic freedom make it easier for entrepreneurs to start and grow new businesses. Countries with low economic freedom (corruption, poor rule of law, excessive regulations, complex laws) make it more difficult for people to start businesses. As a result, these countries are often poorer and less developed than countries with freer economies.

Measuring Economic Freedom

Two major think tanks actively measure and report on Economic Freedom around the world. The Fraser Institute, based in Canada, and the Heritage Foundation, based in the United States.

Economic Freedom of the World

The Fraser Institute’s Economic Freedom of the World is an indicator produced by the Fraser Institute which attempts to measure the degree of economic freedom in the world’s nations.

Economic Freedom of the World map

 

The following countries were the highest ranked according to the 2014 report.

1  Hong Kong 8.88
2  Singapore 8.54
3  New Zealand 8.25
4   Switzerland 8.19
5  Mauritius 8.09
6  United Arab Emirates 8.05
7  Canada 8.00
8  Australia 7.87
9  Jordan 7.86
10=  Chile 7.84
10=  Finland 7.84

South Africa is ranked 93 out of 152 countries measured on the index.

93  South Africa 6.73

Index of Economic Freedom

The Index of Economic Freedom is an annual index and ranking created by The Heritage Foundation and The Wall Street Journal  that measures the degree of economic freedom in the world’s nations.

Index of Economic Freedom map

The following countries were the top ranked countries in the 2014 Index of Economic Freedom.

Country Rank Score Change
 Hong Kong[a] 1 90.1 Increase 0.8
 Singapore 2 89.4 Increase 1.4
 Australia 3 82.0 Decrease 0.6
  Switzerland 4 81.6 Increase 0.6
 New Zealand 5 81.2 Decrease 0.2
 Canada 6 80.2 Increase 0.8
 Chile 7 78.7 Decrease 0.3
 Mauritius 8 76.5 Decrease 0.4
 Ireland 9 76.2 Increase 0.5
 Denmark 10 76.1 Steady 0.0

 South Africa is ranked 75 out of 178 countries measured on the Index.

 South Africa 75 62.5 Increase 0.7

Further Reading on Economic Freedom

The book cover of Hayek's Road to SerfdomF.A. Hayek – The Road to Serfdom

Hayek’s seminal book outlining the dangers that inevitably result from government control of economic decision-making through central planning.

The book also argues that the abandonment of individualism leads to a loss of freedom, the creation of an oppressive society, the tyranny of a dictator, and the serfdom of the individual.

Condensed version – PDF download

 

 

Eamon Butler – Foundations of a Free Society

Authored by economist Eamon Butler, the book explains the core principles by which free societies work. It details the essential foundations of a free society, including free enterprise, trade, property rights, justice, and the moral and economic benefits of freedom.

Foundations of a Free Society – PDF download