September 07, 2006
Economic Freedom of the World: 2006 Annual Report

The 2006 version of the Economic Freedom of the World report (co-authored with Jim Gwartney) was released today.

Press Release:

Economic freedom promotes growth while foreign aid fails developing countries

For Immediate Release

TORONTO, ON, 07 SEPTEMBER 2006—Economic freedom has a greater
impact than foreign aid in helping people in poor nations escape poverty,
according to the Economic Freedom of the World: 2006 Annual Report,
released today by The Fraser Institute.

In new research published in this year’s report economist William Easterly of
New York University compares the impact of economic freedom and foreign aid
on economic growth in the poorest nations. “The demand for foreign aid is typically made in the absence of any empirical evidence that it leads to benefits for recipient nations and without asking whether there are better approaches to poverty reduction for the international community to support,” said co-author of the report, James Gwartney, Professor of Economics at Florida State University. “What the research in this edition of Economic Freedom of the World suggests is that economic freedom, rather than foreign aid, does have a powerful positive impact and is a better approach.” Easterly demonstrates that foreign aid has no positive impact on economic growth in the poorest nations. His research shows that economic freedom has a strong and positive impact on prosperity in general and on helping lift nations out of poverty. Once economic freedom is taken into account, poor nations, far from being caught in a perpetual cycle of poverty, grow faster than rich nations.

“A key component of the success created by economic freedom is the ability to
experiment, find economically successful areas of production, and prune those
that do not succeed so that resources may be transferred to where they are most productive,” said Fred McMahon, The Fraser Institute’s director of trade and globalization studies.

International rankings

In this year’s index, Hong Kong retains the highest rating for economic freedom,
8.7 out of 10, closely followed by Singapore at 8.5. New Zealand, Switzerland, and the United States tied for third with ratings of 8.2.

The United Kingdom and Ireland are tied for the 6th place. Canada receives a score of 8.0 and ranks 8th. Iceland and Luxembourg are tied for 9th place.
The rankings of other large economies are Germany, 17; Japan, 19; France, 24;
Italy, 45; Mexico, 60; India, 53; China, 95; Brazil, 88; and Russia, 102. (Continued...)

Don Boudreaux writes about the index in his TCS column today.

Posted by Robert Lawson at 09:24 AM in Economics

The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith

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