How to create growth: The benefit of economic freedom to citizens in Europe and around the world

1. How to create growth: The benefit of economic freedom to citizens in Europe and around the world Prof. Edward Peter Stringham Hackley Distinguished Professor for the Study of Capitalism and Free Enterprise Fayetteville State University North Carolina, United States

2. What Explains Growth? Is it Resources? Location? Democracy? Or ……

3. North Korea vs. South Korea Per Capita Income = $1,800 Per Capita Income = $24,200

4. Adam Smith’s Question:Why Are Some Countries Rich and Others Poor? An Inquiry into the Nature and Causes of the Wealth of Nations (1776) • Policies and the system of economic organization (e.g., capitalism) matter more than things such as resources, geography, education, democracy, etc.

6. Economic Freedom Economic Freedom means that people are free to trade with others, compete in markets, buy what they want, earn a living in a job they choose, keep what they earn, and own things privately.

7. Measuring Economic Freedom • Economic freedom is complex and multidimensional, but it can be measured: • Personal choice • Freedom to trade, domestically and abroad. • Freedom to enter and compete in markets. • Security of Property/Rule of Law

8. Motivation • The key to changing policy in the world is changing the climate of opinion about what works and what does not work in encouraging world development • The key to changing the climate of opinion is providing the widest possible audience with good information about the causes of development and under-development

9. Economic Freedom of the World Project • Objective: find a way to measure economic freedom and explore the connection between it and other indicators • 20 year project • Led by the late Milton Friedman, Rose Friedman and Michael Walker • Involved 60 of the world’s top scholars, including three Nobel Laureates: Milton Friedman, Douglass North, and Gary Becker

10. What is the Economic Freedom of the World Index? • An annual compilation of data representing factors which make a country economically free • Authors: James Gwartney, Robert Lawson, and Walter Block • A compendium of 42 government policies affecting economic freedom based on objective data or independent surveys • A ranking of 141 countries representing 95% of the world’s population according to the extent to which they permit their citizens to be economically free • Now a collaboration of Institutes in 76 different nations and territories

11. Components of the Economic Freedom of the World Index • Size of government and taxation • Private property and the rule of law • Soundness of money • Trade regulation and tariffs • Regulation of business, labour and capital markets

12. 5 Areas of Economic Freedom of the World (EFW) Index • Size of Government: Expenditures, Taxes, and Enterprises • Legal Structure and Security of Property Rights • Access to Sound Money • Freedom to Trade Internationally • Regulation of Credit, Labor, and Business

13. A Quick Tour of The World Photos are compiled by RusselSobel, Ph.D.

15. Example 1 • A country with VERY LOW economic freedom

16. Families in Guinea-Myanmar

17. Relief efforts in Guinea-Myanmar

18. Example 2 • A country with LOW economic freedom

19. Romania

20. Families in Romania

21. Families in Romania

22. Families in Romania

23. Families in Romania

24. Families in Romania

25. Families in Romania

26. Families in Romania

27. Families in Romania

28. Families in Romania

29. Example 3 • A Country with MEDIUM Economic Freedom

30. India

31. Families in India

32. Families in India

33. Example 4 • Another Country with Medium Economic Freedom

34. Mexico

35. Families in Mexico

36. Families in Mexico

37. Example 5 • A Country with HIGH Economic Freedom

38. Hong Kong

39. Families in Hong Kong

40. Families in Hong Kong

41. Families in Hong Kong

42. Overall Economic Freedom Index and the Top 10 Source: The Fraser Institute.

43. Overall Economic Freedom Index and the Bottom Ten Source: The Fraser Institute.

44. Why is Economic Freedom Important? • Economic rights are fundamental rights in the sense that without them there can be no political or civil freedoms • They are a prerequisite for growth and development • They are a prerequisite for broader human development

45. The impact on economic growth and development

46. Income (per person) of the Bottom Ten Sources: The Fraser Institute; The World Bank, World Development Indicators, 2008.

47. Income (per person) of the Top 10 Sources: The Fraser Institute; The World Bank, World Development Indicators, 2008.

48. Per Capita Income and Economic Freedom Quartile Least Free ………………... Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2008.

49. Foreign Direct Investment and Economic Freedom Quartile Least Free ……………...…... Most Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2008.

50. Economic freedom and economic growth have bestowed benefits across all levels of society