3. 2 Economic Freedom of the World - The Role of Government in the Modern Growth Economy Economic Freedom of the World - The Role of Government in the Modern Growth Economy n Presentation to n Institute X n LOCATION n DATE n PRESENTER n PRESENTING Institute

4. 3 n What causes Economic Success? n What are the practices of economically successful countries and regions? n How can countries and provinces achieve success and avoid failure n What are the implications of successful strategies? The crucial questions for economic management

5. Why do some countries succeed and others fail?

6. 5 A Tale of Two Countries n Hong Kong and Venezuela n From poor to rich n From rich to poor

7. 6 Hong Kong and Venezuela…1950

8. 7 Hong Kong and Venezuela today

9. 8 Hong Kong and Venezuela compared

10. 9 Hong Kong and Venezuela population growth 1950 - present

11. 10 What differences caused Hong Kong to become Rich and Venezuela to become Poor? n Population - evidently not n Natural Resources - not likely n Ability to afford infrastructure - certainly not n Policy differences - a possible source of the difference

12. 11 The Attitude of Success…economic freedom in Hong Kong and Venezuela

13. 12 Hong Kongs Freedom Advantage over Venezuela

14. 13 The story of Hong Kong and Venezuela is repeated around the globe n Motivated the creation of the Economic Freedom of the World Project to examine whether there were empirical regularities that could be found between economic freedom and other characteristics of societies including economic growth and development

15. 14 Economic Freedom of the World Project n 15 year project examining policies of successful and unsuccessful regions n Led by Professor Milton Friedman, Rose Friedman and Michael Walker n Involved 60 of the worlds top economists, four of whom received the Nobel Prize n Objective: find a way to measure economic freedom and explore the connection between it and other attributes

16. 15 What does Economic Freedom Mean? u The right to pursue voluntary acts of trade and exchange without interference by government or others via force or fraud v The ability to access an impartial judiciary for the enforcement of property rights v The right of citizens to keep the majority of the income they earn

17. 16 What is the Index of Economic Freedom? u An attempt to identify the factors which make a country economically free v A compendium of 21 freedom factors based on objective data or independent surveys w A ranking of 123 countries according to the extent to which they are free w Now a collaboration of 55 Institutes in 55 different countries

18. 17 The Index measures 21 factors which are practical indicators which are practical indicators of the extent to which consenting of the extent to which consenting adults can engage in adults can engage in Capitalist Acts. It is the broadest, most objective measure of economic freedom ever constructed.

19. 18

20. 19 The components of The Economic Freedom Index ¬ Size of Government ­ Structure of the Economy ® Monetary and Price Stability ¯ Freedom to Use Alternative Currencies ° Legal Structure and Property Rights ± International Exchange ² Freedom of Exchange in Capital Markets

21. 20 The Top Eleven

22. 21 The Next Ten

23. 22 How does Canadas level of Economic Freedom compare with the ten most free countries and with NAFTA trading partners?

24. 23

25. 24

26. 25

27. 26 World Average: Economic Freedom World Average: Economic Freedom

28. 27 World Average: Economic Freedom, adjusted for population World Average: Economic Freedom, adjusted for population Countries with ranks in 1970

29. 28 World Average: Government Consumption as a Percentage of GDP

30. 29 World Average: Transfers as a percentage of GDP

31. 30 World Average: Publicly owned assets as a percentage of GDP

32. 31 World Average: Existence of Price Controls

33. 32 World Average: Right to own Foreign Currency

34. 33 World Average: Right to Own Private Property

35. 34 World Average: Tariff Rate

36. 35 World Average: Private Ownership of Banks

37. 36 World Average: Right to have Capital Transactions with Foreigners

38. 37 Population of the world, by economic freedom rating

39. 38 The top ten and how they got there

40. 39 Some Asian Countries

41. 40 Countries which have increased or decreased the level of Economic Freedom

42. 41 Countries having significant improvement since 1970

43. 42 Countries with significant deterioration since 1970

44. 43 The Race Toward Capitalism in the Eastern and Former Soviet Transitional Economies

45. 44

46. 45 Why is Economic Freedom Important? n Economic rights are fundamental rights in the sense that without them there can be no political freedom or civil freedoms n They are a prerequisite for growth and development n They are a prerequisite for broader human development

47. 46 Least Free…………...Most Free Least Free…………...Most Free

48. 47

49. 48 Least Free…………...Most Free Least Free…………...Most Free

50. 49 Growth of Real Per Capita Output in the 1990s of Countries That Improved the Most Since 1980.

51. 50

52. 51

53. 52 Of course capitalism works to boost economic outcomes...…But What about Human Development? Do countries have to choose between economic development and community values and social development?

54. 53 Least Free…………...Most Free Least Free…………...Most Free

55. 54

56. 55 Least Free…………...Most Free Least Free…………...Most Free

57. 56 Least Free…………...Most Free Least Free…………...Most Free

58. 57 Least Free…………...Most Free Least Free…………...Most Free

59. 58 Least Free…………...Most Free Least Free…………...Most Free

60. 59 Least Free…………...Most Free Least Free…………...Most Free

61. 60 Least Free…………...Most Free Least Free…………...Most Free

62. 61 Least Free…………...Most Free Least Free…………...Most Free Percent of income accruing to the

63. 62 Underground Economy % of GDP Bolivia Guatemala Honduras Panama Peru Outlier Countries : Bigger Underground Economy Least Free…………...Most Free Least Free…………...Most Free

64. 63 Least Free…………...Most Free Least Free…………...Most Free More Intellectual Property Rights

65. 64 Least Free…………...Most Free Least Free…………...Most Free

66. 65

67. 66

68. 67 Least Free…………...Most Free Least Free…………...Most Free

69. 68 Least Free…………...Most Free Least Free…………...Most Free

70. 69 Least Free…………...Most Free Least Free…………...Most Free

71. 70 Least Free…………...Most Free Least Free…………...Most Free

72. 71

73. 72 Ingredients in the growth recipe: evidence from 123 Countries Ingredients in the growth recipe: evidence from 123 Countries

74. 73 Size of Government and Growth US Can Spain Hong Kong Mexico

75. 74 Private Ownership and Growth Can US Hong Kong China

76. 75 Government Transfers and Subsidies and Growth US Can Hong Kong Mexico

77. 76 Growth and the Friendliness of the Tax System (tax rates and brackets) CanUS China Hong KongMexico

78. 77 Growth and Taxes on Trade Growth and Taxes on Trade Can Hong Kong China Mexico US

79. 78 Some extensions of the Economic Freedom of the World Project n Marketization indices for sub-national jurisdictions n The Fraser Institute Index for North America n The National Institute for Economic Research (Beijing) Marketization index for the 31 Chinese Provinces

80. Freetheworld.com Economic Freedom of the Provinces n Learning from international experience with the Economic Freedom index n Growth and affluence are options and are not predetermined n Recognize that the provinces have very different selections from the range of policy options n Policy settings generally determine the perimeters for wealth creation activity

81. Freetheworld.com Economic Freedom of the Provinces ¬ Government Operations ­ Takings ® Interprovincial sector ¯ Labour Market Regulation

82. Freetheworld.com Government Operations

83. 82

84. Freetheworld.com

85. 84

86. Freetheworld.com Takings

90. Labour Market Regulations

91. Freetheworld.com

92. Economic Freedom of the Provinces Overall Provincial Ranking

93. Freetheworld.com

95. 94

96. 95 Conclusions n Growth and development are choices rather than predetermined n The ingredients of the growth recipe can be determined by observing the policies of successful jurisdictions n The key to high economic performance is providing economic freedom to citizens n The key to progressive social and human development is economic freedom

97. 96 The End……phew! www.freetheworld.com www.fraserinstitute.ca

98. Other Slides of Interest

99. 98 Least Free…………...Most Free Least Free…………...Most Free

100. 99 Least Free…………...Most Free Least Free…………...Most Free

101. Next – Scores in Each Area Adjusted by Population

102. 101 World Average: Economic Freedom, adjusted for population World Average: Economic Freedom, adjusted for population Countries with ranks in 1970

103. 102 World Average: Government Consumption as a Percentage of GDP, adjusted for population Countries with ranks in 1970

104. 103 World Average: Transfers as a percentage of GDP, adjusted for population Countries with ranks in 1970

105. 104 World Average: Publicly owned assets as a percentage of GDP, adjusted for population Countries with ranks in 1970

106. 105 World Average: Existence of Price Controls, adjusted for population

107. 106 World Average: Right to own Foreign Currency, adjusted for population Countries with ranks in 1970

108. 107 World Average: Tariff Rate, adjusted for population Countries with ranks in 1980

109. 108 World Average: Right to have Capital Transactions with Foreigners, adjusted for population Countries with ranks in 1980

110. 109 World Average: Government Consumption as a Percentage of GDP, adjusted for population

111. 110 World Average: Transfers as a percentage of GDP, adjusted for population

112. 111 World Average: Publicly owned assets as a percentage of GDP, adjusted for population

113. 112 World Average: Existence of Price Controls, adjusted for population

114. 113 World Average: Right to own Foreign Currency, adjusted for population

115. 114 World Average: Tariff Rate, adjusted for population

116. 115 World Average: Right to have Capital Transactions with Foreigners, adjusted for population