Our economic freedoms… envy of the world! No seriously. January 13, 2010
Posted by WorldbyStorm in Economy, Irish Politics.trackback
A sort of kind of entertaining exercise is to check out the Index of Economic Freedom and Economic Freedom of the World reports. Because given all the noise about our economy they provide some pretty paradoxical reading. The Index is the product of the US conservative thinktank The Heritage Foundation and the Wall Street Journal, so no room there for fainthearts and liberals.
Did you know that Ireland is ranked number 4 on the Index of Economic Freedom 2009? That it comes in behind Hong Kong at 90, Singapore at 87.1, Australia at 82.6? That we stand at 82.2, just ahead of New Zealand at 82, the United States at 80.7 and Canada at 8.5. Indeed, staggeringly we’re ahead of Denmark (79.6), Switzerland (79.4) and even the UK at a derisory 79 (I jest).
Or take the Economic Freedom of the World 2008 index. There we’re the somewhat more mundane Tenth at 7.92!
Tenth? Ireland? Yep, we’re a step behind the US and Australia both on 8.04, Canada on 8.05, Chile on 8.06, the UK on 8.07, Switzerland on 8.2, New Zealand on 8.28, Singapore on 8.57 and Hong Kong on 8.94.
But even on that index we’re ahead of such hegemons as Taiwan and Denmark…
So what does this prove? Well, according to the Index on Economic Freedom they score countries according to the following definition of economic freedom:
“The highest form of economic freedom provides an absolute right of property ownership, fully realized freedoms of movement for labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself.”
And the headings they take into account are: Business freedom (natch!), Trade Freedom, Monetary Freedom, Government Size (uh-huh), Fiscal Freedom, Property Rights, Investment Freedom, Financial Freedom, Freedom from Corruption and Labour Freedom (this latter one is a new addition, only appearing in 2007).
The Economic Freedom of the World Survey is produced by the Fraser institute, a Canadian conservative think-tank. They’re a bit more tilted towards a small state, indeed according to wiki their survey is a response by those of a libertarian bent to what they thought were inadequacies in the FH report. Not market friendly enough – an odd charge one would think to throw at the Heritage Foundation at the best of times.
You can find the Survey here and they’re not shy about their political position:
Economic freedom has been shown in numerous peer-reviewed studies to promote prosperity and other positive outcomes. It is a necessary condition for democratic development. It liberates people from dependence on government in a planned economy, and allows them to make their own economic and political choices. For information on the effects of economic freedom, please see papers.
And the assessment areas make for interesting reading too. Centralised wage bargaining? Top Marginal Income tax rates. Ownership of banks… oops.
It’s useful to reflect that if we’re on 7.9 on the index ranking, then those at 6.9, a full 10 points below us – and presumably as far from us as we are from very heaven in Hong Kong at 8.9, are countries like Nicaragua, Mexico, Montenegro, the Czech Republic… and so on. Pity them in their statist hell. Speaking of statists, the old axis of evil isn’t represented at all by North Korea. But Iran is in there at 80 with an index ranking of 6.4.
Still, given the provenance of these reports well worth considering that Ireland does very well indeed in both of them and it seems unlikely that recent events or the policies being currently pursued are likely to knock us off that particular perch.
And more importantly, much much more importantly, also worth thinking about when set against the rhetoric from the media and business groups about not just the state of this economy and society but its very structure as regards doing business and the need for ‘reform’.
I may be mistaken, but I recall the ‘Index of Economic Freedom’ as being a Fraser thing, too. Maybe they’ve re-branded?
Whichever it was, Cedar Loungers may be interested to note that Fraser’s ‘Index’ of years past had its Irish bit done by the former Open Republic Institute (which was composed of Constantin Gurdgiev, Sarah Carey’s old non-ideological pal Moore McDowell, insurance industry lobbyist Paul MacDonnell – and a website).
See this example here:
http://www.openrepublic.org/open_republic/20060401_vol2_no2/articles/20060401_nsndw.htm
(the above link isn’t the best; the old ORi site is defunct, but can be searched here: http://web.archive.org/web/*/http://www.openrepublic.org)
Funny, I was only reading about the “Index of Economic Freedom” last night, in a paper called “The economic impact of European integration”:
“While the likely benefits of the Single Market Policy (SMP) thus look significantly smaller than those apparently achieved by the Common Market, they are not insignificant. Yet, as with so many other aspects of European unification, they might well have been reaped even in the absence of Commission initiatives. The 1980s was a period that saw a good deal of domestic liberalization and deregulation in Europe, spurred by the examples of Reagan in the United States and Thatcher in the United Kingdom. To take just one example, the interventionist French government had relaxed some of its tight hold over the financial sector well before the SMP was launched. More broadly, the Fraser Institute’s Economic Freedom Index, which “measures the degree to which the policies and institutions of countries are supportive of economic freedom” (Gwartney and Lawson, 2006, p.3), shows the EC countries as having deregulated their economies faster between 1980 and 1990 than they did between 1990 and 2000. It is thus quite plausible to argue that efforts to liberalize and open economies further might well have happened in any case.
That said, it is hard to imagine that the European countries would have moved as far or fast in deregulating product markets in the absence of the SMP.”
http://www.cepr.org/meets/wkcn/1/1679/papers/Boltho-Eichengreen-Chapter.pdf
Overall, the authors, who are fans of integration, conclude that the economic benefit of EU integration amounts to about a rise of 5% of EU GDP (using counterfactuals to estimate what it would have been if integration had not occured as it did):
“Rough orders of magnitude might suggest that EU GDP is some 5 percent higher today than it would otherwise have been. Thus, we find for the impact of the EU on European incomes roughly the same thing that Fogel found for the impact of the railways on U.S. incomes. Whether these are large or small numbers is ultimately for the reader to judge.”
Just saying.
And there does seem to be a connection between so-called economic freedom and economic equality. I know the old nostrom “correlations does not equal causation”, but there does seem to be a definite relationship.
A UNDP report last year, reported in Business Week of 16 October 2009, listed the top ten most unequal countries according to Gini co-efficient:
1 – Hong Kong
2 – Singapore
3 – USA
4 – Israel
5 – Portugal
6 – New Zealand
7 – tied between Italy and Britain
9 – Australia
10 – Ireland
More evidence that ‘economic freedom’ is bad news for the vast majority of people.
Once again, “inequality” is such a pointless measure of anything and I really don’t know why they bother with it. It seems counterproductive to concentrate on wealth gaps when actual wealth is what’s important. for example, the poorest 10% in an “unequal” country like New Zealand may be a hell of a lot better off than most of the people in an “equal” country – like Haiti or Cuba.
just saying ….
Quite amusing to be tied in an index of inequality.
please forgive a totally off topic comment but I thought ye all should know that here in Buenos Aires the most respectable politics programmes on the telly and radio can’t get enough of the Iris Robinson story.
Superb Eamonn. Thanks for the info.
It’s not always appreciated the impact this governments policies towards the public sector and the unions is having in right wing circles abroad.
Many of them are looking to what is happening in Ireland as what needs to be done in their own country. For example in Cyprus where the communist AKEL party is in power, the right wing press has think pieces that almost daily talk about “taking the Irish road” in relation to the public sector. Simillar noises can be heard in Greece and Austria.
Do you really think there is economic freedom when most privates and small companies are forced to work for larger organizations to survive?