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------23 Prosperity Index. Prosperity results have shown that sustain that shown have results Index

Given Given this relationship, it should be ap Economic freedom is closely related to open to related closely is freedom Economic Equally notable is the strong positive rela The As indicated in Chart 2, countries moving heritage.org/Index between economic freedom and per capita GDP capita per and freedom economic between bothof which reduce economic freedom. The best results are likely to be achieved instead freedom and entrepreneurial opportunity mea opportunity entrepreneurial and freedom parent that a government’s most effective scores that reflect moderate of even levels eco sured by the Business Environment pillar of the the of pillar Environment Business the by sured stimulus activity will not be to increase its er entrepreneurship. ownspending or increase layers of regulation, centives that drive entrepreneurial activi economic dynamism. of per capita income.countries For achieving that empower individuals and firms with the close correspondence between economic through policy reforms that improve the in ty, creating more opportunities for greater levels and freedom economic between tionship up the economic freedom scale show increas nomic freedom (60 or above), the relationship the above), or (60 freedom nomic is highly significant. ingly high levels of average income. Econo mies rated “free” or “mostly free” in the 2019 ing such economic dynamism is achievable more choices, thereby encouraging great 1 shows Chart activity. to entrepreneurial ness when governments adopt economic policies Legatum Institute’s Legatum Institute’s ------strives to The Heritage Foundation | Heritage Foundation The Index Index of Economic Freedom

provide provide as comprehensive a view of eco he

Today’s successful economies are not nec The The need to advance economic freedom is

better goods and services, and better societies. better and services, and goods better strongerthan Ourever. world has experienced— ciency of efciency the government, of scope and size essarily essarily geographically large or richly blessed capitalism, built on the principles of econom the for way make to old the out pushes It change. oring for change. Indeed, a recurring theme of theme a recurring Indeed, change. for oring to global commerce. human history has been resilience and revival. revival. and resilience been has history human nomic policies must be to create an environ ment that provides the best chance for trans managed to expand opportunities for their cit izens enhancing by their economic dynamism. new so that real and true can take place. place. take can progress true and real that so new ic freedom, can be relied upon to provide that that to provide upon be can relied ic freedom, is experiencing—astounding progress, yet many many yet progress, experiencing—astounding is in countries both rich and poor are still clam regulations, and regulations, the openness of the economy minate varying aspects of the rule of thelaw, nomic freedom as possible with data that illu INTO PROSPERITY INTO lating opportunity into prosperity. ECONOMIC FREEDOM: ECONOMIC with natural Many economies resources. have

History History has demonstrated that free-market ECONOMIC FREEDOM ECONOMIC In general, the overarching objective of eco It leads to innovation in all realms: better jobs, jobs, better realms: all in innovation to leads It CHAPTER 4 TRANSFORMING OPPORTUNITY TRANSFORMING

T THE POWER OF OF POWER THE “repressed” economies. Index 24 PROVEN ANTIDOTE TO ECONOMIC THE FREEDOM: history of humankind. Countries that have ad have that Countries humankind. of history the in period prosperous most the been have than six times higher than the average levels in a-half decades during which the more and countries other all in levels average opted some version of free-market capitalism, capitalism, free-market of version some opted freedom economic of advance the charting Legatum ProsperityIndex’s ECONOMIC FREEDOMANDENTREPRENEURIALDYNAMISM Prosperity Index 2017 Heritage Foundation, 2019), http://www.heritage.org/index, SOURCES: Prosperity Index 2017 NOTE: 30 40 50 60 70 80 By a great many measures, the past two-and- past the measures, many great a By enjoy incomes that are over twice the the twice over are that incomes enjoy 20 Represented are the146countries that are inboththe Economic Freedom represents anation Terry Miller, Anthony B. Kim,andJamesM.Roberts, Correlation: 0.87 Correlation: in the Each circle Index of 30 , 2017, http://www.prosperity.com/rankings (accessed August 20, 2018). .

Trend Overall Scoreinthe BusinessEnvironmentPillarSc 40 Index 2019 Index ofEconomic Freedom has been 50 2019 IndexofEconomicFreedom - and Legatum Institute Foundation, As Chart 3 illustrates, over the life of the of life the over illustrates, 3 Chart As with economies that are open to the free flow of nondiscrimination, and open competition— open and nondiscrimination, inte economic and globalization of era an in has fueled unprecedented economic growth. economic unprecedented fueled has dex that is rooted in the principles of economic economic of principles the in rooted is that greater economic freedom, the world economy many to solutions provided has that gration goods,services, and capital, have participated development problemsthroughouttheworld. freedom—empowerment of the individual, individual, the of freedom—empowerment 2019 Index of Economic Freedom 2019 Index of Economic Freedom Unquestionably, the free-market system system free-market the Unquestionably, , as the global economy has moved toward moved has economy global the as , 60 ore 70 andthe Chart 1 The Legatum (Washington: The 80 Legatum heritage.org 90 In - -

25 100

heritage.org Trend FREE 90 $63,588 (Washington: The The (Washington: Chart 2 80 FREE $47,742 MOSTLY 70 heritage.org/Index 2019 Index of Economic Freedom Economic of Index 2019 60 FREE 2019 Index of Economic Freedom $22,382 MODERATELY 50 2019 Index of Economic Freedom 40 The Heritage Foundation | Heritage Foundation The $7,829 UNFREE MOSTLY Overall Score in the Category in the Index of 30 Each circle in the Correlation: 0.64 represents a nation Economic Freedom Terry Miller, Anthony B. Kim, and James M. Roberts, Kim, and James M. Roberts, B. Anthony Miller, Terry 20 $7,716 Figures do not include . Figures $0 REPRESSED (Purchasing Power Parity) GDP per Capita $20,000 $40,000 $80,000 $60,000 $100,000 $120,000 $140,000 Outlook Database, April 2018, http://www.imf.org/external/pubs/ft/weo/2018/01/weodata/weoselgr.aspx http://www.imf.org/external/pubs/ft/weo/2018/01/weodata/weoselgr.aspx April 2018, Outlook Database, 2018). 4, December (accessed NOTE: SOURCES: Economic World Fund, Monetary and International http://www.heritage.org/index, 2019), Heritage Foundation, ECONOMIC FREEDOM AND AND STANDARD FREEDOM ECONOMIC GDP per Capita (Purchasing Power Parity) Capita (Purchasing GDP per 26 AND ECONOMICGROWTH INCREASING ECONOMICFREEDOM EXPANDS ANDPOVERTYFALLS AS ECONOMICFREEDOMRISES,THEGLOBALECONOMY Freedom Index ofEconomic Average Scoreinthe December 4, 2018). Somefigures have beeninterpolated. 2018); andThe World PovcalNet, Bank, http://iresearch.worldbank.org/PovcalNet/povDuplicateWB.aspx (accessed http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators (accessed December 4, Heritage Foundation, 2019), http://www.heritage.org/index.org/index; SOURCES: Capita Growth (Annual %),"https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG (accessed December 7, 2018). Heritage Foundation, 2019), http://www.heritage.org/index, andWorld World Bank, Development Indicators, "GDPper SOURCES: time period. NOTES: Past 25 56 58 60 62 Past 5 1995 Years Years

Figures are country averages inwhichboth

Terry Miller, Anthony B. Kim,andJamesM.Roberts, Terry Miller, Anthony B. Kim,andJamesM.Roberts Five-year growth rates countries, include171 and25–year growth rates include92 countries. Average AnnualGrowthofGDPperCapita (based onconstantlocalcurrency) 60.8 2019 1.0% 2019 Index ofEconomic Freedom of 2010U.S.Dollars Global GDP,inTrillions $30 $50 $70 $90 1992 1.5% Index scores anddata onGDPgrowth are available over thesame , 2019 Index of Economic Freedom 2019 Index of Economic Freedom $80.1 2.3% The World Bank, 2017 2.6% Population inPoverty Percentage ofGlobal 10% 20% 30% 40% 0% 1993 World Development Indicators Chart 4 Chart 3 (Washington: The (Washington: The Economic Freedom Countries Losing Economic Freedom Countries Gaining heritage.org heritage.org 10.0% 2015 , - - - 27 ,

heritage.org score. 0.19 Multidimensional Mostly Unfree Chart 5 and Repressed is much lower on average in coun Human Development Report 2018 Report Human Development Free 0.06 Terry Miller, Anthony B. Kim, and James M. Kim, B. Anthony Miller, Terry 2019 Index of Economic Freedom Economic of Index 2019 Moderately Figures are based on the most recent recent based on the most are Figures 2019 Index of Economic Freedom Economic of Index 2019 Mostly Free and Greater economic freedom, while one of the the of one while freedom, economic Greater Multidimensional Multidimensional Poverty Index (higher scores indicate more intense poverty) POVERTY INTENSITY POVERTY NOTE: NOTE: 2006 between score Index Multidemensional Poverty both an MPI have that the 98 countries for and 2017 2006 and 2017, between one year least at for score and a SOURCES: Roberts, 2019), Heritage Foundation, The (Washington: Development U.N. and http://www.heritage.org/index, Programme, http://hdr.undp.org/ Index,” “Multidimensional Poverty en/content/multidimensional-poverty-index-mpi 2018). 5, (December heritage.org/Index stagnated or slowed. developing developing countries whose economies are considered mostly free or moderately free is only about one-third the level prevailing in countries that are rated less free. er than those of countries where freedom has has freedom where countries of those than er Poverty poor. remain who those of living of dard also has a major positive impact on the stan tries with higher levels of economic freedom. that have grown in economic freedom the most most are on average at least 50 percent high most ef ective means of eliminating poverty, as intensity, measured by the Development Programme’s Development Programme’s PovertyIndex As seen in Chart 5, the intensity of poverty in ------, the per Index and supported The Heritage Foundation | Heritage Foundation The Index Opening the gates of prosperity to ever more more ever to prosperity of gates the Opening Undeniably, countries moving toward More specifically, as documented in the The key driver of poverty reduction is dy As Chart 4 demonstrates, there is a robust by by volumes of academic research, vibrant and before. Clearly, this monumental reduction in before. Clearly, positive. positive. Improvements in economic free per capita. Whether long-term (25 years) or progress, no matter what a country’s current previous editions of the people around the world, economic freedom short-term (five years), the relationship be surprisingly, one surprisingly, of the most important goals capita economic growth rates of countries of rates of economic expansion that are high efectively. enough to reduce poverty dom are a vital ingredient in the achievement economic freedom and empower individuals ernments ernments implement policies that enhance of economic policy in almost every country in comes with improving economic freedom. Not Not freedom. economic improving with comes deeper understanding of its dynamics, and greater economic freedom tend to achieve greater commitment to its promotion. greater commitment global poverty is an achievement that should and rates of economic growth is consistently and the global poverty rate has declined by tween changes that advance economic freedom freedom economic advance that changes tween tive for dynamic economic expansion and true and expansion economic dynamic for tive the world has been to increase the rate of eco two-thirds. higher rates of growth in per capita GDP. has made our globe a profoundly better place. has doubled in size. This progress has lifted hundreds of millions of people out of poverty, relationship between improvements in eco of economic growth nomic freedom and levels nomic growth. namic and resilient economic growth that inspire celebration of the free-market system, level of development may be. may of development level lasting lasting economic growth results when gov with greater choice and more opportunities. More people are living better lives than ever Throughout the history of the Advancing economic freedom is impera the freedom economic Advancing TO HUMAN DEVELOPMENT AND Development Index Development 28 DEMOCRATIC PROGRESS ECONOMIC THE KEY FREEDOM: living in countries worldwide. As Chart 6 shows, ing fortheircitizens. human development as measured by the Unit the by measured as development human tancy,of standard the literacy,and education, tions in poverty. Countries with higher levels of governments that choose policies that increase cerning the environment have tended to be be to tended have environment the cerning opportunities, education more to path the on societies their placing are freedom economic ed Nations Development Programme’s economic freedom enjoy higher levels of overall reduc or incomes higher beyond far extend better health care, and higher standards of liv of standards higher and care, betterhealth Human DevelopmentIndex ECONOMIC FREEDOMANDHUMANDEVELOPMENT (accessed December 5, 2018). Development Report 2018, Heritage Foundation, 2019), http://www.heritage.org/index, and SOURCES: Development Index NOTE: The societal benefits of economic freedom freedom economic of benefits societal The In recent years, policies and actions con actions and policies years, recent In REPRESSED Represented are the176 countries that are inboththe 0.573

Terry Miller, Anthony B. Kim,andJamesM.Roberts . which measures life expec Category inthe http://hdr.undp.org/sites/default/files/2018_human_development_statistical_update.pdf MOSTLY UNFREE 0.614 Score 2019 Index ofEconomic Freedom 2019 IndexofEconomicFreedom Human MODERATELY 0.768 FREE - - - - - Environmental Performance Index intrusive and economically distortionary. Gov have proven to be the key to economic success tal protection as measured in Yale University’s ated subsidies for so-called clean energy.clean so-called for subsidies ated Such cre have emissions,and carbon of selling and emissions and increase taxes on gasoline, have ernments have pushed programs to tax carbon economic freedom has been shown to increase of economic freedom and levels of environmen can also deliver environmental success. Chart 7 that principles free-market same The quired. set up nontransparent and economically harm shows the positive relationship between levels policies not only impose a huge cost on society, ful exchanges and marketplaces for the buying but alsoretard economicgrowth. 2019 Index of Economic Freedom , 2019 Index of Economic Freedom U.N. Human Development Programme, In addition, in countries around the world, world, the around countries in addition, In otntl, uh rd-fs r nt re not are trade-offs such Fortunately, MOSTLY FREE 0.871 Chart 6 andthe (Washington: The Human Human 0.934 FREE . heritage.org ------29 heritage.org 76.1 FREE 2018 2018 (Washington: The The (Washington: and the Chart 7 69.5 FREE 2018 Environmental Performance Performance Environmental 2018 MOSTLY Pursuit of greater economic freedom is thus thus is freedom economic greater of Pursuit However, the positive relationship that heritage.org/Index 2019 Index of Economic Freedom Economic of Index 2019 political freedom through well-functioning empowers the poor and builds the middle class. class. middle the builds and poor the empowers decision-making throughout an economy. democracy is a messy and often excruciat exists between economic freedom and dem ocratic governance is undeniable. (See Chart control of their daily economic lives, freedom an important stepping-stone Itto democracy. terests or compete for political power. for or compete terests ultimately nurtures political reform by making making by reform political nurtures ultimately neurship and disperses economic power and ing process. economic the gain to individuals for possible it resources needed to challenge entrenched in 8.) 8.) By empowering people to exercise greater 2019 Index of Economic Freedom Economic of Index 2019 It is a philosophy that encourages entrepre - - - - 60.8 FREE MODERATELY 2019 Index of Economic Freedom Score . The Heritage Foundation | Heritage Foundation The 47.8 UNFREE MOSTLY Category in the Terry Miller, Anthony B. Kim, and James M. Roberts, and James M. Roberts, Kim, B. Anthony Miller, Terry 49.5 Represented are the 176 countries that are in both the in are that countries the 176 are Represented (New Haven, CT: Yale University, 2018), https://epi.envirocenter.yale.edu (accessed December 5, 2018). 5, December (accessed https://epi.envirocenter.yale.edu 2018), University, Yale CT: Haven, (New REPRESSED Greater economic freedom can also provide provide also can freedom economic Greater Debate over the direction of causality be Index NOTE: Index Performance Environmental SOURCES: University, and Yale http://www.heritage.org/index, 2019), Heritage Foundation, Environmental Performance Index Performance Environmental ECONOMIC FREEDOM AND THE ENVIRONMENT FREEDOM ECONOMIC become more controversial in recent years because of the multifaceted interaction be economic freedom and freer trade. dom and higher levels of innovation ensures countries’ capacity for innovation and thus to greater economic dynamism in coping with tween the two. Undoubtedly, achieving greater greater achieving Undoubtedly, two. the tween tween economic freedom and democracy has ciency over the past decades decades past the over ciencyf e energy and use have occurred not as a result of government more fertile ground for effective democrat ic governance. regulation, but rather because of advances in remarkable improvements in clean energy improve overall environmental performance as as performance environmental overall improve various environmental challenges. The most well. The positive link between economic free 30 Nonetheless, fears that the immediate bene immediate the that fears Nonetheless, SOCIAL PROGRESS SOCIAL SAFEGUARDING UPWARD fits of capitalism are fading have brought to the how over debate the in shift paradigm a flect MOBILITY AND GREATER ECONOMIC FREEDOM: most optimal outcome. In recent decades, this and inequality.the and acknowledging while Even debate has largely been won by capitalism. capitalism. by won been largely has debate re largely life of quality and income of cators societies should be structured to achieve the achieve to structured be should societies positive impact of economic freedom in raising forefront concerns about economic mobility mobility economic about concerns forefront ECONOMIC FREEDOMANDDEMOCRATICGOVERNANCE 2017 Heritage Foundation, 2019), http://www.heritage.org/index, andThe Economist Intelligence Unit, SOURCES: Index 2017 NOTE: The massive improvements in global indi global in improvements massive The 10 0 2 4 6 8 , https://www.eiu.com/topic/democracy-index (accessed December 5, 2018). 0 Represented are the162 countries that are inboththe Economic Freedom represents anation . Terry Miller, Anthony B. Kim,andJamesM.Roberts, in the Each circle 10 Index of

Trend Score Overall Scoreinthe 20 2019 Index ofEconomic Freedom 30 2019 IndexofEconomicFreedom 40 - - - 2019 Index of Economic Freedom GDP growth, opponents of free-market capi free-market of opponents growth, GDP vide the most conducive environments for environments conducive most the vide ideas, products, and innovations have largely largely haveinnovations ideas,products,and tions with higher levels of economic freedom freedom economic of levels higher with tions na that is notable Also demand. citizens their the reducing that suggest to continue talism achieved the high levels of social progress that social progress also largely embrace economic gap the increase can and consequences social size and scope of government leads to harmful petitiveness and open their societies to new new to societies their open and petitiveness freedom. Countries that improve their com their improve that Countries freedom. between therich andpoor. 2019 Index of Economic Freedom As shown in Chart 9, countries that pro that countries 9, Chart in shown As The data,however, telladiferentstory. 50 60 70 Chart 8 Correlation: 0.63 Correlation: andthe (Washington: The Democracy Index 80 Democracy heritage.org 90 - - - -

31 90 heritage.org 2018 Social Social 2018 80 (Washington: The The (Washington: 2018 Social Progress Progress Social 2018 and the Correlation: 0.73 Chart 9 70 60 heritage.org/Index 2019 Index of Economic Freedom Economic of Index 2019 2019 Index of Economic Freedom Economic of Index 2019 - - - 2019 Index of Economic Freedom 50 40 The Heritage Foundation | Heritage Foundation The Score Overall Score in the 30

Index of Trend . Each circle in the Terry Miller, Anthony B. Kim, and James M. Roberts, and James M. Roberts, Kim, B. Anthony Miller, Terry represents a nation Economic Freedom Represented are the 145 countries that are in both the are that countries the 145 are Represented , https://www.socialprogressindex.com/ (December 5, 2018). 5, (December , https://www.socialprogressindex.com/ 20 30 20 40 60 50 70 90 80 It is not massive redistributions of wealth Heritage Foundation, 2019), http://www.heritage.org/index, and The Social Progress Imperative, Imperative, Social Progress and The http://www.heritage.org/index, 2019), Heritage Foundation, Index NOTE: Index Progress SOURCES: Social Progress Index Social Progress ECONOMIC FREEDOM AND SOCIAL PROGRESS AND SOCIAL FREEDOM ECONOMIC 100 produce the most positive social outcomes. In social positive produce outcomes. the most stead, mobility and progress require lower bar lower require progress and mobility stead, or government dictates on wages or prices that that prices or wages on dictates government or and less government intrusion. and less government tion of income. have have a tendency toward a more even distribu riers to entry, freedom to engage with the world, world, the with engage to freedom entry, to riers 32 1 Ranking Regional 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 48 47 46 45 44 43 42 41 40 39 38 37 36 35 34 33 ● ● ● ● ● ● Economic FreedomScores Not Graded Repressed 0–49.9 MostlyUnfree 50–59.9 ModeratelyFree 60–69.9 MostlyFree 70–79.9 Free 80–100 United Saint Lucia Vincent & Grenadines & Vincent . St Costa Dominica The Bahamas Dominican and Trinidad Belize Venezuela ECONOMIC FREEDOM:REGIONALVARIATIONS Americas (59.6) The Hong Kong Taiwan Macau Brunei Kyrgyz Republic Kyrgyz Samoa Papua New New Papua Tonga Vanuatu North Korea Timor-Leste Kiribati Micronesia Burma Solomon Islands (REGIONAL AVERAGE) Asia-Pacific (60.6) 2019 Index ofEconomic Freedom Ireland United Czech Macedonia Kosovo Liechtenstein Herzegovina and Bosnia Europe (68.6) Arab United Libya Syria Yemen Middle East/ North Africa (62.4) Cabo Verde Côte d’Ivoire Côte Seychelles Guinea Comoros São Tomé and Príncipe Guinea-Bissau Congo . Rep Guinea Equatorial Leone Sierra Republic African Central Congo . Rep . Dem Sub-Saharan (54.2) Africa