DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

VISAKHAPATNAM, A. P., INDIA.

PROJECT TITLE:

ECONOMIC FREEDOM

SUBJECT:

ECONOMICS

NAME OF THE FACULTY:

PROF. ABHISHEK SINHA

NAME OF THE STUDENT:

SIMRAN GAHUNIA

ROLL NO:

2017091

SEMESTER – III

SECTION – B

ACKNOWLEDGEMENT

I am highly indebted to my Hon’ble Sociology Professor, Prof. ABHISHEK SINHA, for giving me a
wonderful opportunity to work on the topic: “ECONOMIC AND LEGAL ANALYSIS OF
ECONOMIC FREEDOM”, and it is because of his excellent knowledge, experience and guidance,
this project is made with great interest and effort . I would also like to thank my seniors who have
guided my novice knowledge of doing research on such significant topic. I would also take this as an
opportunity to thank my parents for their support at all times. I have no words to express my gratitude
to each and every person who have guided and suggested me while conducting my research work.

ECONOMICS ABSTRACT

TOPIC- ECONOMIC FREEDOM

Economic freedom or economic liberty is the ability of people of a society to take economic
actions. This is a term used in economic and policy debates as well as in the philosophy of
economics. One approach to economic freedom comes from classical liberal and libertarian
traditions emphasizing free markets, free trade, and private property under free enterprise.
Another approach to economic freedom extends the welfare economics study of individual
choice, with greater economic freedom coming from a "larger" (in some technical sense) set
of possible choices. Other conceptions of economic freedom include freedom from want and
the freedom to engage in collective bargaining.

The free market viewpoint defines economic liberty as the freedom to produce, trade and
consume any goods and services acquired without the use of force, fraud or theft. This is
embodied in the rule of law, property rights and freedom of contract, and characterized by
external and internal openness of the markets, the protection of property rights and freedom
of economic initiative. There are several indices of economic freedom that attempt to
measure free market economic freedom. Based on these rankings correlative studies have
found higher economic growth to be correlated with higher scores on the country rankings.
With regards to other measures, such as equality, corruption, political and social violence and
their correlation to economic freedom it has been argued that the economic freedom indices
conflate unrelated policies and policy outcomes to conceal negative correlations between
economic growth and economic freedom in some subcomponents.

For well over a hundred years, the economic world has been engaged in a great intellectual
debate. On one side of this debate have been those philosophers and economists who
advocate an economic system based on private property and free markets—or what one might
call economic freedom. The key ingredients of economic freedom are personal choice,
voluntary exchange, freedom to compete in markets, and protection of person and property.
Institutions and policies are consistent with economic freedom when they allow voluntary
exchange and protect individuals and their property.

Governments can promote economic freedom by providing a legal structure and a law-
enforcement system that protect the property rights of owners and enforce contracts in an
evenhanded manner. However, economic freedom also requires governments to refrain from
taking people’s property and from interfering with personal choice, voluntary exchange, and
the freedom to enter and compete in labor and product markets. When governments substitute
taxes, government expenditures, and regulations for personal choice, voluntary exchange, and
market coordination, they reduce economic freedom. Restrictions that limit entry into
occupations and business activities also reduce economic freedom.

ECONOMICS SYNOPSIS

TITLE: Economic Freedom

INTRODUCTION:

The freedom to prosper within a country without intervention from a government or

economic authority. Individuals are free to secure and protect his/her human resources, labor
and private property. Economic freedom is common in capitalist economies and must
incorporate other civil liberties to be deemed as truly free.

AIM: Economic and legal analysis on economic freedom

SIGNIFICANCE OF THE PROJECT: importance of this project topic is to bring notice,

about the importance and laws made on economic freedom

LITERATURE REVIEW: Economic freedom or economic liberty is the ability of people of a

society to take economic actions. This is a term used in economic and policy debates as well
as in the philosophy of economics. One approach to economic freedom comes from classical
liberal and libertarian traditions emphasizing free markets, free trade, and private property
under free enterprise.

SCOPE OF THE STUDY:

SUBJECT MATTER-this project contains research about the economic freedom in the world.

TIME PERIOD- this research contain information from the time period of nineteenth century
till the twentieth century.

AREA/LOCATION-information about economic freedom limited till the boundaries of india.

RESEARCH PROBLEM:

1 The different types of aspects of freedom in the economic society.

2 The pros and cons of the freedom given to the economic society.

RESEARCH QUESTION:

1 Whether there are different types of aspects regarding freedom in the economic society?

2 whether there are any pros and cons of freedom in the economic society?

RESEARCH METHODOLOGY:

Descriptive and historical method of study also explanatory study.

DATA AND DATABASE:

secondary data has been taken in the research of this project.

CONCLUSION:

This study is going to bring us all the information of economic freedom.

CHAPTERIZATION:

1. Introduction

2. Literature review

3. Historical perspective

4. Theoretical perspective

5. Impact of this on development of the nation

6. growth of economic freedom index

7. An overview of the result

8. Conclusion

9. Bibliography

TABLE OF CONTENTS

 INTRODUCTION
  INSTITUTIONS OF ECONOMIC FREEDOM
 ECONOMIC AND POLITICAL FREEDOM
 INDICES OF ECONOMIC FREEDOM
 POSITIVE AND NEGATIVE FREEDOM
 SOCIOECONOMIC IMPACT OF ECONOMIC FREEDOM
 GROWTH AND IMPACT OF ECONOMIC FREEDOM
 GAINS AND LOSSES
 ECONOMIC FREEDOM AROUND THE GLOBE
 THE PROVEN IMPACT OF ECONOMIC FREEDOM
 ADVANCING ECONOMIC FREEDOM: THE SOURCE OF TRUE PROGRESS
 CONCLUSION
 BIBILIOGRAPHY

INTRODUCTION
The freedom to prosper within a country without intervention from a government or
economic authority. Individuals are free to secure and protect his/her human resources, labor
and private property. Economic freedom is common in capitalist economies and must
incorporate other civil liberties to be deemed as truly free.

Economic Freedom of the World: 2018 Annual Report is the world’s premier measurement
of economic freedom, ranking countries based on five areas: size of government, legal
structure and security of property rights, access to sound money, freedom to trade
internationally, and regulation of credit, labour and business. This year’s report compares 162
countries and territories. In this year’s ranking, which is based on 2016 data, Hong Kong is
again number one, and Canada (tied for 10th with Australia) trails the United States, which
ranks 6th.

Economic freedom or economic liberty is the ability of people of a society to take economic
actions. This is a term used in economic and policy debates as well as in the philosophy of
economics. One approach to economic freedom comes from classical liberal and libertarian
traditions emphasizing free markets, free trade, and private property under free enterprise.
Another approach to economic freedom extends the welfare economics study of individual
choice, with greater economic freedom coming from a "larger" (in some technical sense) set
of possible choices. Other conceptions of economic freedom include freedom from want and
the freedom to engage in collective bargaining.

The free market viewpoint defines economic liberty as the freedom to produce, trade and
consume any goods and services acquired without the use of force, fraud or theft. This is
embodied in the rule of law, property rights and freedom of contract, and characterized by
external and internal openness of the markets, the protection of property rights and freedom
of economic initiative. There are several indices of economic freedom that attempt to
measure free market economic freedom. Based on these rankings correlative studies have
found higher economic growth to be correlated with higher scores on the country
rankings.With regards to other measures, such as equality, corruption, political and social
violence and their correlation to economic freedom it has been argued that the economic
freedom indices conflate unrelated policies and policy outcomes to conceal negative
correlations between economic growth and economic freedom in some subcomponents,

INSTITUTIONS OF ECONOMIC FREEDOM

According to the free market view, a secure system of private property rights is an essential
part of economic freedom. Such systems include two main rights: the right to control and
benefit from property and the right to transfer property by voluntary means. These rights
offer people the possibility of autonomy and self-determination according to their personal
values and goals. Economist Milton Friedman sees property rights as "the most basic of
human rights and an essential foundation for other human rights." With property rights
protected, people are free to choose the use of their property, earn on it, and transfer it to
anyone else, as long as they do it on a voluntary basis and do not resort to force, fraud or
theft. In such conditions most people can achieve much greater personal freedom and
development than under a regime of government coercion. A secure system of property rights
also reduces uncertainty and encourages investments, creating favorable conditions for an
economy to be successful. Empirical evidence suggests that countries with strong property
rights systems have economic growth rates almost twice as high as those of countries with
weak property rights systems, and that a market system with significant private property
rights is an essential condition for democracy. According to Hernando de Soto, much of the
poverty in the Third World countries is caused by the lack of Western systems of laws and
well-defined and universally recognized property rights. De Soto argues that because of the
legal barriers poor people in those countries can not utilize their assets to produce more
wealth. One thinker to question private property was Pierre-Joseph Proudhon, a socialist and
anarchist, who argued that property is both theft and freedom.

Freedom of contract

Freedom of contract is the right to choose one's contracting parties and to trade with them on
any terms and conditions one sees fit. Contracts permit individuals to create their own
enforceable legal rules, adapted to their unique situations. However, not all contracts need to
be enforced by the state. For example, in the United States there is a large number of third-
party arbitration tribunals which resolve disputes under private commercial law.Negatively
understood, freedom of contract is freedom from government interference and from imposed
value judgments of fairness. The notion of "freedom of contract" was given one of its most
famous legal expressions in 1875 by Sir George Jessel.

If there is one thing more than another public policy requires it is that men of full age and
competent understanding shall have the utmost liberty of contracting, and that their contracts
when entered into freely and voluntarily shall be held sacred and shall be enforced by courts
of justice. Therefore, you have this paramount public policy to consider – that you are not
lightly to interfere with this freedom of contract.

The doctrine of freedom of contract received one of its strongest expressions in the US
Supreme Court case of Lochner v New York which struck down legal restrictions on the
working hours of bakers.

Critics of the classical view of freedom of contract argue that this freedom is illusory when
the bargaining power of the parties is highly unequal, most notably in the case of contracts
between employers and workers. As in the case of restrictions on working hours, workers as a
group may benefit from legal protections that prevent individuals agreeing to contracts that
require long working hours. In its West Coast Hotel Co. v. Parrish decision in 1937,
overturning Lochner, the Supreme Court cited an earlier decisions.

“ The legislature has also recognized the fact, which the experience of legislators in
many States has corroborated, that the proprietors of these establishments and their operatives
do not stand upon an equality, and that their interests are, to a certain extent, conflicting. The
former naturally desire to obtain as much labor as possible from their employees, while the
latter are often induced by the fear of discharge to conform to regulations which their
judgment, fairly exercised, would pronounce to be detrimental to their health or strength. In
other words, the proprietors lay down the rules and the laborers are practically constrained to
obey them. In such cases, self-interest is often an unsafe guide, and the legislature may
properly interpose its authority. ” From this point on, the Lochner view of freedom of
contract has been rejected by US courts.

ECONOMIC AND POLITICAL FREEDOM

Some free market advocates argue that political and civil liberties have simultaneously
expanded with market-based economies, and present empirical evidence to support the claim
that economic and political freedoms are linked.

In Capitalism and Freedom (1962), Friedman further developed Friedrich Hayek's argument
that economic freedom, while itself an extremely important component of total freedom, is
also a necessary condition for political freedom. He commented that centralized control of
economic activities was always accompanied with political repression. In his view, voluntary
character of all transactions in a free market economy and wide diversity that it permits are
fundamental threats to repressive political leaders and greatly diminish power to coerce.
Through elimination of centralized control of economic activities, economic power is
separated from political power, and the one can serve as counterbalance to the other.
Friedman feels that competitive capitalism is especially important to minority groups, since
impersonal market forces protect people from discrimination in their economic activities for
reasons unrelated to their productivity.

Austrian School economist Ludwig von Mises argued that economic and political freedom
were mutually dependent: "The idea that political freedom can be preserved in the absence of
economic freedom, and vice versa, is an illusion. Political freedom is the corollary of
economic freedom. It is no accident that the age of capitalism became also the age of
government by the people."

In The Road to Serfdom, Hayek argued that "Economic control is not merely control of a
sector of human life which can be separated from the rest; it is the control of the means for all
our ends." Hayek criticized socialist policies as the slippery slope that can lead to
totalitarianism.

Gordon Tullock has argued that "the Hayek-Friedman argument" predicted totalitarian
governments in much of Western Europe in the late 20th century – which did not occur. He
uses the example of Sweden, in which the government at that time controlled 63 percent of
GNP, as an example to support his argument that the basic problem with The Road to
Serfdom is "that it offered predictions which turned out to be false. The steady advance of
government in places such as Sweden has not led to any loss of non-economic freedoms."
While criticizing Hayek, Tullock still praises the classical liberal notion of economic
freedom, saying, "Arguments for political freedom are strong, as are the arguments for
economic freedom. We needn’t make one set of arguments depend on the other.

INDICES OF ECONOMIC FREEDOM

The annual surveys Economic Freedom of the World (EFW) and Index of Economic
Freedom (IEF) are two indices which attempt to measure the degree of economic freedom in
the world's nations. The EFW index, originally developed by Gwartney, Lawson and Block at
the Fraser Institute was likely the most used in empirical studies as of 2000.[30] The other
major index, which was developed by The Heritage Foundation and The Wall Street Journal
appears superior for data work, although as it only goes back to 1995, it is less useful for
historical comparisons.

According to the creators of the indices, these rankings correlate strongly with higher average
income per person, higher income of the poorest 10%, higher life expectancy, higher literacy,
lower infant mortality, higher access to water sources and less corruption. The people living
in the top one-fifth of countries enjoy an average income of $23,450 and a growth rate in the
1990s of 2.56 percent per year; in contrast, the bottom one-fifth in the rankings had an
average income of just $2,556 and a -0.85 percent growth rate in the 1990s. The poorest 10
percent of the population have an average income of just $728 in the lowest ranked countries
compared with over $7,000 in the highest ranked countries. The life expectancy of people
living in the highest ranked nations is 20 years longer than for people in the lowest ranked
countries.

Higher economic freedom, as measured by both the Heritage and the Fraser indices,
correlates strongly with higher self-reported happiness.

Erik Gartzke of the Fraser Institute estimates that countries with a high EFW are significantly
less likely to be involved in wars, while his measure of democracy had little or no impact.

The Economic Freedom of the World score for the entire world has grown considerably in
recent decades. The average score has increased from 5.17 in 1985 to 6.4 in 2005. Of the
nations in 1985, 95 nations increased their score, seven saw a decline, and six were
unchanged.Using the 2008 Index of Economic Freedom methodology world economic
freedom has increased 2.6 points since 1995.

Members of the World Bank Group also use Index of Economic Freedom as the indicator of
investment climate, because it covers more aspects relevant to the private sector in wide
number of countries.

Critiques

The nature of economic freedom is often in dispute. Robert Lawson, the co-author of EFW,
even acknowledges the potential shortcomings of freedom indices: "The purpose of the EFW
index is to measure, no doubt imprecisely, the degree of economic freedom that exists." He
likens the recent attempts of economists to measure economic freedom to the initial attempts
of economists to measure GDP: "They [macroeconomists] were scientists who sat down to
design, as best they could with the tools at hand, a measure of the current economic activity
of the nation. Economic activity exists and their job was to measure it. Likewise economic
freedom exists. It is a thing. We can define and measure it." Thus, it follows that some
economists, socialists and anarchists contend that the existing indicators of economic
freedom are too narrowly defined and should take into account a broader conception of
economic freedoms.

Critics of the indices (e.g. Thom Hartmann) also oppose the inclusion of business-related
measures like corporate charters and intellectual property protection. John Miller in Dollars
& Sense has stated that the indices are "a poor barometer of either freedom more broadly
construed or of prosperity." He argues that the high correlation between living standards and
economic freedom as measured by IEF is the result of choices made in the construction of the
index that guarantee this result. For example, the treatment of a large informal sector
(common in poor countries) as an indicator of restrictive government policy, and the use of
the change in the ratio of government spending to national income, rather than the level of
this ratio. Hartmann argues that these choices cause the social democratic European countries
to rank higher than countries where the government share of the economy is small but
growing.

Economists Dani Rodrik and Jeffrey Sachs have separately noted that there appears to be
little correlation between measured economic freedom and economic growth when the least
free countries are disregarded, as indicated by the strong growth of the Chinese economy in
recent years. Morris Altman found that there is a relatively large correlation between
economic freedom and both per capita income and per capita growth. He argues that this is
especially true when it comes to sub-indices relating to property rights and sound money,
while he calls into question the importance of sub-indices relating to labor regulation and
government size once certain threshold values are passed. John Miller further observes that
Hong Kong and Singapore, both only "partially free" according to Freedom House, are
leading countries on both economic freedom indices and casts doubt on the claim that
measured economic freedom is associated with political freedom. However, according to the
Freedom House, "there is a high and statistically significant correlation between the level of
political freedom as measured by Freedom House and economic freedom as measured by the
Wall Street Journal/Heritage Foundation survey."

POSITIVE AND NEGATIVE FREEDOM

The differences between alternative views of economic freedom have been expressed in
terms of Isaiah Berlin's distinction between positive freedom and negative freedom. Classical
liberals favour a focus on negative freedom as did Berlin himself. By contrast Amartya Sen
argues for an understanding of freedom in terms of capabilities to pursue a range of goals.
One measure which attempts to assess freedom in the positive sense is Goodin, Rice, Parpo,
and Eriksson's measure of discretionary time, which is an estimate of how much time people
have at their disposal during which they are free to choose the activities in which they
participate, after taking into account the time they need to spend acquiring the necessities of
life. In his book, Capitalism and Freedom, Milton Friedman explains the preservation of
freedom is the reason for limited and decentralized governments. It creates positive freedom
within the society allowing for freedom of choice for an individual in a free society.

FREEDOM FROM WANT

Franklin D. Roosevelt included freedom from want in his Four freedoms speech. Roosevelt
stated that freedom from want "translated into world terms, means economic understandings
which will secure to every nation a healthy peacetime life for its inhabitants-everywhere in
the world". In terms of US policy, Roosevelt's New Deal included economic freedoms such
as freedom of trade union organisation, as well as a wide range of policies of government
intervention and redistributive taxation aimed at promoting freedom from want.[citation
needed] Internationally, Roosevelt favored the policies associated with the Bretton Woods
Agreement which fixed exchange rates and established international economic institutions
such as the World Bank and International Monetary Fund.

Herbert Hoover saw economic freedom as a fifth freedom, which secures survival of
Roosevelt's Four freedoms. He described economic freedom as freedom "for men to choose
their own calling, to accumulate property in protection of their children and old age, [and]
freedom of enterprise that does not injure others."

FREEDOM OF ASSOCIATION AND UNIONS

The Philadelphia Declaration (enshrined in the constitution of the International Labour

Organization) states that "all human beings, irrespective of race, creed or sex, have the right
to pursue both their material well-being and their spiritual development in conditions of
freedom and dignity, of economic security and equal opportunity." The ILO further states that
"The right of workers and employers to form and join organizations of their own choosing is
an integral part of a free and open society."

SOCIALIST VIEW

The socialist view of economic freedom conceives of freedom as a concrete situation as

opposed to an abstract or moral concept. This view of freedom is closely related to the
socialist view of human creativity and the importance ascribed to creative freedom. Socialists
view creativity as an essential aspect of human nature, thus defining freedom as a situation or
state of being where individuals are able to express their creativity unhindered by constraints
of both material scarcity and coercive social institutions. Marxists stress the importance of
freeing the individual from what they view as coercive, exploitative and alienating social
relationships of production they are compelled to partake in, as well as the importance of
economic development as providing the material basis for the existence of a state of society
where there are enough resources to allow for each individual to pursue his or her genuine
creative interests.

SOCIOECONOMIC IMPACT OF ECONOMIC FREEDOM

One of the ways to measure economic competitiveness is by comparing an extent of

economic freedom that countries have, which as surveys show can also largely explain
differences in economic well-being across the world. Generally, countries with higher
economic freedom have higher gross domestic product per capita and its growth rates, as well
as better health care, education quality, environment protection, income equality, and
happiness results. These trends of increasing prosperity are confirmed even when we
compare these indicators within territories of countries. Nevertheless, despite these benefits
societies have to be aware that with increasing economic freedom they will have to face
going through a phase of increasing inequality, which basically is a result of decreased
redistribution, as well as other negative effects from economic liberalization, i.e., running of
local enterprises out of business, takeover of competitive firms, enforcing of interests of
foreign companies, dependence on foreign capital, deteriorating work rights, harmful
manufacturing for the environment, introducing of commercial practices that are not
favorable for consumers, as well as endangerment for survival of national cultures. However,
on the bright side, these negative effects from economic freedom tend to be felt in a shorter
term, and if countries use the opportunities of economic freedom in our increasingly
globalized economy in a right way, as research shows their socioeconomic conditions will be
significantly better than in a case of less economic freedom.

GROWTH AND IMPACT OF ECONOMIC FREEDOM

Economic freedom has advanced in over 100 countries over the past year. Global average
economic freedom increased by 0.2 point to a record level of 60.9 on the 0–100 scale used in
the Index of Economic Freedom. In the years since the inception of the Index in 1995,
average scores have increased by over 5 percent. Behind this record of advancing economic
freedom are stories of human progress and the achievements of countries and their citizens
literally billions of people around the world whose lives have been measurably improved.
There also are stories of policy failure, backsliding, and continuing repression.

GAINS AND LOSSES

In the 2017 Index, 103 countries, the majority of which are less developed or emerging
economies, showed advances in economic freedom over the past year. Remarkably, 49
countries achieved their highest economic freedom scores ever. Two large economies (China
and Russia) are included in this group. While two countries (Mauritius and the United
Kingdom) recorded no change in score, 73 experienced declines in economic freedom, and
16 countries, including notably the Bahamas, Bahrain, El Salvador, Pakistan, Venezuela, and
the United States, recorded their lowest economic freedom scores ever.

The Asia–Pacific region is home to nine of the 20 most improved countries: Fiji, Kiribati,
Kazakhstan, China, Turkmenistan, Uzbekistan, Vanuatu, Tajikistan, and the Solomon Islands
all recorded score gains of four points or more. On the other hand, Sub-Saharan Africa has
the

most countries (Cabo Verde, Djibouti, Ghana, Guinea, Kenya, The Gambia, and Madagascar)
recording notable score declines, followed by the Americas (Barbados, the Bahamas,
Venezuela, Suriname, Saint Lucia, and Brazil). Score improvements in 19 countries, all of
which are developing or emerging economies, were significant enough to merit upgrades in
their economic freedom status in the Index. Notably, Macedonia and Armenia have joined the
ranks of the “mostly free,” with Macedonia ranked “mostly free” for the first time ever and
Armenia regaining a level of economic freedom it had not experienced since 2006. Seven
developing countries (Fiji, Tonga, Indonesia, Swaziland, the Kyrgyz Republic, Uganda, and
Bosnia and Herzegovina) have advanced into the ranks of the “moderately free,” and 10
others (Belarus, the Democratic Republic Congo, the Solomon Islands, Laos, Burma,
Uzbekistan, the Central African Republic, Kiribati, Iran, and Argentina) have escaped the
status of economically “repressed.” Of the 180 economies whose economic freedom has been
graded and ranked in the 2017 Index, only five have sustained very high freedom scores of 80
or more, putting them in the ranks of the economically “free.” The five are Hong Kong,
Singapore, New Zealand, Switzerland, and Australia. A further 29 countries, including Chile,
the United Arab Emirates, the United Kingdom, Georgia, the United States, and Mauritius,
have been rated as “mostly free” economies with scores between 70 and 80. A total of 92
economies, or about 51 percent of all nations and territories graded in the 2017 Index, have
earned a designation of “moderately free” or better. These economies provide institutional
environments in which individuals and private enterprises benefit from at least a moderate
degree of economic freedom in the pursuit of greater competitiveness, growth, and
prosperity. On the opposite side of the spectrum, nearly half of the countries graded in the
Index—88 economies—have registered economic freedom scores below 60. Of those, 65
economies are considered “mostly unfree” (scores of 50–60), and 23 are considered
“repressed” (scores below 50). Despite the global progress recorded over the 23-year history
of the Index, the number Suriname, Saint Lucia, and Brazil).

most countries (Cabo Verde, Djibouti, Ghana, Guinea, Kenya, The Gambia, and Madagascar)
recording notable score declines, followed by the Americas (Barbados, the Bahamas,
Venezuela, Suriname, Saint Lucia, and Brazil). Score improvements in 19 countries, all of
which are developing or emerging economies, were significant enough to merit upgrades in
their economic freedom status in the Index. Notably, Macedonia and Armenia have joined the
ranks of the “mostly free,” with Macedonia ranked “mostly free” for the first time ever and
Armenia regaining a level of economic freedom it had not experienced since 2006. Seven
developing countries (Fiji, Tonga, Indonesia, Swaziland, the Kyrgyz Republic, Uganda, and
Bosnia and Herzegovina) have advanced into the ranks of the “moderately free,” and 10
others (Belarus, the Democratic Republic Congo, the Solomon Islands, Laos, Burma,
Uzbekistan, the Central African Republic, Kiribati, Iran, and Argentina) have escaped the
status of economically “repressed.” Of the 180 economies whose economic freedom has been
graded and ranked in the 2017 Index, only five have sustained very high freedom scores of 80
or more, putting them in the ranks of the economically “free.” The five are Hong Kong,
Singapore, New Zealand, Switzerland, and Australia. A further 29 countries, including Chile,
the United Arab Emirates, the United Kingdom, Georgia, the United States, and Mauritius,
have been rated as “mostly free” economies with scores between 70 and 80. A total of 92
economies, or about 51 percent of all nations and territories graded in the 2017 Index, have
earned a designation of “moderately free” or better. These economies provide institutional
environments in which individuals and private enterprises benefit from at least a moderate
degree of economic freedom in the pursuit of greater competitiveness, growth, and
prosperity. On the opposite side of the spectrum, nearly half of the countries graded in the
Index—88 economies—have registered economic freedom scores below 60. Of those, 65
economies are considered “mostly unfree” (scores of 50–60), and 23 are considered
“repressed” (scores below 50). Despite the global progress recorded over the 23-year history
of the Index, the number “repressed” (scores below 50).Despite the global progress recorded
over the 23-year history of the Index, the number of people suffering from a lack of economic
freedom remains disturbingly high: around 4.5 billion, or about 65 percent of the world’s
population. More than half of these people live in just two countries, China and India, where
advancement toward greater economic freedom has been both limited and uneven. In the two
most populous economies, structural reforms in a few key sectors have sometimes boosted
growth, but the governments have failed to institutionalize open environments that promote
broad-based and sustainable improvements in the economic well-being of the population as a
whole.

ECONOMIC FREEDOM AROUND THE GLOBE

Patterns of economic freedom are quite diverse both within and among the five Index
regions, reflecting the unique culture and history of the nations and the individuals that
inhabit them, not to mention circumstances of geography or endowments of natural resources.
With an average score of 68, Europe has recorded the highest level of average economic
freedom among the regions. Despite the ongoing economic and political turmoil in a number
of countries in the Middle East and North Africa, the region as a whole has still achieved an
average economic freedom score slightly above 60 due to high ratings of economic freedom
in the United Arab Emirates, Qatar, Israel, and Bahrain. Despite some progress in recent
years, the average economic freedom score in Sub-Saharan Africa continues to be below 60.
As demonstrated in previous editions of the Index, it is notable that despite varying degrees
of economic freedom across the regions, the fundamentally positive relationship between
economic freedom and prosperity is readily apparent worldwide. Chart 3 shows that, no
matter the region, the higher a country’s level of economic freedom is, the higher its income
per capita also is. The diversity of the world’s peoples and cultures implies that there will be
many paths to economic development and prosperity. The whole idea of economic freedom is
to empower people with more opportunity to choose for themselves how to pursue and fulfill
their dreams, subject only to the basic rule of law and honest competition from others. There
is no single answer to the particular challenges of development that we face as individuals or
as members of distinct societies. One thing, however, is proven: Governments that respect
and promote economic freedom provide the best environment for experimentation,
innovation, and progress, and it is through these that humankind grows in prosperity and
well-being.

THE PROVEN IMPACT OF ECONOMIC FREEDOM

As successive editions of the Index have documented since 1995, the affirmative link
between economic freedom and long-term development is unmistakable and robust.
Countries that allow their citizens more economic freedom achieve higher incomes and better
standards of living. People in economically free societies have longer lives. They have better
health and access to more effective education. They are able to be better stewards of the
environment, and they push forward the frontiers of human achievement in science and
technology through greater innovation. It has become quite apparent that despite ups and
downs, the principles and lessons of economic freedom have been widely understood,
accepted, and implemented in practice by a significant number of countries around the globe.
Their progress is seen in the score changes. The poorer-performing countries, by contrast,
have tried only some of the ideas, adulterated others, or even in a few cases rejected them
outright. The economic performance of countries with various rankings in the Index provides
numerous examples of the consequences of the rise and fall of economic freedom around the
globe. For example:

Countries that allow private ownership of property protected by an effective judicial system
encourage more entrepreneurial initiative than do countries that require collective or
government ownership or control of economic resources. • Governments that dominate their
countries’ economies with heavy taxation and deficit spending end up impoverishing their
citizens through prolonged economic stagnation exacerbated by high debt burdens. • Open
competition, facilitated by regulatory efficiency, promotes greater productivity and ensures
better-organized allocation of resources than do systems of central planning. • Countries that
practice some version of free-market capitalism, with economies open to global trade,
investment, and financial markets, do better than those that are protectionist or that shun
economic linkages with others. Policies that promote economic freedom, whether through
improvements in the rule of law, the promotion of efficiency and openness, or suitable
restraints on the size and reach of government, therefore provide the environment that can
best inspire people to develop practical solutions to the economic and social challenges that
confront our world.

ECONOMIC FREEDOM ALLEVIATES POVERTY AND PROMOTES OVERALL

HUMAN DEVELOPMENT

The free-market system that is rooted in the principles of economic freedom has fueled
unprecedented economic growth around the world. As the global economy has moved toward
greater economic freedom over the past two decades, real world GDP has increased by about
80 percent, and the global poverty rate has been cut in half, lifting hundreds of millions of
people out of poverty. Achieving greater overall prosperity that goes beyond the materialistic
and monetary dimensions of well-being is equally important. The societal benefits of
economic freedom extend far beyond reductions in poverty. Countries with higher levels of
economic freedom enjoy higher levels of human development in terms of life expectancy,
literacy, education, and overall quality of life. As Chart 5 shows, governments that choose
policies that increase economic freedom are placing their societies on the path to more
education opportunities, better health care, and higher standards of living for their citizens.

ECONOMIC FREEDOM FACILITATES INNOVATION AND BETTER

ENVIRONMENTAL PROTECTION

The positive link between economic freedom and higher levels of innovation ensures greater
economic dynamism in coping with various developmental challenges by spurring a virtuous
cycle of investment, innovation (including in greener technologies), and dynamic
entrepreneurial growth. In recent years, government policies and actions concerning the
environment have become more intrusive and economically distortionary. Many governments
have promoted programs to tax carbon emissions and increase taxes on gasoline, have
organized non-transparent and sometimes corrupt exchanges for the buying and selling of
carbon emissions, and have provided subsidies for “clean” energy to politically favored firms.
Such policies impose a huge direct cost on society and retard economic growth—and all for
uncertain environmental benefits. In addition, the fact that the most remarkable
improvements in clean energy use and energy efficiency over the past decades have occurred
not as a result of government regulation, but rather as a result of advances in technology and
trade should not be overlooked. Around the world, economic freedom has been a key factor
in enhancing countries’ capacity for innovation and, by so doing, in improving their overall
environmental performance.

ECONOMIC FREEDOM ENSURES GREATER SOCIETAL PROGRESS

The massive improvements in global indicators of income and quality of life largely reflect a
paradigm shift in the debate about how societies should be structured to achieve the most
optimal outcome. Over the past two decades, this debate has largely been won by capitalism.
However, fears that the immediate benefits of capitalism are fading have led to concerns
about economic mobility and economic freedom. At the heart of ensuring upward economic
mobility is the task of advancing economic freedom so that ordinary people in a free society
can enjoy the fruits of dynamic and inclusive growth. Economic freedom is critical to
generating the broader-based economic growth that brings more opportunities for a greater
number of people to work, produce, and save. In other words, ensuring greater economic
freedom is directly related to preserving and enhancing dynamic upward mobility. Not
surprisingly, societies based on economic freedom are the ones that have demonstrated the
strongest social progress. As shown in Chart 7, countries that more fully embrace economic
freedom have provided the institutional environments that are most conducive to societal
progress. Countries that have improved their competitiveness and have opened their societies
to new ideas have largely achieved the high levels of societal progress that their citizens
demand. It is not massive redistributions of wealth or government dictates on income levels
that produce the most positive societal outcomes. Instead, mobility and progress require
lower barriers to market entry, freedom to engage with the world, and less government
intrusion.

ADVANCING ECONOMIC FREEDOM: THE SOURCE OF TRUE PROGRESS

Regrettably, it has been an avoidable human tragedy that not all of the world’s people have
participated in our era’s spread of economic freedom. Free-market capitalism, given a
chance, does benefit the greatest number of people. No other systems that have been tried
have come close in terms of providing broad-based prosperity. Countries that have not joined
the march of freedom have left their citizens lagging behind and even, in the worst cases,
stuck in poverty or destitution. Such failures are inexcusable. Most important, they are
preventable. Advancing the free market is the most democratic and effective way to challenge
big government, concentrated government power, and the status quo. Perhaps one of the
critical lessons of the past years is that the fundamental superiority and value of economic
liberty must be retaught to a new generation of political leaders, either by their peers who
have lived in less free systems and less free times or by their own citizens, who understand
instinctively that when individuals are allowed to decide for themselves how best to pursue
their dreams and aspirations, their collective achievements can add up to a better society for
all. As Friedrich A. Hayek once observed, “If old truths are to retain their hold on men’s
minds, they must be restated in the language and concepts of successive generations.” The
Index of Economic Freedom provides the basis for such a dialogue and a foundation for
economic revival in the years ahead.

CONCLUSION
The conclusion of this project is that the freedom to prosper within a country without
intervention from a government or economic authority. Individuals are free to secure and
protect his/her human resources, labor and private property. Economic freedom is common in
capitalist economies and must incorporate other civil liberties to be deemed as truly free.

BIBILIOGRAPHY
BOOKS

Economic Freedom and Interventionism , by Ludwig von Mises

Economic Freedom and Welfare ,Petar Stankov

ONLINE WEBSITES

www.wikipedia.com

www.economywatch.com