I was recently reading the Index of Economic Freedom World Rankings developed by the Heritage Foundation which is a measure of the economic freedom and opportunity in countries. In 1776, economist Adam Smith, in his influential work, The Wealth of Nations, formulated a theory that when institutions and governments protect the economic liberty of individuals, greater prosperity results for all.
Today that theory has been measured and proven, as you can see in the chart below. In red is plotted the economic freedom score of 157 countries, and in blue is plotted the GDP per capita in those same countries. As you can see, the greater the economic freedom in a country, the greater the economic prosperity of its people.
Gross domestic product (GDP) is a primary indicator of wealth and economic prosperity; it represents the total dollar value of all goods and services produced by the country and is divided by the population (per capita) to adjust for population size difference.
What is Economic Freedom?
Economic freedom is defined as the right to control one’s own labor and property. “In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. In economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.” (See http://www.heritage.org/Index/FAQ.aspx)
The economic freedom score is determined based on each countries performance in 10 areas:
As shown in the graph above, there is empirical evidence that economic freedom, as defined by the ten factors above, leads to economic prosperity. Despite that, there are still many doubters, particularly in the moderate and left-leaning political philosophies. With the so-called stimulus bill, our president, most in his party, and some in the opposition party, are currently engaged in one of the largest expansions of government in our country’s history. This expansion of government brings with it a reduction of economic freedom, and consequently the economic prosperity of all will be diminished. Thus this stimulus package, passed in the name of helping people, will in fact hurt the economic fortunes of individuals and businesses in our country.
Economic Freedom scores taken from the Heritage Foundation
GDP per capita by country was taken from Wikipedia: