Economic Freedom in the World: Is it Ethically Significant?

Prof. Domènec Melé finds gaps in economic freedom indices

15/04/2014 Barcelona

Economic Freedom in the World: Is it Ethically Significant?

Using data from the World Bank, International Monetary Fund and the Economist intelligence Unit, among others, various indices attempt to measure the degree of economic freedom in a range of countries.

One is the Index of Economic Freedom created by the Heritage Foundation and Wall Street Journal. It is based on a series of 10 economic measurements: business freedom, trade freedom, monetary freedom, government size, physical freedom, property rights, investment freedom, financial freedom, freedom from corruption, labor freedom (all these factors are averaged equally into a total score).

A second index is the Economic Freedom of the World produced by the Fraser Institute, a Canadian think tank, in cooperation with the Economic Freedom Network, a group of independent research and educational institutes in nearly 90 nations and territories worldwide. This latter index used forty-two variables in five broad areas: size of government, legal system and property rights, sound money; freedom to trade internationally and absence of regulation.

The 2013 annual Economic Freedom of the World report gives 2011 data from 151 countries. According to this index, globally, the average economic freedom score rose slightly to 6.87 out of 10 compared to 6.74 the previous year. Hong- Kong and Singapore occupy the top two positions. The other nations in the top 10 are New Zealand, Switzerland, United Arab Emirates, Mauritius, Finland, Bahrain, Canada, and Australia.

The 10 lowest-rated countries are: Algeria, Democratic Republic of Congo, Burundi, Central African Republic, Angola, Chad, Zimbabwe, Republic of Congo, Myanmar, and—in last place—Venezuela. Eight of the countries in the bottom ten are located in Africa.

From an ethical perspective, two main considerations can be made. First, respect for freedom is intrinsically good if it is not abusive by powerful, since freedom is an essential human feature. In addition, economic freedom could contribute to the common good, since economic freedom tends to contribute to wealth creations rather than a system with less economic freedom. The report mentioned here empathized that there is a high correlation between countries with economic freedom and average per-capita GDP. Specifically, it says that nations in the top quartile of economic freedom had an average per-capita GDP of US$36,446 in 2011, compared to US$4,382 for nations in the bottom quartile in 2011.

The second consideration is the lack of information provided by these indexes about abuse or lack of responsibility in exercising freedom. Growing of GDP could be compatible with unfair working conditions or with lack of respect for the environment. On the other hand, regulations and being opposed to economic freedom are not ethically necessarily objectionable. They can be reasonable, as well as abusive. My conclusion is that such indexes should be combines with others that take into account a responsible use of such freedoms.

This article is based on a recent Business Ethics blog post by Prof. Melé.