James d. Gwartney

Exhibit 12: Economic Freedom, Income and Economic Growth
Economic Freedom
Country
2017 GDP Per Capita
2013–2017 Annual
Growth
Top 10 Rank 2016
1
Hong Kong
$61,540
2.8%
2
Singapore
$93,905
3.5%
3
New Zealand
$40,917
3.3%
4
Switzerland
$65,006
1.8%
5
Ireland
$76,305
9.4%
6
United States
$59,532
2.2%
7
Georgia
$10,689
3.7%
8
Mauritius
$22,279
3.7%
9
United Kingdom
$43,887
2.2%
10
Australia
$47,047
2.4%
10
Canada
$46,378
2.2%
AVERAGE
$56,749
3.7%
Bottom 10 Rank 2016
153
Sudan
$4,904
2.8%
154
Guinea-Bissau
$1,700
4.5%
155
Angola
$6,389
1.1%
156
Central African Republic
$726
-4.4%
157
Syria
$2,900
N/A
157
Republic of the Congo
$887
6.1%
159
Algeria
$15,275
3%
160
Argentina
$20,787
0.7%
161
Libya
$19,631
-9.2%
162
Venezuela
N/A
-7.8%
AVERAGE
$8,133
-0.4%
Source: Data from the World Bank.
Note: GDP per capita, PPP.

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Video:
Economic Freedom Impacts
When low-income countries adopt good institutions and policies, they are able to
achieve exceedingly high growth rates and narrow the income gap relative to high-income
industrial nations. In 1980, the two most populous countries, China and India, were also among
the world’s least free economies. During the 1980s and 1990s, they adopted policies more
consistent with economic freedom and are now achieving impressive rates of economic growth
of 6% a year or more.
Although the greater economic success of freer countries can be inferred from the
examples above, there are always countries that don’t quite fit the pattern. The link is clearer if
we combine countries in groups. Exhibit 13 breaks the countries into four groups (called
quartiles), where each group contains 25% of the countries arrayed from low to high by their
EFW rating, and shows their average income level over a longer period. Since current income
reflects the effect of growth over decades or more, the differences stand out. Making the
assumption (which is supported by deeper analysis) that currently free countries have spent
more time in recent years also being free, it is clear that the freer economies (as measured by
average scores for the two decades from 1995 to 2016) have achieved much higher income
levels. The most-free countries had an average 2016 per capita income of $40,376, over seven
times the average for the least-free countries.

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