According to Miller and Kim (2013), economic freedom is vital for the growth and stability of an economy. Economic freedom is measured on a scale of 0 to 100 based on 10 individual economic freedoms from 4 categories:
- Rule of Law
- property rights, freedom from corruption
- Limited government
- fiscal freedom, government spending
- Regulatory efficiency
- business freedom, labor freedom, monetary freedom
- Open markets
- trade freedom, investment freedom, financial freedom
Economic freedom is the condition of autonomy within individuals and the actions they take to pursue a stable and prosperous livelihood. It is the rights and liberties of individuals seeking their own happiness that helps an economy flourish. Of course, there are limits to what individuals can do. The governments of countries make policies, rules, regulations, and laws that limit individual freedoms for the prosperity and well-being of the people. The key to making economic freedom beneficial to an economy is to find the right balance between freedom and government control. (Miller & Kim, 2013)
The U.S. is one of the most economically powerful nations in the world, as well as one of the wealthiest. This is largely due to the fact that the U.S. has a high level of economic freedom. However, economic freedom has been slowly declining in the past few years. This is largely due to the Great Recession that occurred in 2008, the worst recession since the Great Depression in the 1930s. Though the effects of the recession are still evident, the current outlook of the economy is looking better, but economic recovery and growth is very slow. Government spending has increased in order to bailout industries and stabilize the market, and also to protect consumers financial abuses. While the U.S. maintains high scores in the areas of business, trade, property, and labor freedoms, its scores in the other freedoms are dramatically low, especially in government spending and fiscal freedom. If the U.S. can reform its fiscal policies and lower government spending, it can be as economically free as it was before the recession. The overall score of economic freedom for the U.S. is 76.(Miller, Holmes, & Feulner, 2013)
Like the U.S., New Zealand also has a strong economy. It is also one of the wealthiest nations in the world. It ranks higher than the U.S. in both wealth and economic freedom. Yet, the GDP of New Zealand is lower than that of the U.S. This is due to the limited population and isolation of the country. New Zealand is also recovering from the recession they experienced in 2008. Their recovery is rapid in comparison with the U.S. New Zealand has high scores of economic in all 10 of the economic freedoms. However, their plans to build better infrastructure will cause an increase in government spending which will make its score decrease. A goal for its economy is to continue building while keeping government spending under control. The overall score of economic freedom for New Zealand is 81.4. (Miller, Holmes, & Feulner, 2013)
Equatorial Guinea is very different from both the U.S. and New Zealand. Though it is a considerably small country, it has recently been very prosperous. Its prosperity is attributed to its large oil reserves. Equatorial Guinea trades its abundance of oil with other countries, and these trades account for the majority of the GDP. In comparison with New Zealand and the U.S., this country is not considered to be economically free. In fact, the country is repressed in all of the economic freedoms except trade and monetary freedom. The overall score for the economic freedom of Equatorial Guinea is 42.3. (Miller, Holmes, & Feulner, 2013)
Country Intelligence: Report: New Zealand. (2013). New Zealand Country Monitor, 1-18.
Country Intelligence Report: United States. (2013). United States Country Monitor, 1-18.
Guindó, P. (2013). Equatorial Guinea. New Internationalist, (464), 28.
Long-term outlook. (2011). Energy Industry Report: Equatorial Guinea, (1), 6-7.
Miller, T., Holmes, K., & Feulner, E. (2013). 2013 Index of Economic Freedom. Retrieved from: http://www.heritage.org/index/download
Miller, T. & Kim, A. (2013). Defining Economic Freedom. 2013 Index of Economic Freedom. Retrieved from: http://www.heritage.org/index/book/chapter-7