July 20, 2004

ECONOMIC FREEDOM ON THE RISE around the globe. Robert Lawson and James Gwartney report on the progress of the global trend toward economic freedom since the Reagan-Thatcher revolution of 25 years ago. Quotable:
In 2002, only 15 of these 104 countries had double-digit inflation rates compared to 76 in 1980.

The use of extremely high marginal tax rates fell sharply. In 2002, not a single country imposed a 60 percent marginal tax rate on personal income; in 1980, 49 did.

In 2002, there were only four countries with a black-market exchange-rate premium of 25 percent or more compared to 36 countries with such a premium in 1980.

Tariff rates were reduced. In 2002, the average tariff rate was 10.4 percent compared to 26.1 percent in 1980.

The size of the trade sector expanded. Between 1980 and 2002, on average, exports plus imports as a share of GDP increased by 25.2 percent.

Many countries have also seen marked improvements in their economic-freedom ratings. Chile�s rating improved from 3.6 in 1975 to 5.8 in 1985 and 7.5 in 1995.

China�s rating rose from 3.8 in 1980 to 4.3 in 1990 and 5.8 in 2000.

India�s rating has improved substantially since 1990. After stagnating between 4.1 and 4.9 throughout the 1970-1990 period, India�s rating rose to 5.5 in 1995, 6.2 in 2000, and 6.3 in 2002.

Ireland�s rating jumped between 1985 and 1995. It rose from 6.2 in 1985 to 7.0 in 1990 and 8.2 in 1995. However, during the last few years, Ireland�s rating has receded slightly, hitting to 7.8 in 2002.

United Kingdom was a big gainer during the Thatcher years when its rating rose from 6.1 in 1980 to 7.0 in 1985, 7.7 in 1990, and 8.2 in 1995, where it has remained during the last several years.

Substantial increases in economic freedom have also been achieved by several other countries, including Botswana, 7.4 in 2002; Ghana, 6.4; Mauritius, 7.2; and New Zealand, 8.2.

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