Working for the future of Greece: Is a Greek Tiger possible? Fred McMahon Fraser Institute
Thanks! Liberty Forum Nicos Rompapas Atlas Network Alexander Skouras
My job Introduce economic freedom the best available measure of free markets But first let s clear up some popular misconceptions Greece is not free market Greece has not tried neo-liberalism Greece s weak growth and the depth and length of the crisis are due to lack of functioning free markets
Reforms could be a huge opportunity to create a Greek Tiger * Work ethic *Entrepreneurship EU approach muddled though with wrong emphasis
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic Freedom Rank 1 10 19 28 37 46 55 64 73 82 91 100 Greece Switzerland Ireland
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Per capita GDP Constant US$ $80.000 $70.000 $60.000 $50.000 $40.000 $30.000 $20.000 $10.000 $0 Deep Irish reforms begin Greece Switzerland Ireland
Income share held by poorest 10% 3,5 3,3 3,1 2,9 2,7 2,5 2,3 2,1 Greece Ireland Switzerland 1,9 1,7 1,5 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total unemployment % 30 25 20 15 10 Greece Ireland Switzerland 5 0
Youth unemployment % 60 50 40 30 20 Greece Ireland Switzerland 10 0
Most recent 2016 data 50% 5% 40% 4% 30% 3% 20% 10% Ireland Greece 2% 1% Ireland Greece 0% 0%
Employment to population ratio, 15+ 70 65 60 55 50 45 Greece Ireland Switzerland 40 35
World Competitive Rank 1 10 19 28 37 46 55 64 73 82 91 100 109 61 65 67 71 Greece 83 90 96 91 81 81
But it is also a time of peril Reforms can get perverted by powerful interests: Egypt, Tunisia For successful reforms three elements are needed A government truly committed to free market reform or a strong civil society to keep it honest Good institutions or at least a commitment to build them: Georgia Most importantly: People must understand and support reform Advantage of meetings like this
What is the Economic Freedom of the World Index? An annual compilation of data representing factors which make a country economically free Authors: James Gwartney, Robert Lawson, and Joshua Hall A compendium of 42 government policies affecting economic freedom based on objective data or independent surveys A ranking of 156 countries plus Hong Kong, representing 95% of the world s population, according to the extent to which they permit their citizens to be economically free Now a collaboration of Institutes in 90 nations and territories
What is Economic Freedom Individuals have economic freedom when property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. An index of economic freedom should measure the extent to which rightly acquired property is protected and individuals are engaged in voluntary transactions. James Gwartney et al. 1996
Components of the Economic Freedom of the World Index Size of government and taxation Private property and the rule of law Sound money Trade regulation and tariffs Regulation of business, labour and capital markets
Talk about making a difference
Member Institutes of Economic Freedom of The World Network Afghanistan Economic and Legal Studies Organization (AELSO), Afghanistan Albanian Center for Economic Research (ACER), Albania Fundación Libertad, Argentina Centre of Political, Legal and Economic Researches and Forecasting (PLERF), Armenia Institute of Public Affairs, Australia TIGRA, Austria Center for Economic and Political Research, Azerbaijan The Nassau Institute, Bahamas Making Our Economy Right (MOER), Bangladesh Scientific Research Mises Center, Belarus Centre for the New Europe, Belgium Politicas Publicas para la Libertad (POPULI), Bolivia Instituto Liberal do Rio de Janeiro, Brazil Institute for Market Economics, Bulgaria Le Centre des Affaires Humaines (CEDAH), Burkina Faso The Cambodia Institute of Development Study, Cambodia Instituto Libertad y Desarrollo, Chile Center for China & Globalization, China Instituto de Ciencia Politica, Colombia Instituto para la Libertad y el Análisis de Políticas, Costa Rica Audace Institut Afrique, Côte d Ivoire The Institute of Economics, Croatia Liberální Institut, Czech Republic Center for Politiske Studier (CEPOS), Denmark Fundación Economía y Desarrollo Inc, Dominican Republic Instituto Ecuatoriano de Economía Política, Ecuador Institut Economique Molinari, France Society for Disseminating Economic Knowledge: New Economic School, Georgia Liberales Institut, Germany The Institute of Economic Affairs, Ghana Centro de Investigaciones Económicas Nacionales, Guatemala InafEcon-Institute of African Economics, Guinea Institut de Recherche pour la Liberté Economique et la Prospérité (IRLEP), Haiti Centro de Investigaciones Economicas y Sociales (CIES), Honduras Hong Kong Centre for Economic Research, Hong Kong Szazadveg Foundation, Hungary Centre for Social and Economic Research (RSE), Iceland Centre for Civil Society, India The Institute for Development of Economics and Finance, Indonesia Open Republic Institute, Ireland Jerusalem Institute for Market Studies, Israel Centro Einaudi, Italy Young Entrepreneurs Association, Jordan Central Asian Free Market Institute, Kazakhstan African Research Center for Public Policy and Market Process, Kenya Center for Free Enterprise, Korea Group for Legal and Political Studies, Kosovo Economic Policy Institute-Bishkek Consensus, Kyrgyz Republic Lithuanian Free Market Institute, Lithuania D'Letzeburger Land, Luxembourg Institute for Democracy and Economic Affairs (IDEAS), Malaysia Centro de Investigación para el Desarrollo A.C., Mexico Open Society Forum, Mongolia The Center for Entrepreneurship and Economic Development, Montenegro The Prosperity Foundation, Nepal The New Zealand Business Roundtable, New Zealand Initiative for Public Policy Analysis, Nigeria Center for Business and Society Incorporated (Civita), Norway International Research Foundation (IRF), Oman Alternate Solutions Institute, Pakistan Pal-Think for Strategic Studies, Palestine Fundación Libertad, Panama Centro de Investigación y Estudios Legales (CITEL), Peru The Center for Research and Communication, Philippines Centrum im. Adama Smitha, Poland Causa Liberal, Portugal Romania Think Tank, Romania Institute of Economic Analysis, Russia Free Market Center (FMC), Serbia The F.A. Hayek Foundation, Slovak Republic The Free Market Foundation of Southern Africa, South Africa Fundacio Catalunya, Spain Pathfinder Foundation, Sri Lanka Nile Institute of Economic Studies, Sudan Timbro, Sweden Liberales Institut, Switzerland Tajikistan Free Market Centre, Tajikistan Arthur Lok Jack Graduate School of Business, The University of the West Indies, Trinidad and Tobago Association for Liberal Thinking, Turkey The Ukrainian Center for Independent Political Research, Ukraine The Institute of Economic Affairs (IEA), United Kingdom CATO Institute, USA The Centre for the Dissemination of Economic Knowledge (CEDICE), Venezuela Research Center for Entrepreneurship Development, Vietnam Zambia Institute for Public Policy Analysis (ZIPPA), Zambia
World Average Economic Freedom Over Time Source: The Fraser Institute.
Why is Economic Freedom Important? They are a prerequisite for growth and development They are a prerequisite for broader human development
The impact on prosperity and development
GDP Per Capita (ppp), 2012 Per Capita Income and Economic Freedom Quartile $42.000 $39.000 $36.000 $33.000 $30.000 $27.000 $24.000 $21.000 $18.000 $15.000 $12.000 $9.000 $6.000 $3.000 $0 Most Free Quartile 2nd Quartile 3rd Quartile Least Free Quartile Most Free. Least Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013
Economic Freedom, the Poor, and Inequality
Income Share of the Poorest 10% and Economic Freedom Most Free. Least Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.
Income of the Poorest 10% and Economic Freedom Most Free. Least Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.
Economic Freedom, Governance, and Democracy
Political Rights (out of 10) Economic Freedom and Political Rights 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0 Most Free Quartile 2nd Quartile 3rd Quartile Least Free Quartile Most Free. Least Free Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2012, available at http://www.freedomhouse.org/.
Civil Liberties (out of 10) Economic Freedom and Civil Rights 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0 Freest Quartile 2nd Quartile 3rd Quartile Least Free Quartile Most Free. Least Free Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2012, available at http://www.freedomhouse.org/.
The impact of Economic Freedom on other indicators of well-being
Corruption Rating (out of 100) Economic Freedom and Corruption High scores indicate low corruption 70 60 50 40 30 20 10 0 Most Free Quartile 2nd Quartile 3rd Quartile Least Free Quartile Most Free. Least Free Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, 2014 available at http://www.transparency.org.
Life Satisfaction of of 10 Economic Freedom and Life Satisfaction 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 Most Free Quartile 2nd Quartile Sources: The Fraser Institute; Happy Planet Index 2014 3rd Quartile Least Free Quartile Most Free. Least Free
Life Expectancy at Birth and Economic Freedom Quartiles 85 80 75 70 65 60 55 50 45 Most Free Quartile 2nd Quartile 3rd Quartile Least Free Quartile Most Free. Least Free Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.
Literacy (% of population) Male Female 100 90 80 70 60 50 Most Free Quartile 2nd Quartile 3rd Quartile Least Free Quartile Most Free. Least Free Sources: The Fraser Institute; World Development Indicators 2013
Some of the great longer-term successes
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 9 Asia Economic Freedom Scores 8,5 8 7,5 7 6,5 6 Southeast Asia Korea, South Singapore 5,5 5
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Per Capita GDP $40.000 $35.000 $30.000 $25.000 $20.000 $15.000 Southeast Asia Korea, South Singapore $10.000 $5.000 $0
1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Sub-Sahara Africa Economic Freedom Scores 8 7,5 7 6,5 6 Botswana Sub-sahara Africa 5,5 5 4,5
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 Per Capita GDP $8.000 $7.000 $6.000 $5.000 $4.000 $3.000 Sub-Saharan Africa Botswana $2.000 $1.000 $0
Zambia: Economic Freedom 8 7,5 7 6,5 6 5,5 5 4,5 4 3,5
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Zambia: Per capita GDP $900 $850 $800 $750 $700 $650 $600 $550 $500
How is Greece doing?
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic freedom 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 Overall Switzerland Ireland Greece
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic freedom 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0 4,5 4,0 3,5 3,0 Size of Government Switzerland Ireland Greece
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic freedom 10 Rule of Law 9 8 7 6 5 Switzerland Ireland Greece
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic freedom 10 10 9 9 8 8 7 7 6 6 5 Sound Money Switzerland Ireland Greece
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic freedom 10,0 Freedom to Trade Internationally 9,0 8,0 7,0 6,0 5,0 Switzerland Ireland Greece
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic freedom 8,5 Regulation 7,5 6,5 5,5 4,5 3,5 Switzerland Ireland Greece
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic freedom 10,0 9,5 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0 4,5 4,0 3,5 3,0 Credit market regulations
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic freedom 9,0 Labor Market regulations 8,0 7,0 6,0 5,0 4,0 3,0 Switzerland Ireland Greece
Economic freedom Business regulations 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0 4,5 4,0 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 Switzerland Ireland Greece
Economic Freedom Increases prosperity for all Reduces poverty Improves quality of life
www.freetheworld.com www.fraserinstitute.org