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Heritage Foundation

Essay by   •  September 25, 2012  •  Essay  •  422 Words (2 Pages)  •  1,188 Views

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The Heritage Foundation and the Wall Street Journal partnered in 1995 to track individual countries economic freedom based on a points scale, with 100 being the ideal mark. The research conducted by these two has proven Adam Smith's theories on liberty, prosperity, and economic freedom "by creating 10 benchmarks that gauge the economic success of 184 countries around the world"1. The study researches a country's trade activity, monetary policy, foreign investment, banking, wages, property rights, regulation, and taxation. Limited government is ideal in having a higher score on the EFI.

Many reputable companies and economist use this index to formulate ideas on how each economy is running and how they compare to each other. By looking at the size of government, government spending, and government corruption, the Economic Freedom Index details how the market presently is and what might in the forecast. On this note, the index is sufficient in research. However, there are also criticisms stating economic freedom cannot be calculated without including "human development, expanding market opportunities and maintaining democracy".2 One example of how the index fails comes from a 1997 ranking on the country Bahrain. During this year, Bahrain ranked the third freest economy in the world. They consisted of monetary stability and liberal financial markets. However, the economy is very much dominated by government interference. "45% of all consumption expenditures are determined by the government rather than by the personal choices of its citizens." 2 . According to the Library of Economics and Liberty, "the key ingredients of economic freedom are personal choice, voluntary exchange, freedom to compete in markets, and protection of person and property."3 The country of Bahrain may be prospering and show overall signs of economic freedom, but the citizen have not had a choice. How can they be considered an economically free country when the government interference controls almost half of their expenditures? By central planning and political power, Bahrain single-handedly uses government to control their economy.

The Heritage Foundation and the Wall Street Journal have, undoubtedly, pinpointed very important facts that increase growth and economic freedom throughout the world. The information they gather and report for each country is very factual as well. They are considered reputable by many research and media companies, and they are known as an "American conservative think tank". The reason for this alternate view is to show there are other factors that affect success and economic freedom. Other factors, such as human development and market opportunities, should be considered by companies when looking at a country's market.

1 http://www.heritage.org/index/default

2 http://world.std.com/~mhuben/ief.html

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