TCS Daily


West Is Freer, But East Improves Faster

By Carlo Stagnaro - January 31, 2005 12:00 AM

Most people tend to believe that Europe and the European Union are the same thing. Such a claim may be true in the sense that the EU is a cartel of the governments of the old Continent. But, if you look at the Heritage Foundation-Wall Street Journal's Index of Economic Freedom 2005, you'll realize it is completely false as far as liberty is concerned. This is especially significant as this year's index pays more attention than before to Europe, perhaps as a consequence of the partnership the editors could develop with a few European think tanks, including the Centre for a New Europe (Brussels), F.A. Hayek Foundation (Slovakia), Institute of Economic Affairs (UK), Institute for Market Economics (Bulgaria), and Istituto Bruno Leoni (Italy).

In fact, while Europe is "leading the push toward more economic freedom", the dominant EU countries did not have a good performance last year. Nor have they been significant champions of economic freedom, to tell the truth. In fact, this year's Index show that small countries tend to be freer in Europe; it also shows that Eastern European countries tend to improve faster in terms of economic freedom than Western ones. France and Germany, the most important countries in the EU decision making, rank respectively 44 and 18; compare them with, say, Estonia and Luxembourg, that rank respectively 4 and 3.

The following tables show the scores and rankings for the EU15 and EU25 countries.

Old European Countries

Country

Score 2005

Ranking 2005

Score 2004

Ranking 2004

Category

Delta

Population

Austria

2.09

19

2.08

20

Mostly Free

+0.01

8,145,400

Belgium

2.13

21

2.19

22

Mostly Free

-0.06

10,372,000

Denmark

1.76

8

1.80

8

Free

-0.04

5,383,000

Finland

1.90

15

1.95

14

Free

-0.05

5,206,300

France

2.63

44

2.63

44

Mostly Free

=

61,539,641

Germany

2.00

18

2.03

18

Mostly Free

-0.03

82,536,700

Greece

2.80

59

2.80

54

Mostly Free

=

11,018,400

Ireland

1.70

5

1.74

5

Free

-0.04

3,963,600

Italy

2.28

26

2.26

26

Mostly Free

+0.02

57,321,000

Luxembourg

1.63

3

1.71

4

Free

-0.08

448,300

Portugal

2.44

37

2.38

31

Mostly Free

-0.04

10,407,500

Spain

2.34

31

2.31

27

Mostly Free

-0.03

41,550,600

Sweden

1.89

14

1.90

12

Free

-0.01

8,940,800

The Netherlands

1.95

17

2.04

19

Free

-0.09

16,192,572

United Kingdom

1.75

7

1.79

7

Free

-0.04

60,270,708

New European Countries

Country

Score 2005

Ranking 2005

Score 2004

Ranking 2004

Category

Delta

Population

Cyprus

2.13

21

1.95

14

Mostly Free

+0.18

765,000

Czech Republic

2.36

33

2.39

32

Mostly Free

-0.03

10,200,300

Estonia

1.65

4

1.76

6

Free

-0.11

1,356,045

Hungary

2.40

35

2.60

42

Mostly Free

-0.20

10,142,400

Latvia

2.31

28

2.36

29

Mostly Free

-0.05

2,338,000

Lithuania

2.18

23

2.19

22

Mostly Free

-0.01

3,469,000

Malta

2.33

29

2.51

37

Mostly Free

-0.18

397,000

Poland

2.54

41

2.81

56

Mostly Free

-0.27

38,218,500

Slovakia

2.43

36

2.44

35

Mostly Free

-0.01

5,379,200

Slovenia

2.64

45

2.75

52

Mostly Free

-0.11

1,996,433

Such data allow us to draw the following conclusions.

The West Is Freer, But the East Improves Faster

On average, Western European countries are freer than Eastern ones: the former score 2.09, while the latter score 2.29. That is not surprising. Most Eastern countries were governed by communist tyrannies 15 years ago, and before gaining more liberal institutions they had to go through chaotic and unstable governments. However, the divide between the West and the East is decreasing: in 2004 the former scored on average 2.10 and the latter 2.38. This means that the West improved its economic freedom by less than 0.04 points, while the East gained almost 0.08. The median rank of the East is 29.5 (32.5 last year) and 21.6 in the West (20.7 last year). The East gained 3 positions, while the West lost 1 in a one year time span.

Small Countries are Freer

Evidence suggests the smaller, the freer. On average, small countries (population size less than 10,000,000) scored 2.05, as larger countries score 2.30. Out of 8 European countries that are ranked as "free", 6 (75%) are small countries.

Smaller countries tend to be more free-market oriented for several reasons. In smaller states, citizens can better understand how tax money is spent and democracy can work better: politicians who waste public resources, either for personal or ideological reasons, face greater difficulty getting reelected. Antonio Martino, the Italian minister of Defense, points out that "generally less regulated countries are the small ones."


 

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