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Prosperity and Economic Freedom

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LandJ posted on Sat, Apr 6 2013 11:17 AM

Libertarians say that economic freedom is prerequisite for prosperity. 

Hong kong is currently the most economically free country. http://www.heritage.org/index/ranking

However, it is demonstrated as the 18th country in prosperity index. http://www.prosperity.com/Ranking.aspx

a. Why? Shouldn't it 1st in prosperity index? What are the factors that prevent this country from high positions in prosperity index?

 

According to the same link, it is illustrated that the first 3 countries in prosperity are Scandinabian countries.  1 Norway, 2 Denmark, 3 Sweden

b. How Norway is 1st in prosperity since it is 31th in economic freedom?

c. How Denmark is 9th in economic freedom index? Isn't their government Social Democratic with high taxation ?

d. How Sweden is 3rd in prosperity index, since it is not in the first positions (18th) in economic freedom index?

 

 

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Economic freedom is how you make the most of what you have. If other countries have much more to begin with, they might wind up with more. So:

a. Hong Kong has little arable land and few natural resources. [wikipedia].

b. Norway is the fifth largest oil exporter and third largest gas exporter in the world. [wikipedia].

c. That's a question for those who made up the index.

d. Sweden has timber, hydropower and iron ore. [wikipedia].

 

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Can economic freedom really be quantified?  Are heritage foundation estimates accurate?  How do you explain the incredible growth in living standards in Hong Kong during the latter half of the 20th century, but for their economic freedom?  Also the economic freedom present immediately right now does not translate into the economic status of a nation right now, but rather the prevelance of economic freedom in the past translates into the wealth of a nation presently.  These things take time.

 

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Prosperity is something that is achieved in the very long term, after a lot of capital has been accumulated.

Economic freedom can be achieved faster, before prosperity.

Generally speaking, when a poor country moves towards more economic freedom, it is expected to be more prosperous in the long run than it would otherwise be had it remained economically unfree.

Such a statement can be observed by the striking contrast in the development of regions like North and South Korea, East and West Germany, Zimbabwe and Botswana, Argentina and Chile, Cuba and Puerto Rico, Taiwan and Mainland China.

At the onset these paired regions had similar level of prosperity, and similar geographical, ethnical and demographical compositions. Often times the unfree states starting at a higher position and being eventually (and invariably) overtaken by their freer counterparts.

Those are the significant comparisons. A comparison between Norway and Hong Kong is a comparison between an apple and an orange.

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And if you think the measurement of economic freedom is bad, the measurements for wealth are even worse.  And these prosperity indexes tend to overweight "government provided" services.  If you look at the prosperity survey only two of the categories relate to economics? 

That being said, Norway has huge oil reservers and a lot of mineral extraction for a country with a very small population.  Denmark is significantly freer in the respect for private property and contract than say the USA or the UK.  As bad as the wealth survey is, it rated Denmark number 1 for entrepreneurship which is directly related to private property.

Considering Hong Kong, the place unlike Norway is full of millions and has very little in the way of natural resources.  Add into the equation that it is literally attached to a Communist Country so its ability to interact with its neighbor China until the death of Mao has been limited.  And look at number two: Singapore where growth has been much faster and you find that there is an increasing amount of cross border trade.

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