Economic Freedom and Economic Growth: A Note

Abstract

The purpose of this research note is to re-examine the link between economic freedom and economic growth because the connection has been massively over played in the past 35 years, using a sample of 175 countries. Answering this question has important socioeconomic policy implications as economic freedom as a means of fostering higher economic growth has been high on the priority list of leading countries like the UK and US. Indeed, virtually every country in the world has embarked on this agenda either voluntarily or at the behest of the World Bank and IMF through Washington Consensus. A small, yet significant association is found in line with recent studies. Despite this, the World Bank and the IMF have built their agenda on a strong assumed association. From the analysis in this research note, we need to be careful about over extrapolating the link between economic freedom and economic growth. Although the analysis is rudimentary yet robust in this research note, it appears that no such consideration was undertaken by the IMF and World Bank before Washington Consensus bulldozed its way around the developing parts of the globe, leading to major economic and financial disruption. Arguably this disarray continues today due to the ideological nature that economic freedom has morphed into.