Copyright 2014

Is Economic Freedom Related to Economic Growth?

Thomas Jefferson observed that "a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement."

Many economists and sociologists contend that the link between economic freedom and economic growth has been massively over played in the past 35 years. Understanding this issue 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 of increasing economic freedom at all costs.

Economic Freedom and Economic Growth

From 1980 to 2008 and during the 'Great Moderation,' the world underwent a massive period of economic and financial liberalization that led to greater globalization. That process commenced in the early 1980s in developed countries like the UK and US with Thatcherism and Reaganomics, respectively. Washington Consensus, at the behest of the World Bank and IMF mapped the economic liberalism developed in the West to emerging economies during 1988 to 1991 with disastrous consequences in terms of global economic and financial stability.