Freedom, Rough Patches and The Five Bs

IR&M

Alexander Ineichen

Research

48 Pages

IR&M examines how economic freedom influences growth, income levels, and overall resilience across global economies. The paper highlights a notable decline in global freedom scores in 2018, challenging the assumption of steady progress and raising concerns about future economic momentum.

Key Takeaways

Income Disparity Gap: “Free” economies average GDP per capita above $60,000 versus under $6,000 in “repressed” countries, implying a roughly 10x difference tied to institutional quality.
Freedom Score Decline: The global average fell to 61.1 in 2018, with 89 countries declining year over year, signaling a broad-based slowdown in reform momentum.
Capital Attraction Effect: Economies scoring above 80 in freedom metrics see foreign investment inflows up to 3x higher than lower-scoring peers due to stronger legal and regulatory frameworks.
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