Economic freedom has increased in Lithuania but it still fails to outpace its neighbours

VILNIUS, LITHUANIA, 07 09 2006 The level of economic freedom in Lithuania has increased in 2004, shows the Economic Freedom of the World: 2006 Annual Report by the Fraser Institute, Canada, released today by the Lithuanian Free Market Institute and other independent organizations in 70 countries throughout the globe. According to the report, Lithuania ranks 40th (in 2003 it stood 45th) among 130 states, however, it still lags behind other Baltic countries – Estonia who fell from 9th to 12th place, and Latvia who climbed by two positions to 35th place. Lithuania moved from 93rd to the current 40th place during the period from 1995 through 2004, but remains the lowest ranking country among the Baltic States.
In 2004, as compared to 2003, Lithuania improved its score in two areas out of five – the size of government and regulation of credit, labour and business. However, in the remaining three areas (legal structure and security of property rights, access to sound money; and freedom of exchange with foreigners) Lithuania received slightly poorer scores.
Foreign aid does not have great impact in helping people in poor nations escape poverty
In new research published in this year’s report economist William Easterly of New York University compares the impact of economic freedom and foreign aid on economic growth in the poorest nations. Easterly demonstrates that foreign aid has no positive impact on economic growth in the poorest nations. His research shows that economic freedom has a strong and positive impact on prosperity in general and on helping lift nations out of poverty.
“The demand for foreign aid is typically made in the absence of any empirical evidence that it leads to benefits for recipient nations and without asking whether there are better approaches to poverty reduction for the international community to support,” said co-author of the report, James Gwartney, Professor of Economics at Florida State University. “What the research in this edition of Economic Freedom of the World suggests is that economic freedom, rather than foreign aid, does have a powerful positive impact and is a better approach.”
“A key component of the success created by economic freedom is the ability to experiment, find economically successful areas of production, and prune those that do not succeed so that resources may be transferred to where they are most productive,” said Fred McMahon, The Fraser Institute’s director of trade and globalization studies.
International rankings
In this year’s index, Hong Kong retains the highest rating for economic freedom, 8.7 out of 10, closely followed by Singapore at 8.5. New Zealand, Switzerland, and the United States tied for third with ratings of 8.2.
The United Kingdom and Ireland are tied for the 6th   place. Canada receives a score of 8.0 and ranks 8th.  Iceland and Luxembourg are tied for 9th place.
 The rankings of other large economies are Germany, 17; Japan, 19; France, 24; Italy, 45; Mexico, 60; India, 53; China, 95; Brazil, 88; and Russia, 102.
Among those nations that have made substantial gains in economic freedom since 1985 are Hungary, Iceland, El Salvador, Zambia, Poland, Bolivia, Israel, Ghana, Uganda, Peru, and Nicaragua—though some of these began at very low levels or have experienced ups and downs over the period. Among those nations that have registered significant losses in economic freedom since 1985 are Myanmar, Venezuela, and Zimbabwe.
Most of the lowest-ranking nations are African, Latin American, or former communist states. Botswana’s ranking of 35 is the best among continental sub-Saharan African nations. Chile, ranked at 20, has the best record in Latin America.
The bottom nations were the Central African Republic, Rwanda, Burundi, Algeria, Guinea-Bissau, Venezuela, Democratic Republic of Congo, Republic of Congo, Myanmar, and Zimbabwe. However, a number of other nations for which data are not available, such as North Korea and Cuba, may have even less economic freedom.
About the Economic Freedom Index
Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom.
The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of privately owned property.
This is the 10th edition of Economic Freedom of the World. This year’s publication ranks 130 nations for 2004, the most recent year for which data are available. The report also updates data in earlier reports in instances where data have been revised.
Thirty-eight components and sub-components are used to construct a summary index and to measure the degree of economic freedom in five areas: (1) size of government; (2) legal structure and protection of property rights; (3) access to sound money; (4) international exchange; and (5) regulation.
The annual report is published in conjunction with the Economic Freedom Network, a group of independent research and educational institutes in over 70 nations.