Economic Freedom: The Way for World Economies to Grow

By Christos Papoutsy

CHRISTOS PAPOUTSY, prior director of U.S. Arbitration & Mediation of New England's Northern New England Office, has over thirty years of business experience to his name as owner, president and CEO of several companies. He has successfully mediated commercial and community actions in both New Hampshire and Massachusetts. Mr. Papoutsy is a member of the New Hampshire Mediators Association.
The Index of Economic Freedom, a systematic measurement of economic freedom in countries throughout the world, has been published annually since 1995 by the Heritage Foundation. The measurement is drawn from a set of objective economic criteria, involving fifty variables divided into ten categories. Those ten categories deal with: trade policy; the fiscal burden of the government; government intervention in the economy; monetary policy; capital flow and foreign investment; banking and finance; wages and prices; property rights; regulation; and black market activity. The index reveals that those countries with the most economic freedom are more prosperous than are those with less economic freedom and also have higher rates of long-term growth. The region encompassed by North America and Europe remains the world's freest economically.

(The World Bank's 2001 World Development Indicators support this theory of economic freedom, reporting that the annual per capita income in purchasing power is U.S. $23,325 in free economies; $11,549 in mostly free economies; $3,238 in mostly unfree economies; and $3,829 in repressed economies.)

"Economic freedom is defined as the absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself."

The Index of Economic Freedom considers a broad array of factors, including:

Corruption in the judiciary, customs services, and government bureaucracy

Non-tariff barriers to trade, such as import bans and quotas, as well as strict labeling and licensing requirements

The fiscal burden of government, which encompasses income tax rates, corporate tax rates, and government expenditures as a percent of output

The rule of law, efficiency within the judiciary, and the ability to enforce contracts

Regulatory burdens on business, including health, safety, and environmental regulations

Restrictions on banks regarding financial services, such as the selling of securities and insurance

Labor market regulations, such as established work weeks and mandatory separation pay

Black market activities, including smuggling, piracy of intellectual property rights, and the underground provision of labor and other services

Greece ranked 55th with a score of 2.80, out of one hundred fifty-five countries in the 2002 Index of Economic Freedom. It has been categorized as a mostly free economy. Its scores from the past seven years reflect a steady improvement. (For more on this, see

The 2001 scores for Greece in the Index's ten categories are as follows:
(Index Rating Scale 0 to 5.0)
(lower = better rating)

Trade policy: 2 -- Stable (low level of protectionism.)

Fiscal burden: 4 -- Income and corporate taxation (high tax rate.) Greece's highest income tax is forty-five percent; the highest corporate rate is forty percent. Government expenditures amounted to 43.9% of the GDP.

Government intervention in the economy: 2 -- Better (low level of intervention.) The government consumes fifteen percent of the GDP.

Monetary policy: 2 -- Stable (low level of inflation.) From 1991 to 2000, Greece's weighted average annual rate of inflation was 3.35 percent.

Foreign investment: 3 -- Worse (moderate barriers to foreign investment.) Economist intelligence reports that prospective foreign investors find the Greek bureaucracy obstructive. Language barriers and poor organization are major impediments during initial investment stages.

Banking and finance: 3 -- Stable (moderate degree of restriction.) Although the government has liberalized the banking system considerably as a condition of membership in the European Union, it still owns a significant number of banks.

Wages and prices: 3 -- Stable (moderate degree of intervention.) The government imposes price controls on pharmaceuticals and can set minimum prices for fuel and private school tuition fees.

Property rights: 3 -- Worse (moderate degree of protection.) The court system is a highly time consuming means for enforcing property and contractual rights.

Regulation: 3 -- Stable (moderate degree of regulation.) The Greek government is very bureaucratic and imposes many burdensome regulations. Greeks believe officials in charge of issuing conservation permits take bribes. Although the law against bribery is strict, enforcement is not.

Black market: 3 -- Stable (moderate degree of activity.) Greece's 2001 score from Transparency International is 4.2.

Background information on the Greek economy

Population: 10,538,000

Land area: 131,940 square kilometers

Major industries: tourism, food and tobacco processing, textiles, chemicals, metal products, petroleum

Major agricultural products: wheat, corn, barley, sugar beets, olives, tomatoes, wine, tobacco, potatoes, meat, dairy products

Gross domestic product: $133 billion

GDP growth rate: 3.4%

Export of goods and services: $27 billion

Major export trading partners: Germany 15.9%, Italy 13.5%, United Kingdom 6.4%, United States 5.7%

Imports of goods and services: $37 billion

Major import trading partners: Italy 15.6%, Germany 15%, France 9.2%, Netherlands 6.4%

Foreign direct investment (net): N/A

Economic Liberty and Freedom is the engine for World Economies to succeed and grow. The Index of Economic Freedom provides a data based on empirical study and a careful theoretical analysis of the factors that most influence the institutional settings of economic growth.

World Score Score


The Heritage Foundation

Transparency International