PETALING JAYA: Economic freedom produces faster economic growth, higher living standards, and even increased happiness as people gain control of their lives, according to a research review released today by the Center for Market Education (CME) and the Fraser Institute.
CME CEO Dr Carmelo Ferlito said research shows that increasing economic freedom in Malaysia would vastly improve the lives of the people of Malaysia.
“Such a research finding is particularly important because the policy evolution of the last three years in the country went in the direction of an increasing role of the government interference with the market process, and therefore in the direction of diminishing people’s welfare. This was particularly evident in the labour legislation, in the ‘selective’ approach to foreign direct invesments and in price ceilings,“ Ferlito said in a statement.
In the academic world, there’s a growing consensus that increased economic freedom correlates with positive outcomes for people in countries around the world, according to Robert A. Lawson, professor of economics at Southern Methodist University and author of Economic Freedom in the Literature-What Is It Good (Bad) For?, a paper released by CME and the Fraser Institute.
The review examined 721 empirical papers (published between 1996 and 2022) using the Economic Freedom of the World index, which measures economic freedom – the ability of individuals to make their own economic decisions – by analysing policies and institutions of jurisdictions and assessing indicators such as regulation, size of government, property rights, trade openness, government spending and taxation.
More than 50% of the papers reported good correlations between economic freedom and good outcomes (faster economic growth, higher living standards, reduced conflict) while about 45% report mixed/null/uncertain results. Only one out of 20 papers reported a bad outcome.
The research not only shows that economic freedom boosts prosperity and economic growth, but also leads to positive outcomes in a number of other areas, Lawson noted.
“Individuals and families, when free to do so, make the best decisions for themselves, not crony elites or over-powerful government.”
The majority of studies in the following areas found economic freedom was related to reduced conflict, wars, civil unrest, and terrorist attacks; increased entrepreneurship & innovation; stronger economic growth; improved human rights & social development; boosted income & productivity; improved labour market outcomes such as reduced unemployment and increased wages and participation.
“Personal choice, voluntary exchange and open markets remain the cornerstones of economic freedom, which is key to prosperity worldwide,“ Lawson said.
“In order to boost sound economic growth in a moment of global uncertainty and rising price tensions, Malaysia needs to rediscover its vocation to economic openness and business-friendly attitude, and to recognise the superiority of the market process outcomes over government control and interference.”