Economic Freedom & Wealth
Economic efficiency and growth is impeded by these restrictions. Countries like the US and Canada whose tariff rates are very low enjoy greater economic freedom and production according to comparative advantage. On the other hand, countries with many trade restrictions have slow economic growth and wealth creation.
Government Spending and Interference Government’s role in a free economy is one of support and protection. Governments have had a long history of imposing constraints on economic activities. Government spending as a percentage of GDP is one measure of the impact of government spending on the economic freedom of the country. Hong Kong, which ranks number one on the Index, has total government expenditures of 18.6% of GDP. In comparison Cuba, ranked near the bottom of the Index at 177, has total government expenditures equaling 78.1% of GDP. This reflects the continued government dominance of Cuba’s economy. Government spending reduces the resources available for private-sector use. The higher the government spending within the country, the higher the opportunity cost of these lost resources. “In addition, governments, because they operate outside of market constraints and competition, are typically susceptible to excessive bureaucracy, corruption, and waste” (Miller, 2011). Countries that were able to reduce government spending over the last couple of years experienced economic growth as