The Director General of the Institute for Economic Studies, Gregorio Izquierdo, has presented the report económica Economic freedom and freedom of business in Spain. Spain 2020 Economic Freedom Index ', edited and adapted for Spain by the IEE. For twenty-six years, the Heritage Foundation, led by The Wall Street Journal, publishes the results of this well-known index obtained from official information from institutional entities and accredited sources.
The report points to the free exercise of the business function as the main engine of wealth generation of a society, which is reflected in the creation of employment and well-being within it. For this reason, the right to freedom of enterprise is one of the basic institutions on which the most advanced societies are based. Business freedom is an engine of prosperity in itself, as it enables companies to learn, discover and meet new needs, while promoting innovation in processes and results, as well as efficiency through competition. Business freedom is not antagonistic to social justice but quite the opposite. You cannot distribute what has not been generated. The greatest social justice is the opportunity to generate the greatest possible employment, and this is the result of an environment that promotes freedom of business.
The freedom of enterprise is inherently linked to a series of principles that allow its full exercise, such as legal security, the guarantee of private property, the free market, and the quality of the regulatory framework. To these four principles should be added a fifth, which is the principle of flexibility, especially relevant in a context such as the current one, where the ability to adapt to a new complex and changing environment is particularly necessary.
Economic freedom is closely linked to economic and social progress, presenting a remarkable correlation with the per capita income of a country. Countries with greater economic freedom show higher long-term growth rates, as well as higher levels of innovation. In addition, economic freedom is also highly correlated with other variables that transcend the economic, but which are very relevant in an advanced society, such as democratic quality, respect for the environment, poverty reduction and human development.
The results of the Economic Freedom Index (ILE) for 2020 show that the country with the freest economy in the world is Singapore, with 8.9 points (on a scale of 0 to 10, 10 being the maximum value of economic freedom), followed by Hong Kong and New Zealand. At the opposite extreme are Cuba, North Korea, Venezuela and Bolivia. The average grade assigned by the ILE of the 180 countries is 6.2 points, Spain occupying 58th place, one less than the previous year.
From the Institute of Economic Studies, the Index for the Spanish economy has been exhaustively analyzed, evaluating its results from 0 to 10. The score for Spain has been 6.7 points, ranking 30th out of 37 OECD countries and the 21 of the EU-27, which includes it in the segment of moderately free economies. Being in the lower middle zone of the classification, Spain is surpassed by most of the developed countries, very distant from those with a favorable framework for economic freedom. The room for improvement for Spain is large. Compared to the EU average, economic freedom should increase by a minimum of 6%, while the increase should be at least 9% to achieve OECD average levels. Similarly, to be homologated with the best practices in our comparative environment, Spain would have to improve 26% in terms of economic freedom
The IEE has also analyzed the temporal evolution in Spain of the ILE, which has registered an increase of 8.6% in the last 25 years, which shows the limited progress of the Spanish economy to position itself as a freer economy. The analysis reflects two stages. The first (1995-2010), where the opening of the markets and the size of the State were conditioned by the incorporation of Spain into the EMU. And the second phase (2010-2020), marked by the impact of the financial and debt crisis that affected the Spanish economy.
The ILE considers four broad categories to assess the attributes associated with economic freedom. The first is the rule of law, which assesses property rights, which in Spain is high (7.5 points), while judicial effectiveness and the absence of corruption have low ratings compared to the more advanced economies, for the slowness of judicial processes and resolutions and the less transparency existing in the source of financing for political parties. The second pillar addresses the size of the State, where public spending is valued, with a grade of 4.8 points, being the worst figure in this block. Budgetary strength is also valued here, ranking 35th out of 37 OECD countries and the last place in the EU, in addition to the tax burden, which is ranked 166th out of 180 countries worldwide. The third pillar is the efficiency of regulation, which includes freedom of enterprise, labor flexibility, and monetary freedom. Freedom of enterprise indicates an average assessment identical to the ILE (6.7 points), but when its position is observed with respect to the OECD countries (34/37) and the EU (21/27), its low level stands out. This same behavior is observed in the subcomponent of labor flexibility, while, on the contrary, monetary freedom presents a remarkable record. And the last pillar is the opening of the markets that includes commercial freedom, investment freedom and financial freedom, subcomponents that register high valuations (commercial freedom, 8.6 points; investment freedom, 8.5 points; and freedom financial, 7 points).
