Have India and China improved their economic freedom ratings?
The Cato Institute has released the latest international economic freedom rankings (for year 2003). While it is clear that most of India’s neighbours slipped in this year’s rankings, India’s own position is not as clear. For example, while Cato’s EFW 2004 ranks India at number 68 for year 2002, EFW 2005 ranks it at 62 for the same year. That suggests that going by its original measure, India’s has climbed two steps in the rankings. But going by its latest report, India has slipped four notches. China is similarly affected.
Country EFI Rank (2005) EFI Rank (2004) EFI Rank (2003) India 66 6862 71 Sri Lanka 76 7880 71 China 86 9084 84 Bangladesh 96 8384 87 Pakistan 98 9093 101 Nepal 112 9493 87 Myanmar 127 123 122
India leads its neighbours in terms of economic freedom. But that’s not enough. It is already clear that there is a clear correlation between economic freedom and human development. There’s no reason for the Indian government to delay bringing on further economic liberalisation.
Related Link: Dan Drezner discusses Cato’s findings that compared to democracy, economic freedom is much more likely to prevent war. He quotes Eric Gartzke’s observations, which look suspiciously like the Golden Arches theory of conflict prevention.
The Indo-Pakistani conflict has regularly erupted in warfare but leaders in both countries have recently come to accept that their more open economies suffer greatly from active hostilities. The growing dependence on international capital and the declining value of disputed territory relative to technological innovation means that the impetus to make peace has increased and the value of war has declined. [Dan Drezner]
The Acorn has always had reservations about such theories, especially when applied to Pakistan.