PRESS RELEASE
September 20, 2011JIMS-Logo
FOR IMMEDIATE RELEASE
Jerusalem Institute for Market Studies
www.jims-israel.org

Contact: Yarden Gazit
Yarden.Gazit@jims-israel.org 
 
054-5887769

Israel Ranks 83 of 141 Countries in Economic Freedom

 

Decline of Two Spots from Last Year

 

Israel Ranks 83 in the world in terms of economic freedom, according to the Economic Freedom of the World Annual Report issued today (Tuesday, Sept. 20). Since 2005 Israel's ranking has fallen 35 spots, according to the Jerusalem Institute for Market Studies (JIMS), which publishes the report in Israel. Last year, Israel ranked 81.

 

"The report puts recent middle class protests over the cost of living in context," says Corinne Sauer, JIMS' Director. "The level of economic freedom in Israel is in decline. The rise in the cost of living is directly linked with lack of economic freedom and competitiveness."

 

The automobile market as an example

Sauer notes that lack of freedom in the subcategory measuring tariff rates on certain products - Israel is ranked 121 - is felt by every Israeli buying a car. Taxes on imported cars in Israel are five times higher than in most European countries. High taxes and import barriers mean there is little competition in the automobile market, and Israelis pay more and have less choice than they would in a competitive market.

 

The banking sector

"Entry barriers to new banks, whether local or international, and the regulatory burden imposed on banks necessarily lead to cartels and higher prices," Sauer says. Sectors in which consumers enjoy freedom of choice are those in which they also enjoy lower prices. Israeli consumers discovered this long ago when the price of international telephone calls fell as soon as competition with Bezek was allowed.

 

Size of government

The area in which Israel is least economically free is the size of its government, for which it received a score of 4.6 out of 10 (ranking 127). The score in this category is based on marginal tax rates, the rate of transfer payments relative to GDP, and government ownership of enterprises and investments.

 

Comparison to social-democratic countries

But even compared with social-democratic countries with large governments, Israel lags in many areas. Israel scored 6.0 (ranking 53) for its legal system and protection of property rights, for which Scandinavian countries hold 5 out of the top 7 rankings.

 

Regulation and bureaucracy

Israel ranked 107 in terms of regulation, far behind countries such as Iceland, Denmark, Sweden and the Netherlands. It received particularly low scores for administrative requirements (3.5) and bureaucratic costs (4.2). For competition from foreign banks, Israel received a score of 6 (ranking 94), while the Scandinavian countries received a score of 8 or 9. For the share of deposits in privately held banks Israel received 5 out of 10 points (ranking 97), while all Scandinavian countries received a perfect score.

 

"One of the demands made by Israel's protesters is to adopt the Nordic welfare state model," says Sauer. "But comparing the Israeli economy to the Nordic economies shows that Israel has a long way to go in liberalizing its economy if it wants to be like them. Such liberalization would include reforms to increase the efficiency of the legal system, reduce bureaucracy and allow a competitive banking sector."

 

Category

Israel

Sweden

 

Size of government

 

4.6

 

3.2

Legal system & protection of property rights

6.0

8.4

Protection of property rights

6.2

8.8

Legal enforcement of contracts

3.2

4.7

Restrictions on the sale of real    property

5.6

8.9

Freedom to trade internationally

7.1

7.6

Sound money

8.8

9.6

Regulation

6.2

7.3

Administrative requirements

3.5

5.1

Competition from foreign banks

6.0

8.0

Share of deposits in privately held banks

5.0

10.0

 

 

Israel received its best scores for sound money (8.8, ranking 55), and freedom to trade internationally (7.1, ranking 45). Differences in tariff rates on certain products such as cars relative to other products (3.8), and the small size of the trade sector (2.1) prevented it from receiving a higher score.

 

The report is based on data for 2009, and ranks Hong Kong first, ahead of Singapore, New Zealand and Switzerland. The least economically free country is Zimbabwe, followed by Myanmar, Venezuela and Angola.

 

Despite a correlation of economic freedom and economic growth, the response of many countries to the global economic crisis has decreased the level of global economic freedom. The United States, for example, fell three spots in the rankings because of higher spending and borrowing and increased regulation. It now ranks 10.

 

The Economic Freedom of the World Report was created by Nobel Laureate Milton Friedman and Professor Paul Walker in the 1970s. It is prepared by Canada's Fraser Institute in cooperation with independent institutes in 85 countries, including JIMS in Israel. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property. Research shows that individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity, greater individual freedoms, and longer life spans.

 

 

The full report can be found at www.freetheworld.com. For further information visit JIMS' website: www.jims-israel.org or call Yarden Gazit: 054 588 7769.

 

 

About the Jerusalem Institute for Market Studies


The Jerusalem Institute for Market Studies (JIMS) is an independent, non-profit economic policy think tank whose mission is to promote social progress in Israel through economic freedom and individual liberty. JIMS' website is www.jims-israel.org