Ireland’s reputation as one of the most economically free states to conduct business has been damaged by the massive state intervention to support the banking system, according to a report published today.
The Fraser Institute's Freedom of the World report for 2011 showed Ireland’s score as a free economy slid from 7.74 to 7.38 out of a possible 10.
As a result, Ireland’s ranking among the most economically liberal states in the world fell 14 places to 25th, placing it behind states like Lithuania and Panama of the 142 surveyed.
Individual countries are assessed according to 42 criteria including the percentage of the economy accounted for by Government activity, the presence of price controls, the legal structure and security of property rights, the freedom to trade, and the regulation of credit and business.
The main reason for Ireland’s decline was blamed on the State’s increased shareholding in the main banks which saw the country’s score in terms of the size of government drop to 4.6 from 5.28 in the last year’s report.
Director of the Dublin-based public policy institute Open Republic, Paul MacDonnell, said: “Ireland's Government has taken extraordinary measures to intervene in the economy to support the banking system and the government has dragged its feet over domestic economic reform, particularly reform in the public sector.”
“If anything the Government has sought to extend the reach of the state into the private sphere as a strategy for the protection of vested interests.”
“For example in its approach to ESB privatisation it is performing to the letter of its agreement with the ‘Troika’ to privatise State assets but only in a way that ensures the state body will continue to benefit at the expense of competition and consumers.”
Hong Kong was again ranked first for economic freedom, followed by Singapore and New Zealand. The United States experienced one of the largest drops in economic freedom, falling to 10th place overall from sixth in 2010.
The report found that overall levels of economic freedom decreased around the globe.
This year’s report shows that the average economic freedom score fell to 6.64 in 2009, the lowest in nearly three decades, from 6.67 in 2008.
“In response to the American and European debt crises, governments around the world are embracing perverse regulations and this has huge, negative implications for economic freedom and financial recovery,” said Mr MacDonnell.
“Much of this decline is a result of higher spending and borrowing on the part of the US government, and lower scores for legal structure and property rights.”
