TORONTO, ON-Alberta has the highest level of economic
freedom in Canada, and the second highest level in North
America, trailing only Delaware and tied with Texas, according
to a new study from independent research organization the
But the rest of Canada badly trails Alberta. Ontario has the
second highest economic freedom ranking in Canada, but is 51st
overall in North America, trailing every US state except West
Virginia. British Columbia (52nd), Newfoundland (tied for 53rd)
and Saskatchewan (tied for 53rd) follow Ontario.
"Economic freedom is one of the main drivers of prosperity
and growth. Provinces with low levels of economic freedom
reduce the ability of their citizens to prosper economically,
leaving people poorer than they need be," said Fred McMahon,
co-author of the report and director of globalization studies
at the Fraser Institute.
"Provinces with high levels of economic freedom are those
that tend to have lower taxes, smaller government, and flexible
labor markets. These conditions create jobs and opportunities
leading to economic growth."
The report points out the clear connection between economic
freedom and prosperity. The five provinces with the highest
levels of economic freedom had an average per capita GDP in
2005 of $47,472 compared to the five provinces with the lowest
levels of economic freedom, where average per capita GDP was
The Fraser Institute's peer-reviewed study,
Economic Freedom of North America: 2008 Annual Report, measures the impact of economic freedom on the level of
economic activity and the growth of economic activity in the 10
Canadian provinces and 50 U.S. states by creating an index
utilizing 10 components based on size of government, taxation,
and labor market freedom.
The Economic Freedom of North America index is an offshoot
of the Fraser Institute's
Economic Freedom of the World
index, the result of two decades of work by more than 60
scholars, including three Nobel Laureates.
The report found that between 2000 and 2005, five provinces
improved their levels of economic freedom led by Newfoundland
and Labrador. Alberta, Saskatchewan, BC, and Nova Scotia also
improved while Ontario, Quebec, and Prince Edward Island saw
their levels of economic freedom decrease.
The report demonstrates the impact of economic freedom by
contrasting the economies of BC and Ontario. Between 1995 and
2000, economic freedom grew in BC at a much smaller rate than
Ontario. During this period, BC's economic growth was just five
per cent compared to Ontario's 14 per cent.
But in the most recent five-year period examined
(2000-2005), economic freedom in BC increased while Ontario has
slipped. As economic freedom grew in BC, the province's economy
grew by 10 per cent, while Ontario's economy grew by just two
per cent over the same time period, the lowest rate of all
"Although Ontario remains slightly ahead of BC in overall
terms of economic freedom, the rate of change is a key factor
when looking at economic growth. If economic freedom in Ontario
continues to show weak growth, it's likely Ontario's economy
will also lag," McMahon said.
The report also found that the beneficial effects of
economic freedom are much weaker for Canadian provinces than
for American states, primarily due to Canada's fiscal
federalism and the structure of the equalization program.
"Low levels of economic freedom reduce economic activity
which results in additional federal transfers of money from
wealthy provinces to the have not provinces," McMahon said.
"Since most of these transfers can be captured in the have
not provinces by a small group of political and business
elites, it creates incentives to limit economic growth and
reduce economic freedom in order to maintain the steady stream
of federal largesse."
Economic Freedom of North America: 2008 Annual Report (U.S.