Freedom and Finance

Freedom. For most Americans, that word conjures images of bald eagles, fireworks, and the 4th of July. But what does it really mean, and could it even impact a country’s success? In the context of an individual’s freedom within a country, it’s traditionally defined as “the power or right to act, speak, or think as one wants without hindrance or restraint¹,” but that isn’t exactly something that is easily quantified and can be quite subjective and relative. Yet we instinctively know freedom is powerful; that’s why we celebrate it each July. Given this, it’s a logical next step to wonder just what freedom means to an individual and the country at large, and since we also equate success with finances, the relationship between freedom and finance is worth looking into.

Each year, Freedom House publishes Freedom in the World; a report that assigns a score to each country based on their freedoms. This score is based on the idea that people are most free in “liberal, democratic societies²” and uses this belief as well as the Universal Declaration of Human Rights to measure political rights and civil liberties to calculate these scores with a 100 representing complete freedom. Combining this score with a country’s Gross Domestic Product can help us see how one might influence the other. This can be seen in the chart below. Each dot represents an individual country and is plotted based on their GDP and freedom score. Dots are colored by region as defined by the World Bank. Countries in the top left are high in each category, and those in the lower right are low in each category, those between vary. The line shows the predicted score or GDP if the other is known.

Interestingly, this graph doesn’t seem to show any real correlation between freedom score and GDP as there is no strong negative or positive trend between the two. However, it’s important to note that GDP does not account for a country’s population as it’s the sum of all goods and services produced by a country. This means that countries would be represented on the same level whether they had a population of 100,000 or 1 million. If we take population into account (see graph below), we see that there’s a positive correlation between freedom score and GDP per capita. The orientation of this graph implies that as the GDP per capita goes up, so does the freedom score, but it also can be said that more freedom could lead to a higher GDP. This serves to highlight the importance of freedom.

¹ Oxford Languages ² https://freedomhouse.org/reports/freedom-world/freedom-world-research-methodology