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Journal number 4 ∘ Murman Kvaratskhelia
FACTORS OF ECONOMIC FREEDOM LEVEL

Expanded Summary

In Conditions of open economy categorization of countries according to the degree of economic freedom is very important. Its indicator differs from region to region. Countries are divided into two categories by the freedom level – from most free or open to the most closed. The first five countries having the open economy are: Hong Kong, Singapore, New Zealand, and Austria.  The closed economy countries are: North Korea,   Venezuela, Cuba, Republic of Congo, and Eritrea. The most significant is the fact that the freedom economy index tends to decrease. 

 The level of freedom of economy is as a rule assessed on the basis of the qualitative and quantitative factors, which in their turn are divided into four categories. Among them the most significant are: the supremacy of law, government measure, and freedom of business, labor and currency, freedom of trade, investments and finances.   In this present paper, index of economic freedom is analyzed according to the separate countries reflecting the positive connection with the economic freedom and other social and economic targets. In general, together with the other factors,   it helps overcome poverty.      

In order to achieve the economic freedom and benefit it is necessary to carry out different system reforms, enabling improvement of separate, average indicators. This is an important orienting point for accelerating the economic development of a country.

The indicators of freedom of the leading countries are analyzed in the paper. The governments    of those countries by using the consistent economic policy and active industrialization aim at fiscal stimuli, increase the State investments, thus attracting the foreign investors.   High safety of property is of a paramount importance.  

In the paper is discussed the conditioning factors   of the tendency for   economic freedom growth in leading countries. The crucial factor is increase of the levels of trade and labor freedom. They consequently follow the long-time market oriented policy, being one of the   decisive factors for economic growth.         

The paper studies the situation in Georgia, from the economic freedom point of view. For Georgia the most vulnerable and crucial point is overcoming of poverty. According to the statistical data by the economic freedom index in 2019, Georgia occupies the 16th place in the world and 8th place in Europe. Increase of the index level conditioned decrease of the poverty level. Separate components, especially the rights on property, integrity of government, effectiveness of court,   business, labor, and monetary and financial freedom indexes are very interesting.        

The rating of Georgia in 2012-2019 is shown in the tables, as well as the scores according to the separate components reflecting the economic freedom. The index of dynamics of the level of life is also analyzed, which in its turn is conditioned by the improvement of the index of freedom.  The index of the life level is characterized by the growth tendency.  The part of the population being below the line in 2017 in Georgia comprised from 21, 9% to 20, 1% in 2018. The dynamics of the median consumption decreased from 60% to 40%. Besides, the indicator of Gini coefficient is  also  analyzed. The conducted analysis   demonstrates, that the positive tendencies of the freedom dynamics is the result of the life level growth parameters.

The present work enabled us to draw the following conclusions: 

  • Existence of the economic freedom is the necessary precondition of the country development, without which is reaching of the economic growth is impossible. 
  • According to the separate components the indicatorsof the economic growth in Georgia  have been improved, consequently having the positive impact on the life level.
  • The experience of the developed countries confirms, that they have to carry out the active economic policy on the State level for supporting the economy growth. This is first of all associated with the fiscal stimuli, increase of State investments and attraction of investors. At the same time, high level of property safety  is of a paramount  importance, which is the stimulating factor for increase of the economic freedom level in the Georgian reality.