Reforms and growth: The 2015 IBL Index of Liberalisations
Diego Zuluaga // 01.12.2015
EPICENTER’s Italian partner, Istituto Bruno Leoni, just released its 2015 Index of Liberalisations report. This study, first conducted in 2007 and led by Dr Carlo Stagnaro, ranks EU Member States according to how free and open their markets are in a range of sectors. They include gasoline and diesel, electricity and natural gas, labour markets, postal services, telecommunications, broadcasting, air transport, rail transport, and insurance.
In each category, countries’ performance is assessed against a number of benchmarks. The top-performing country is then given a 100 (maximum) score, and the 27 other Member States are then ranked relative to the best performer. The scores in each individual category are then averaged out to come up with each country’s overall score.
This year, the top three performers are the UK – which leads in electricity and natural gas markets, labour markets, and air transport – the Netherlands – number 1 in postal services and ranking high across the board – and Spain – which performs particularly well in telecoms regulation. The greatest laggards are Cyprus, Latvia and Croatia.
The Index is useful for EU and national policymakers, as well as to economists and students of regulation. To EU officials, it offers a clear picture of the divergences in liberalisation which remain, despite strenuous efforts at a European level to bring down domestic barriers – overwhelmingly created by governments – and open up markets to greater competition. To decision makers in the Member States, the Index highlights how far their country is from the EU’s top performers, and the particular segments of each market which they need to focus on in order to improve outcomes.
But the IBL study is also important from another perspective, namely as a tool to analyse how market reforms and liberalisations correlate with broader indicators of economic performance. And indeed, if we look at the most liberalised Member States as ranked by the Index, they are also some of the EU’s most prosperous and/ or promising economies – the UK and the Netherlands, but also Sweden, Spain, Germany and Poland.
They are countries which, at one point or another, undertook significant and controversial reforms in the direction of markets – the UK in the 1980s, Poland and Sweden in the 1990s, Germany in the early 2000s, and Spain in the past few years. These reforms are now paying off, resulting in higher per capita incomes, higher GDP growth, and more prosperous societies than the EU average.
By contrast, the Member States at the bottom of the ranking – Slovenia, Greece, Cyprus – never reformed prior to 2008, then went into deep and protracted crises and have yet to move beyond spending cuts and tax increases towards introducing genuine liberalisation to reduce the costs of entrepreneurship and investment. Failing to do so has prolonged their plight, and, while reforms may be politically difficult, as the ranking’s top performers show, they pay off over the long haul.
You can read the abstract in English here and the full report in Italian here. An English translation of the study will be available shortly.
Diego Zuluaga is Head of Research at EPICENTER.
EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).