Conversations about economic development often gravitate toward such topics as monetary policy, trade regulation, tax structures, infrastructure, etc. These are critical pieces of the puzzle indeed, but there exist even more primary components of prosperity that are often skipped over.
Rule of law is essential if you want to have a functioning economy. You cannot have a functioning economy without secure property rights. You cannot have a functioning economy unless contracts are enforced. You cannot have a functioning economy if government officials can act in an arbitrary fashion.
The Property Rights Alliance, a Washington D.C.-based think tank, publishes research concerning private property and rule of law. Earlier this month, the organization released its annual 2013 International Property Rights Index (IPRI), which measures the intellectual and physical property rights of 131 nations from around the world, representing 98% of world GDP.
The 2013 IPRI represents the seventh edition of the index and focuses on three core components:
- Legal and Political Environment
- Physical Property Rights
- Intellectual Property Rights
Countries received a score (on a scale of 0 – 10, where 10 is the highest value for a property rights system and 0 is the lowest value) in each of these areas; those scores were then averaged to calculate the “IPRI score.” The countries receiving the top five IPRI scores were Finland, New Zealand, Sweden, Norway, and the Netherlands. The United States claimed the 17th spot.