The Three Pillars of Economic Freedoms

Three anniversaries are converging, each marking a turning point that reshaped the economic lives of billions.

The first is widely recognized: 2026 marks 250 years since American independence. The American democratic experiment ignited democracy as a political model that many countries around the world now practice in some form.

Second, and a bit more obscure, 2026 is also the 250th anniversary of Adam Smith’s The Wealth of Nations, a foundational text for modern market economics also practiced in various forms around the world.

Political freedom and modern economic thought share 1776 as a birth year of sorts.

The third milestone is close behind. In December 1978, China began its “reform and opening” period. It started using many tools of a market economy. The results were huge. Since 1978, China’s economy has grown by more than nine percent a year on average, and nearly 800 million people have moved out of extreme poverty. But China has not caught up with the world’s richest countries. Even after adjusting for local prices, income per person in China is still only about one-third of income per person in the United States. China’s story is one of fast growth, but not full convergence.

China’s rise raises a key question: can a country use market tools, deny political freedom, and still build lasting prosperity? The United States paired markets with political freedom, rule of law, and civic voice. China adopted many market tools but kept one-party rule. CIPE’s work shows that markets and democratic governance are strongest when they work together.

Definition: The Three Pillars of Economic Freedoms

Economic freedoms are the rules and institutions that let individuals compete in the marketplace without undue interference, including the right to express opinions on economic issues and to freely associate in pursuit of them.

This definition rests on three pillars. Each pillar includes several freedoms.¹

Fair Competition means prices are set by supply and demand: businesses can enter the market, and the state does not pick winners. This is what most people mean by a “market economy.” China has built some of this. So has Vietnam. So did Pinochet’s Chile. But none of these systems gave people a real say. A market without legal protection and civic voice is fragile. That is why the next two pillars matter.

Rule of Law means rules are public, predictable, and applied consistently by institutions that are governed by law rather than political power.² This is where property rights live, not as a market mechanism, but as a guarantee that a court will back a business owner against someone more powerful. China offers very little real protection from the whims of the powerful. Jack Ma found that out when Ant Group’s record-setting IPO was suspended after he publicly criticized regulators, and the broader Alibaba ecosystem then faced intense regulatory pressure without an independent court serving as a check on state power. Without the rule of law, people lose confidence that their investments will be protected and lose the drive to innovate.

Civic Voice means people can express opinions on how their commercial system works and can organize to advocate for those opinions: freedom of speech and freedom of association. It is closely aligned with the broader concept of political freedom. Civic voice includes the right to say a regulation is unfair or a tax exemption is corrupt. It also includes the right to team up with people who agree with you, in a trade association or a chamber of commerce, and then go to government and ask for a fix. Take this pillar away and grievance has nowhere legitimate and protected to go.

By looking at all three dimensions together, we can understand where China’s model departs from the one that has produced the world’s most prosperous economies. China has used some of the market elements under Fair Competition. However, it has built far less under Rule of Law or Civic Voice. What has been the result? Despite the impressive growth from a low starting point, as Figure 1 shows, China’s per capita income lands almost exactly where you would predict given that partial package of economic freedoms. Partial adoption has delivered partial results.

I have spent the last two decades watching this gap between the American and Chinese models play out in real life. I have sat in finance ministries, met with business associations, and heard business leaders debate which freedoms to build first. In this series, I will draw on that experience and CIPE’s work to explain how economic freedoms support both prosperity and democracy.

Now that we’ve laid down the framework, future posts will explore:

• How major global indexes measure these three pillars, where they agree or disagree, and what they miss.
• What CIPE case studies reveal about the practical work of strengthening economic freedoms around the world.
• How current events and global competition look through the lens of economic freedoms.

Getting the definition right is the first step toward building a world where everyone is free to compete and free to succeed.

Paul Pleva is senior director for Strategy and Impact at the Center for International Private Enterprise, where he leads CIPE’s work on economic freedoms. He began his career at the Millennium Challenge Corporation and then served as a Foreign Service economist and senior official at the U.S. Agency for International Development, including in USAID’s Office of the Chief Economist. He has lived and worked across Africa, Asia, and the Middle East addressing economic growth, infrastructure, finance, and business-enabling reforms. He brings over two decades of experience linking policy analysis to field implementation.

Notes

¹ CIPE is not alone in seeing them as linked. The Atlantic Council’s Freedom and Prosperity Index lays out a similar three-part model.

² The U.S. Chamber of Commerce has made this pillar a focus of its own international work. Its 2026 Global Rule of Law and Business Dashboard measures rule of law performance across 149 economies, making the business case for why predictable institutions are the foundation of growth.