Heritage Foundation/Wall Street
Journal Report shows former British colonies in Asia arethe world's
freest; Europe remains home to the most economically free
countries; Limited progress charted on all continents
WASHINGTON, JAN. 16, 2007-The move toward greater
economic freedom worldwide stalled over the last year, according to
the 13th annual Index of Economic Freedom, released
today by The Heritage Foundation and The Wall Street
Journal.
The 157 nations rated in the new Index received an average
economic freedom score of 60.6 (on a scale in which 100 represents
ideal economic freedom). That's down slightly (0.3 percentage
point) from the previous year's average, but still rates as the
second highest level of freedom in Index history.
Index editors Tim Kane, Kim Holmes and Mary Anastasia O'Grady
express regret that "the march toward greater economic freedom
halted, especially since 13 years of Index data strongly suggest
that countries that increase their levels of economic freedom
experience faster growth rates."
Hong Kong and Singapore, the economic jewels of
Asia, finished 1st and 2nd in the rankings
for the 13th straight year. Australia jumped from
9th to 3rd, giving Asia a sweep of the top
three spots and, with New Zealand at number 5, four of the
top 10.
Europe also placed four countries in the top 10: the United
Kingdom, Ireland, Luxembourg and
Switzerland. For the first time, "Americas" is listed as a
separate region. The United States finished 4th
worldwide, joining Canada (10th) as the sole
representatives of this region in the top 10.
This year's Index, the editors point out, provides an even more
precise snapshot of economic freedom than its predecessors. It uses
a new methodology that draws upon the best and latest information,
including World Bank data that only recently became publicly
available. The editors also assembled an academic advisory board
which reviewed the methodology to ensure it reflects the details of
each country's policies.
Two of those experts, Xavier Sala-i-Martin (a professor at
Columbia University) and Johnny Munkhammer (an economist with the
Swedish think tank Timbro) contributed chapters to this year's
Index. Sala-i-Martin's explains the importance of globalization. He
found that poverty is retreating as a result of international
economic growth. Munkhammer, meanwhile, focuses on the dangers of
an over-regulated labor market. "The free market is a superior
institution for labor, yielding the best results for society and
workers," he found.
The 2007 Index also uses a new rating system. Countries are
ranked on a 0-to-100 scale, with a higher score representing
greater freedom-a switch from the 5-1 ranking of previous Indexes
(in which lower numbers denoted greater freedom). Scores and
rankings for all previous years have been updated to reflect the
new approach.
This year's edition measures economic freedom within 10 specific
categories (as previous Indexes did), but the editors made
important changes here as well. The new Index measures "labor
freedom" for the first time and emphasizes entrepreneurship as a
segment of the "business freedom" factor. The other categories are:
trade freedom, fiscal freedom, freedom from government, monetary
freedom, investment freedom, financial freedom, property rights and
freedom from corruption. Scores in these categories are averaged to
create an overall score.
The Most Free
Hong Kong(1st)
Singapore(2nd)
Australia(3rd)
United States(4th)
New Zealand(5th)
United Kingdom(6th)
Ireland(7th)
Luxembourg(8th)
Switzerland(9th)
Canada(10th)
The Least Free
Guinea-Bissau(148th)
Angola(149th)
Iran(150th)
Congo(151st)
Turkmenistan(152nd)
Burma(153rd)
Zimbabwe(154th)
Libya(155th)
Cuba(156th)
North Korea(157th)
The Index finds that only seven of the 157 countries graded
scored 80 or higher, making them "free" economies. Another 23
countries earned 70-79.9 points and are characterized as "mostly
free" economies. Forty-eight of the countries surveyed are
"moderately free" (with scores between 60 and 69.9) while 59 are
"mostly unfree" (scores from 50 to 59.9). The remaining 20
countries are economically "repressed" (with scores lower than
50).
"Among specific economies during the past year, the scores of 65
countries are now higher and the scores of 92 are now lower," the
editors write, noting that losers outnumbered gainers 3 to 2. But
they express optimism about the future spread of economic freedom:
Since China and India are both in the "mostly unfree" category,
"when they further open their economies to globalization, the rise
in global prosperity is poised for very large increases," they
write.
Across the five regions, Europe is the most free, with an
average score of 67.5. The Americas follow at 62.3, with the
remaining regions below the world average. Yet, "trends in freedom
are mirrored closely across all regions, and in each region, the
richest countries tend to be those with the strongest economic
freedoms," the editors note.
Asia-Pacific
What makes Asia unique is the variance in the region. Hong
Kong and Singapore continue to lead the world in
economic freedom, along with other former British colonies
Australiaand New Zealand.
Meanwhile, Turkmenistan, Vietnam, Laos,
Bangladesh and Burma are all "repressed," and
North Korea remains the world's least-free economy. In all,
13 countries in the region improved their Index scores from 2006,
while 16 declined. Vietnamremained unchanged.
Europe
This year's Index separates Europe from North America.
A majority of the world's 20 freest countries are in Europe, and
it produces one quarter of the world's economic output. The
United Kingdomis the highest-rated European country, ranked
6th worldwide, followed immediately by Ireland at
7th, Luxembourg at 8th and
Switzerland at 9th.
However, Europe suffers from the second-worst regional score in
labor freedom and is last in fiscal freedom and freedom from
government. Overall, 26 economies lost ground in economic freedom
and 15 did better.
The Americas
This year, Latin America and the Caribbean are categorized along
with North American economies in a single region.
The United States (4th) Canada
(10th) and Chile (11th) all made the
top 20 this year, and the Americas has been the second-highest
region in terms of freedom since 1999, when it was the world
leader.
However, the rise of socialists including Evo Morales
(Bolivia) and Hugo Chavez (Venezuela) is dragging the
region down. Overall, 18 countries saw their scores decline, while
11 improved. Canada remained the same.
North Africa and the Middle
East
This is the only region to increase its average economic freedom
score over the last year, but it still lags the rest of the world.
Most of its economies are not free.
Israel is ranked only 37th in the world, but
leads this region. Bahrain is a close second at 39th. At the
other end of the scale are Syria, Iran and
Libya. Overall 12 countries improved their scores, while
only five lost ground.
Sub-Saharan Africa
The region is still without a free economy, and is well-known as
the poorest and most violent region in the world. Africa's overall
level of economic freedom is weaker than any other region's and
declined in the past year.
Mauritius marks a bright spot of sorts, leading the
region and finishing with a score of 69-almost reaching "mostly
free" status. Botswana is next, followed by South
Africa. On the other hand, Zimbabwe is last in the
region. It faces myriad problems, including 80 percent unemployment
and a 350 percent inflation rate.
Overall, 24 sub-Saharan countries lost ground, while 15 gained
some economic freedom. Niger held steady.
The Index was edited by Tim Kane, director of the Center for
International Trade and Economics at The Heritage Foundation, Kim
Holmes, Heritage's vice president for foreign affairs, and Mary
Anastasia O'Grady, who is a member of the Journal's editorial board
and edits the "Americas" column. Copies of the 2007 Index (408 pp.,
$24.95) can be ordered at heritage.org/index or by
calling 1-800-975-8625.
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