Two regions chart gains,
while three register retreat;
Hong Kong and Singapore lead;
Egypt, Mauritius, and Mongolia are most improved
WASHINGTON, JAN. 15, 2008--The level of
economic freedom found throughout the world remained essentially
unchanged over the last year, with overall gains in only two of the
five regions examined in the 14th 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 60.3 (on a scale in which 100 represents
the ideal). Global economic freedom has improved 2.6 points since
the first Index in 1995.
Still, progress is coming, though "more slowly than one might
hope," write Index editors Kim Holmes, Edwin Feulner and Mary
Anastasia O'Grady.
Hong Kong and Singapore finished 1st and
2nd in the rankings for the 14th straight
year. With Australia in 4th place and New Zealand at
number 6, the Asia-Pacific region boasts four economies in the top
10.
Europe placed three countries in the top 10: the United Kingdom,
Ireland and Switzerland. The "Americas" region did likewise, with
the United States finishing 5th and Canada
(7th) and Chile (8th) rounding out the top
10.
Every region has at least one economy in the top 20, but fully
half of the countries included on that list are European. One of
the countries in sub-Saharan Africa, Mauritius, moved 14 places up
the world rankings to secure a spot in the top 20, while Bahrain,
representing the Middle East/Africa region, rose five spots to
garner a place on the list.
Egypt takes the prize for most-improved economy. A 2007 score of
55.1 earned it a worldwide ranking of 106th place, but
its score in the latest Index--59.2, an upgrade fueled in part by
improving the business environment and implementing tax
reforms--helped it climb to the 85th slot. Guyana,
meanwhile, posted the biggest drop. High government spending and
widespread corruption, among other factors, knocked five points off
last year's score and brought it from 118th worldwide in
the 2007 Index to 136th this year.
The Index measures economic freedom within 10 specific
categories: labor freedom, business freedom, trade freedom, fiscal
freedom, government size, monetary freedom, investment freedom,
financial freedom, property rights and freedom from corruption.
Scores in these categories are averaged to create an overall
score.
This year's Index aims to be the most precise measure of
economic freedom ever published. The editors fine-tuned a
methodology first employed last year to grade each economy in the
world. "The methodology has been vetted with an academic advisory
board and should now even better reflect the details of each
country's economic policies," they write.
The Most Free
Hong Kong (1st)
Singapore (2nd)
Ireland (3rd)
Australia (4th)
United States (5th)
New Zealand (6th)
Canada (7th)
Chile (8th)
Switzerland (9th)
United Kingdom (10th)
The Least Free
Venezuela (148th)
Bangladesh (149th)
Belarus (150th)
Iran (151st)
Turkmenistan (152nd)
Burma (153rd)
Libya (154th)
Zimbabwe (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. Fifty-one of the countries surveyed are
"moderately free" (with scores between 60 and 69.9) while 52 are
"mostly unfree" (scores from 50 to 59.9). The remaining 24
countries--up from 20 last year--are economically "repressed"
(scores below 50).
"Improved scores in business freedom, fiscal freedom, government
size and investment freedom were offset by worsened scores in
monetary freedom, freedom from corruption and labor freedom," the
editors write. "Notwithstanding the absence of dramatic improvement
in global economic freedom this year, it is gratifying to note that
the past two editions of the Index have recorded the two highest
global scores ever achieved."
The 2008 Index, they note, again underscores the central message
of past Indexes: Economic freedom is strongly related to good
economic performance. "The world's freest economies have twice the
average per capita income of the second quintile of countries and
over five times the average income of the fifth quintile," they
write. They also have lower rates of unemployment and lower
inflation.
Across the five regions, Europe is the most free, with an
average score of 66.8. The Americas follow at 61.6, with the
remaining regions below the world average. The other three regions
fall below the world average: Asia-Pacific (58.7 percent), Middle
East/North Africa (58.7 percent) and sub-Saharan Africa (54.5
percent). "However, trends in freedom are mixed across regions,"
the editors point out.
Asia-Pacific
Asia retains its reputation as the "Jekyll and Hyde" region,
home to the freest and the most repressed economies. Hong Kong and
Singapore continue to lead the world, along with Australia and New
Zealand. Japan (17th) and Taiwan (25th)
earned places in the world's top 30 as well.
Meanwhile, Turkmenistan, Vietnam, Laos, Bangladesh and Burma are
all "repressed," and North Korea remains the world's least-free
economy. In all, 18 countries in the region improved their Index
scores from 2007, while 10 declined.
Europe
Most of the world's 20 freest countries are in Europe, where per
capita income averages $20,282. Ireland is the highest-rated
European country, ranked 3rd worldwide, followed by
Switzerland at 9th and--in a decline from last year's
Index--the United Kingdom at 10th. European countries
hold the next six consecutive spots on the world rankings: Denmark,
Estonia, The Netherlands, Iceland, Luxembourg and Finland.
Europe has continued to advance its economic freedom thanks to
tax rate cuts and other business climate reforms as economies in
the region compete with each other to attract more investment.
Overall, 21 European economies gained ground in economic freedom
but Europe, the editors caution, is saddled with burdensome labor
regulations that are hindering job creation..
The Americas
Chile (8th) improved enough over the last year to
join the United States (5th) and Canada (7th)
in the top 10 this year. Overall, the Americas is the
second-highest region in terms of economic freedom.
But the editors also point to a reversal of free-market policies
in some countries. Hugo Chavez's Venezuela (148th),
along with Haiti and Guyana, logged notable declines. "Across the
region," they write, "the reality is that economies are
stagnating." Overall, 17 economies in this region saw their scores
decline, while 12 improved.
North Africa and the Middle East
Most economies in this region are not free. Plagued by a 13.6
percent unemployment rate, the Middle East has a regional gross
domestic product of only $7,508 per person.
Bahrain (19th), however, improved its Index score
enough to vault five spots into the world's top 20. Kuwait
(39th), Oman (42nd) and Israel
(46th), also become freer. And Egypt (85th),
as noted earlier, improved more than any other country. At the
other end of the scale are Syria, Iran and Libya. Overall, eight
countries in this region saw their scores rise, while nine lost
ground.
Sub-Saharan Africa
The region--"well known as the world's poorest and most
unstable," the editors write--has yet to boast a free economy and
actually saw its overall level of economic freedom decline in the
past year. Nine of the 24 countries worldwide rated in the Index as
"repressed" can be found in sub-Saharan Africa.
One exception to the overall trend is Mauritius
(18th), which continued on the path of reform noted in
last year's Index and snagged a spot in the top 20. Botswana is
next, followed by Uganda. Zimbabwe (155th), still last
in the region, even managed to shave two more points off of its
score. It faces myriad problems, including pandemic corruption and
a 766 percent inflation rate (a three-year weighted average).
Overall, 25 sub-Saharan countries lost ground, while 15 gained
some economic freedom.
The Index was edited by Kim Holmes, Heritage's vice president
for foreign affairs, Edwin Feulner, Heritage's president, and Mary
Anastasia O'Grady, who is a member of the Journal's editorial board
and edits the "Americas" column. Copies of the 2008 Index (410 pp.,
$24.95) can be ordered at heritage.org/index or by calling
1-800-975-8625.
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U.S. Contacts: Jim
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