More countries expanded economic freedom during the past year than curtailed it, The Heritage Foundation and The Wall Street Journal report in their annual “Index of Economic Freedom.”
The survey showed 70 of the 155 countries rated granted their citizens more economic liberty, while 52 imposed new restrictions. There has been a net increase in economic freedom every year since the Index was first published in 1995.
Despite the gains, most of the world’s economies remain relatively “unfree.” Overall, 74 economies were rated as “free” or “mostly free,” while 81 earned ratings of “mostly unfree” or “repressed.” Most of the freest economies are concentrated in North America and Europe, while a majority of the world’s most repressed economies are in Asia and Africa.
“The countries with the most economic freedom also have higher rates of economic growth and are more prosperous than are those with less economic freedom,” write Index editors Gerald P. O’Driscoll Jr., director of Heritage’s Center for International Trade and Economics, Kim R. Holmes, a Heritage vice president and director of the think tank’s Davis International Studies Institute, and Melanie Kirkpatrick, assistant editorial page editor of The Wall Street Journal.
The 2001 Index, published by The Heritage Foundation and The Wall Street Journal editorial page, shows that scores for three regions–North America and Europe, Latin America and the Caribbean, and Sub-Saharan Africa–improved. Scores for the remaining two regions–Asia-Pacific and North Africa and the Middle East–declined.
The editors found a strong relationship between economic freedom and per capita income. World Bank data show that per capita income for “mostly unfree” or “repressed” economies averaged about $2,800 in 1998–a figure that quadruples to $11,054 for “mostly free” economies and doubles again to $21,206 for “free” economies.
retained its No. 1 ranking. Government spending rose in this “Special Administrative Region” of the People’s Republic of China, but inflation declined, allowing its Index score to remain the same. Singapore held on to the No. 2 spot, but with the public sector of its economy increasing, its overall score declined.
continued to thrive, with tax cuts, an openness to foreign investment, and a competitive banking system helping it move from No. 7 in the 2000 Index to No. 3. The tied Luxembourg for fifth place on the 2001 report, behind New Zealand and ahead of the United Kingdom. For the first time, the Netherlands made the top 10, while Austria moved up to 14th place. Seven countries in the bottom 10 saw their scores decline; the rest stayed the same.
The 10 Most Free
The 10 Least Free
Three factors played a large role in the gains and losses, the editors note. Many improvements can be traced to worldwide success at lowering inflation, from Mozambique (45 percent in 1997, 0.6 percent in 1999) to Bulgaria (1,082 percent in 1997, –5.5 percent in 1999). Another reason many scores rose: The fiscal burden of government, from taxation to government spending, has been lifted considerably in places such as Belize, where the top tax rate has been cut from 50 percent to 25 percent.
Many reversals, on the other hand, are due to the fact that property rights are under siege in many parts of the globe–such as Venezuela, where the judicial system is in disarray, and Zimbabwe, where large-scale property theft has been condoned by government officials.
The 2001 Index of Economic Freedom is the seventh edition of the popular guidebook. For the first time, the full text, as well as all charts and graphs, will be available via the Internet at index.heritage.org. A Spanish-language edition is being co-published with five independent Latin American foundations: Centro de Estudios en Educaci