The Right Coast

January 09, 2004
The Index of Economic Freedom
By Michael Rappaport

The Wall Street Journal today has one of my favorite annual features – a report on the Index of Economic Freedom. For the last 10 years, the Journal and the Heritage Foundation have been compiling the Index to rate the countries of the world according to 10 criteria of economic freedom, including fiscal burdens, government regulation, and monetary and trade policy.

The Journal article refers to a larger book which is issued every year and discusses various aspects of the Index. For those who have never examined it, it is well worth your time and money.

The Index always includes many interesting facts and some surprises. Part of the reason, and part of its value, is that so little attention is paid in the mainstream media to economic freedom. Here are some of the interesting facts:

As usual, Hong Kong (1) and Singapore (2) are at the top of the list. It appears that China has not (yet) damaged the jewel that is Hong Kong.

The top ten nations include New Zealand (3), Ireland (5), and Estonia (6). Estonia has been within the top 10 for years – clearly the standout of the former Soviet Republics. The United States is number 10, while Chile is number 13.

The most repressed countries in terms of economic liberty also include the worst tyrannies, exactly what Friedman and Hayek have taught us. Thus, among the 12 worst are Cuba (144), Iran (148), Libya (154) and North Korea (155) – which is dead last. (In previous years, Iraq was also in this group, but in the past couple of years it has been unrated.) From mainstream press accounts, one would never know that these nations do not just repress political liberty, but also economic liberty.

Other aspects are of interest: Israel is number 29, in the “mostly free” category. Surprising, it is freer than Taiwan (34), Japan (38), and not as surprisingly, France (44).

Middle Eastern countries, as you might expect, don’t do so well. In addition to Iran and Lybia, mentioned above, Saudi Arabia rates 74 and Egypt 95. Jordan does better at 51.

In the end, economic liberty is not only connected with political liberty, but also with wealth. As the articles states, “secure property rights help explain why Hong Kong and Singapore enjoy annual per capita incomes of better than $24,000 while Zimbabwe, where property rights have been trampled, has an annual per capita income of $559.” Sadly, you won’t find that fact mentioned by Dan Rather or the New York Times.