The conservative think tank, Heritage, publishes an annual “Index of Economic Freedom,” ranking countries by measurements that include
- property rights
- legal protections and due process
- ability to incorporate and engage in other entrepreneurial activities
- mobility of investments
- ability to choose freely in a marketplace
This means that countries that impose restrictions on these and other economic freedoms generally do the following:
- restrictions on use of property
- government use or taking of property, especially without compensation
- tax rates & taxes in general
- freedom of movement
- regulatory restrictions on capital, incorporation, etc. (In some countries, it takes several years to incorporate)
- regulatory restrictions on economic activity
- monopolies and public ownership of economic sectors
- ability to hire/ fire freely
Heritage puts it this way:
- Rule of Law (property rights, freedom from corruption);
- Limited Government (fiscal freedom, government spending);
- Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and
- Open Markets (trade freedom, investment freedom, financial freedom).
Obviously, Heritage places a higher value upon individual liberties than collective security such as social welfare programs, etc., but items such as “Rule of Law” and “Open Markets” are generally accepted principles of freedom in the U.S.
So, where do you put the USA on this list? Guess in the comments below, then look up the list here: Country Rankings
Let me know if you’re surprised. Also, do you buy into this index at all? Do you agree with it’s conclusion that higher economic freedoms equates to higher standards of living and benefits societies? I think we will all agree that extreme limits on economic freedoms, such as are going on in Argentina and Venezuela, are severely detrimental to a society. And we all might agree that liberalization of economic activity in China has benefited its people enormously over the last 20 years. Where do you put the limits on this?
No surprise that trade-based nations score high on this list, such as Hong Kong, Singapore. Mauritius, and the Netherlands. There is also no surprise that most of the top ten are small countries.
My “surprise” country on the list is New Zealand. I knew that Australia has liberalized trade and reduced regulations, but I wasn’t aware that the sheep farmers were up there, too. Poor UK, with its English-speaking colonies scoring so well, but it dropping on the list.
Interestingly, with the exception of the US, Australia, Canada, NZ, Hong Kong, Macau, and Singapore, no former European colony except Chile scores on the top 20.
The most important indicator for a low ranking is Corruption, and you will note that the bottom of the list are the most corrupt societies, which means: property is not secure, courts are unfair and corrupt, and the law is applied unequally and randomly.