The global advance toward economic freedom has ground to a halt, according the 19th annual Index of Economic Freedom, released by The Heritage Foundation and The Wall Street Journal.
The world average score of 59.6 was only one-tenth of a point above the 2012 average. Since reaching a global peak in 2008, the editors note, economic freedom has continued to stagnate.
The overall trend for last year, however, was positive: Among the 177 countries ranked in the 2013 Index, scores improved for 91 countries and declined for 78.
On the plus side, average government spending scores improved. Unfortunately, this was matched by a decline in regulatory efficiency, as a number of countries hiked minimum wages and tightened control of labour markets.
Hong Kong and Singapore finished first and second in the rankings for the 19th straight year. Australia and New Zealand ranked third and fourth, and Switzerland fifth. Canada finished sixth, despite slipping a half point, while Chile took seventh place and moved more than half a point toward greater economic freedom.
Mauritius, the only Sub-Saharan country to rank among the top 10, was eighth with an overall score of 76.9. Denmark finished ninth, just ahead of the United States, which remains in tenth.
Launched in 1995, the Index evaluates countries in four broad areas of economic freedom: rule of law; regulatory efficiency; limited government; and open markets. Based on an aggregate score, each of 177 countries graded in the 2013 Index was classified as “free” (i.e. combined scores of 80 or higher); “mostly free” (70-79.9); “moderately free” (60-69.9); “mostly unfree” (50-59.9); or “repressed” (under 50).
There are 10 specific categories: property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom. Scores in these categories are averaged to create an overall score.
The world’s most-improved country is Georgia, which saw its score rise 2.8 points, giving it an overall score of 72.2 and a place among the world’s “mostly free” economies. Although Zimbabwe continues to rank among the least free of the 177 countries rated, it once again showed one of the biggest gains in economic freedom. Belize’s Index score declined the most, plunging nearly five points to 57.3.
The Index also studies economic freedom on a regional basis. In the 2013 Index, only Europe and North America advanced. Economic freedom in the other regions -- South and Central America/Caribbean, Middle-East/North Africa, Sub-Saharan Africa and Asia-Pacific -- declined or remained largely unchanged.
Asia-Pacific Dominates Rankings
The Asia-Pacific region dominates both the top and the bottom of the rankings. Hong Kong, Singapore, Australia and New Zealand finished 1-2-3-4 respectively worldwide. North Korea is ranked last in the world and Burma, the Solomon Islands, Uzbekistan, Turkmenistan and Timor-Leste all rank 160th or worse.
Europe, the second-freest region and the world’s most improved, narrowed the gap with North America in the 2013 Index. The scores of 32 countries improved, while just nine lost economic freedom. Switzerland continues to be the only “free” economy in the region, which has only two “repressed” economies that score below 50: Ukraine and Belarus.
Five European countries had notable changes in status: Georgia, Norway and the Czech Republic became “mostly free” economies. Cyprus dropped 2.8 points into the “moderately free” category, while Italy regained that status. Estonia and Poland also were among the world’s 10 most improved.
North America continues to be the world’s freest region, though Mexico was the only economy that improved its Index score over the last year. The region boasts two “mostly free” economies (Canada and the United States) and one “moderately free” economy (Mexico). It leads the world in terms of rule of law, regulatory efficiency and open markets, but is getting worse where government spending is concerned.
South and Central America/Caribbean experienced the sharpest drop -- a 0.6-point loss. All but nine countries in scored as “mostly unfree” or “moderately free.” Five countries changed status over the year.
Bolivia and Haiti dropped from “mostly unfree” to “repressed.” Belize and the Dominican Republic fell from “moderately free” to “mostly unfree.” The Bahamas stood out as the only country in the region to improve in classification, becoming “mostly free.”
Economic freedom continued to decline last year in the Middle East/North Africa region. The region’s 0.3-point loss likely would have been greater had grading been possible for Libya and Syria, the editors note. Bahrain remained the region’s top performer in the Index by gaining 0.3 points, and defended its spot at No.12 in the world with an overall score of 75.5 points. Egypt lost 3.1 points, leaving it tied for the third-largest decline in the world.
Sub-Saharan Africa’s overall level of economic freedom “remains weaker than that of any other region,” the Index editors write. A majority of nations in this region either fall into the Index’s “mostly unfree” or “repressed” categories. Indeed, 15 of the world’s 33 repressed economies are in Sub-Saharan Africa, and 22 are in the next lowest, “mostly unfree.”