March 18, 2012
BY: Robert Hallberg, Topics: Index of Economic Freedom
Every year the heritage foundation comes out with a report called the index of economic freedom. They track the march of economic freedom around the world in this report and come out with a cumulative score (1 â 100) for each country based on 10 economic factors including: business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption, labor freedom. The score is in my opinion not a perfect representation of those countries total freedoms but it does provide a model on which to compare countries against each other.
The panic of 2008 and the recession that followed sent a lot of financial freedoms in reverse. The policy response to combat the recession has done the opposite to reverse this trend. In the United States and most other developed countries government spending and taxes has increased, while movement of capital has been restricted.
The countries that have remained mostly free have done better than countries that have intervened in their economies, imposed high taxes and burdensome regulations. Below is a chart of the 10 countries that have the highest index of economic freedom according to this model.
The next chart shows the trend of the 10 countries that scored the highest on this ratio. Some have remained economically free while other countries have put on the breaks.
The next chart compares the economies of the five countries with the highest score against countries with much lower scores. Although there may be other factors at play you can see that the countries with less restricted economies have a much higher standard of living and lower unemployment. Singapore and Hong Kong for example have virtually no natural resources and a limited amount of land, yet they have the best functioning economies and highest standard of living with very low unemployment.
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