Hong Kong again topped the rankings, followed by Singapore, New Zealand, and Switzerland. Australia and Canada tied for fifth, of the 144 countries and territories in the Fraiser Institute’s 2012 Economic Freedom of the World Report.
“The United States, like many nations, embraced heavy-handed regulation and extensive over-spending in response to the global recession and debt crises. Consequently, its level of economic freedom has dropped,” said Fred McMahon, Fraser Institute vice-president of international policy research.
The annual Economic Freedom of the World report uses 42 distinct variables to create an index ranking countries around the world based on policies that encourage economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property. Economic freedom is measured in five different areas: (1) size of government, (2) legal structure and security of property rights, (3) access to sound money, (4) freedom to trade internationally, and (5) regulation of credit, labor, and business.
Hong Kong offers the highest level of economic freedom worldwide, with a score of 8.90 out of 10, followed by Singapore (8.69), New Zealand (8.36), Switzerland (8.24), Australia and Canada (each 7.97), Bahrain (7.94), Mauritius (7.90), Finland (7.88), Chile (7.84).
The rankings and scores of other large economies include: United States (18th), Japan (20th), Germany (31st), South Korea (37th), France (47th), Italy (83rd), Mexico (91st), Russia (95th), Brazil (105th), China (107th), and India (111th).
When looking at the changes over the past decade, some African and formerly Communist nations have shown the largest increases in economic freedom worldwide: Rwanda (44th this year, compared to 106th in 2000), Ghana (53rd, up from 101st), Romania (42nd, up from 110th), Bulgaria (47th, up from 108th), and Albania (32nd, up from 77th). During that same period the USA has dropped from 2nd to 19th.
The rankings are similar to the World Bank Rankings of easiest countries in which to do business. But they are not identical, the USA is still hanging in the top 5 in that ranking. The BRICs (Brazil, Russia, India and China) do just as poorly in both. The ranking due show the real situation of economies that are far from working well in those countries. China and Brazil, especially, have made some great strides when you look at increasing GDP and growing the economy. But there are substantial structural changes needed. India is suffering greatly from serious failures to improve basic economic fundamentals (infrastructure, universal education, eliminating petty corruption [China has serious problems with this also]…).
Ghana is a country I have great hope for. They have been doing very well recently. It is very easy for a poor country to slip up as they try to move up the economic ladder. And making the right moves over decades (which is what it takes to succeed) is very difficult. I am hopeful Ghana can do so (they have done well for 15 years, they have most likely at least another 20 years of precarious progress to make before they can afford to make huge mistakes. Look at the USA and Europe, there failed political leadership in the last 20 years greatly exceeds the failures elsewhere but the USA and Europe had such wealth that they could absorb those huge failures much more (though as we can see with places like Greece the failures will even eventually have to be dealt with by rich countries – they just can avoid it a lot longer). Africa has suffered from few positive examples of country wide economic gains. Several countries have been doing well recently. I think Ghana is the brightest hope, but the situation is tenuous (as it always is for a poor country). If they can continue making gains for the next 15-20 years they can help provide a positive example of what can be done.
Related: The Relative Economic Position of the USA is Likely to Decline – Government Debt as Percent of GDP 1998-2010 for OECD – Top Countries For Renewable Energy Capacity – Top 10 Countries for Manufacturing Production in 2010: China, USA, Japan, Germany