Wednesday, 21 September 2011

Economic freedom of the world: 2011

The index published in Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of privately owned property. Forty-two data points are used to construct a summary index and to measure the degree of economic freedom in five broad areas:
  1. Size of Government: Expenditures, Taxes, and Enterprises;
  2. Legal Structure and Security of Property Rights;
  3. Access to Sound Money;
  4. Freedom to Trade Internationally;
  5. Regulation of Credit, Labour, and Business.
The top ten countries in this year’s index are
  1. Hong Kong 9.01 out of 10;
  2. Singapore (8.68);
  3. New Zealand (8.20);
  4. Switzerland (8.03);
  5. Australia (7.98);
  6. Canada (7.81);
  7. Chile (7.77);
  8. United Kingdom (7.71);
  9. Mauritius (7.67);
  10. and the United States (7.60).
The bottom ten countries in this year’s index are
  1. Zimbabwe (4.08);
  2. Myanmar (4.16);
  3. Venezuela (4.28);
  4. Angola (4.76);
  5. Democratic Republic of Congo (4.84);
  6. Central African Republic (4.88);
  7. Guinea-Bissau (5.03);
  8. Republic of Congo (5.04);
  9. Burundi (5.12);
  10. and Chad (5.32).
I don't think there are any real surprises in either list. That Hong Kong is at the top and Zimbabwe is at the bottom is not great surprise, but perhaps the most interesting point is that the U.S. is down to 10th. Over the last 10 yeasrs, the United States, has suffered one of the largest declines in economic freedom. Much of this decline is a result of higher government spending and borrowing and lower scores for the legal structure and property rights components.

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