Economic Freedom: Hong Kong, Singapore On Top, US Falls In Rankings
The United States has fallen 15 places since 2000 in the global ranking of economic freedom, while Hong Kong and Singapore maintained their top spots. The ‘Economic Freedom of the World’ report 2013, compiled by Canada’s Fraser Institute, ranks Hong Kong first with an overall Economic Freedom Rating of 8.97, followed by Singapore (8.73). In the area of credit market regulations, both the East Asian City States scored 10 out of 10. The United States is positioned as the world’s 17th freest economy behind nations such as New Zealand, Switzerland, United Arab Emirates, Mauritius, Finland, Bahrain, Canada, and Australia, who are in the top ten. Throughout most of the period from 1980 to 2000, the United States was ranked as the world’s third-freest economy, behind Hong Kong and Singapore.
The U.S. ratings and rankings have fallen in all five areas of the EFW index. The worst reduction was in the area of Legal System and Property Rights, where the rating had slid to 6.93, placing the United States 38th worldwide, tied with Venezuela. The report blames the slippage of the United States, once considered a bastion of economic freedom, on ‘overspending, weakening rule of law, and regulatory overkill on the part of the U.S. government.’ Major countries that ranked below the United States include Germany, Japan, South Korea, France, Italy, Mexico, Russia, Brazil, and India. China, despite being a major economic power, is ranked as low as 123rd in a list of 152 countries. Eight of the ten lowest-rated countries are located in Africa, with Myanmar and Venezuela ending up in last place.
The index published in the report, which was compiled using data and surveys from the World Bank, International Monetary Fund, and World Economic Forum, 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. The degree of economic freedom to rank countries was measured using five criteria: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulation.
The average chain-linked economic freedom rating for the countries has increased from 5.34 in 1980 to 6.87 in 2011. Nations that are economically free out-perform non-free nations in indicators of well-being. Nations in the top quartile of economic freedom had an average per-capita GDP of $36,446 in 2011, compared to $4,382 for nations in the bottom quartile in the same period. Life expectancy is 79.2 years in nations in the top quartile compared to 60.2 years in those in the bottom quartile. Political and civil liberties are considerably higher in economically free nations than in less free nations.
Nepal Falls among Least Economically Free Countries
Meanwhile, Nepal remained among the least economically free countries in the report for this year. The report states that the degradations in terms of the legal structures and security of property rights and size of the government weighed down on the economic freedom of the country. Nepal ranked 125th out of 152 countries in the report. According to the report, Nepal scored 6.19 out of 10. This marked the further degradation of economic freedom in Nepal. Last year, the country was placed in 110th position out of 144 nations and scored 6.33 points in the index.
The ‘Economic Freedom of the World Report 2013’ further emphasized the Nepal government size to be reduced. Regarding the area of ‘size of government’ in the index, Nepal scored 7.6 in 2013 (31st position in the world) against 8.34 of the previous year. The area of ‘freedom to trade internationally’ also declined to 6.4 (118th in the world) which scored 6.74 in 2012.
However, the report also showed that Nepal made little progress regarding areas of ‘legal structures and ensuring property rights to its citizens’ with a score of 4.2 (126th in the world) this year against 3.85 of 2012. Similarly, the country also performed better in the areas of ‘access to sound money’ and ‘regulations on credit, labour and business.’ With the improvements in taming of inflation and money growth in the financial system, the area of access to sound money improved slightly to 6.3 (136th in the world) from last year’s 6.26. Likewise, the area of regulations on credit, labour and business also rose to 6.5 (109th in the world) from 6.47 last year.