Mapped: Economic Freedom in the World
How would you define the economic freedom of a country?
The cornerstones of economic freedom through most measures are personal choice, voluntary exchange, independence to compete in markets, and security of person and private property. Simply put, it is about the quality of political and economic institutions in countries.
Based on Index of economic freedom through the Heritage Organization, we have mapped the economic freedom of 178 countries around the world.
Measures of economic freedom
The index uses five broad domains to assess economic freedom for each country:
- Government size: Increased public spending, taxation, and larger government agencies tend to reduce individual choice and economic freedom.
- Legal system and property rights: The ability to accumulate private goods and wealth is a central motivating force for workers and investors in a market economy, and well-functioning legal frameworks protect the rights of all citizens.
- Healthy money: Does the money earned retain its value or is it lost due to inflation? When inflation is high and volatile, people cannot plan for the future and use economic freedom effectively.
- Freedom to trade internationally: The freedom to trade – in its broadest sense, buying, selling, entering into contracts, etc. – is considered essential to economic prosperity. Limited international trade options greatly reduce the potential for growth.
- Regulation: When governments use tools and impose oppressive regulations that limit the right to trade, economic freedom usually suffers.
Global economic freedom by region
In 2021, the global average score for economic freedom is 61.6, the highest for 27 years.
But from Mauritius and the small African countries which are beacons of hope to the countries of East Asia and Oceania embodying economic democracy, each region has a different story to tell.
Let’s take a look at the economic freedom of each region of the world.
Even though the United States and Canada continue to be among the most economically free countries in the world, some markers suffer.
The regional average unemployment rate has risen to 6.9%, and inflation (outside Venezuela) increased to reach 5.2%. The region’s average level of public debt, already the highest in the world, has risen to 85.2% of its GDP over the past year.
In many Latin American countries, widespread corruption and weak protection of property rights have exacerbated regulatory ineffectiveness and monetary instability.
For example, the Argentine Peronist government recently set the price of 1,432 products in response to a 3.5% price increase in September, the equivalent of a 53% increase if annualized.
More than half of the 38 freest countries in the world (with overall scores above 70) are in Europe. This is due to the relatively large and long-established free market institutions, the strong rule of law and the exceptionally strong freedom of investment.
However, Europe still grapples with a variety of political obstacles to vigorous economic expansion. This includes overly protective and costly labor regulations, which was one of the main reasons the UK voted to leave the EU.
Brexit has since had a major impact on the region.
Even a year later, official UK figures showed a record fall in trade with the EU in January 2021, as the economy grappled with post-Brexit rules and the pandemic.
Dictatorships, corruption and conflict have historically kept African nations among the most economically repressed in the world.
As larger and more prosperous African nations struggle to advance economic freedom, some smaller countries are becoming the beacon of hope for the continent.
Mauritius (11th place), Seychelles (43) and Botswana (45) were the leading African countries, offering the strongest policies and institutions supporting economic self-reliance.
From property rights to financial freedom, small African countries are ahead of the continent’s largest in advance economic autonomy as they seek to create business opportunities for their citizens.
Middle East and Central Asia
When Israel, the United Arab Emirates and Bahrain signed the Abrahamic Accords last year, there was a sense of new paradigm are emerging in a region with a long history of conflict.
One year after the signing of this resolution, the effects have been promising. Bilateral initiatives within the private sector and civil society have led to increasing economic and political stability in the region.
The Central Asian countries that were once part of the Soviet Union have recently started to integrate more directly into the world economy, mainly through exports of natural resources. In total, natural resources represent around 65% of exports in Kyrgyzstan, Tajikistan and Uzbekistan, and more than 90% in Kazakhstan and Turkmenistan.
Despite this progress, these countries have a long way to go in terms of economic freedom. Uzbekistan (108), Turkmenistan (167) and Tajikistan (134) are still among the lowest ranked countries in the world.
East Asia and Oceania
Despite massive populations and strong economies, countries like China and India remain mostly non-free savings. The modest improvements in scores over the past few years have translated into gains in terms of property rights, judicial efficiency and freedom to conduct indicators.
Nearby, Singapore’s economy was ranked the freest in the world for the second year in a row. Singapore remains the only country in the world considered economically free in each index category.
Finally, it should be noted that Australia and New Zealand are regional leaders and are two of the five nations currently in the âfreeâ category of the index.