Chapter 1 Economic Freedom: Global and Regional Patterns · 10 2013 Index of Economic Freedom over the past five years, ... economic freedom again this year. ... Monetary Fund,

Chapter 1 9

On a worldwide basis, the advance of eco-nomic freedom has ground to a halt. Since peaking in 2008, when the average eco-

nomic freedom score reached 60.2 on the Index 0–100 scale, global economic freedom has failed to advance, and this year’s average score of 59.6 is no better than the score achieved a full decade ago in 2003.

Still, there are bright spots around the world:

• Four Asia–Pacific economies and Swit-zerland earned designation as truly “free” economies in the 2013 Index. Each achieved a score above 80 on the grading scale. Hong Kong was able to hold its position as the world’s freest economy, a position it has held for 19 consecutive years. With another strong advance in economic freedom, Singapore remains a close second and has narrowed the gap between it and Hong Kong. Australia, New Zealand, and Switzerland maintained their previous standings of 3rd, 4th, and 5th, respec-tively. The relative strength of these five free economies is no accident. Their continuing

commitment to rule of law, limited govern-ment, regulatory efficiency, and open markets has been the source of impressive resilience during uncertain economic times.

• Seven emerging economies and one advanced economy joined those considered “mostly free” in the 2013 Index, raising the number of countries in that category to 30. The eight countries are Georgia, United Arab Emirates, Czech Republic, Botswa-na, Norway, Jordan, South Korea, and the Bahamas. Notably, in the 2013 Index, Jordan became a “mostly free” economy for the first time, and Georgia recorded the largest score improvement over the past year.

• The scores of 91 countries improved, and 24 recorded their highest scores ever in the Index. Of the 91 economies that record-ed score gains, 71 are considered developing or emerging economies. Of those developing economies, 23 come from the Sub-Saharan Africa region, 16 are from Europe, and 15 are from the Asia–Pacific region.

• Five emerging economies have recorded notable increases in economic freedom

Chapter 1

Economic Freedom: Global and Regional Patterns

Ambassador Terry Miller and Anthony B. Kim

10 2013 Index of Economic Freedom

over the past five years, maintaining high economic growth rates despite the dif-ficult international economic environ-ment. The five countries are Colombia, Indonesia, Jordan, Poland, and the Unit-ed Arab Emirates. With a five-year cumula-tive score increase of 3.5 points or more, each of these countries has achieved five consecu-tive years of improving economic freedom since 2008 and turned the global economic crisis into an opportunity to upgrade its eco-nomic system.

• Every region continues to be represented by at least one of the top 20 freest econo-mies, but some notable reshuffling has

occurred in the 2013 Index. Half of the lead-ing economies are in Europe, led by Switzer-land and Denmark. The Danish economy has climbed to the 9th spot, overtaking the United States and Ireland. Losing its status of one of the world’s 10 freest economies, Ireland has fallen to 11th place. Germany and Sweden have replaced Macau and Cyprus in the top 20. Five top performers are in the Asia–Pacific region, with Taiwan, just squeaking in at number 20, joining world leaders Hong Kong, Singapore, Australia, and New Zealand. Canada and the U.S. represent North America. The other regions are represented by one country each: Chile (South and Central America/Caribbean

56

57

58

59

60

61

1995 2000 2005 2010 2013

Source: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www.heritage.org/index.

Chart 1 heritage.org

Global Average Economic Freedom

Average Score in the Index of Economic Freedom Since 1995

57.6

57.1

59.6

60.2

59.4

59.6

Chapter 1 11

region); Mauritius (Sub-Saharan Africa region); and Bahrain (Middle East and North Africa region).

economic leadeRs in decline

The overall stagnation observed in worldwide lev-els of economic freedom has coincided with signifi-cant setbacks in countries previously regarded as leaders in economic free-dom. In particular, the United States and Ireland, which had risen in previ-ous years as high as 4th place in the rankings, have seen their scores drop sub-stantially in recent years. Both suffered declines in economic freedom again this year.

S e v e n t y- e i g h t c o u n -tries registered declines in economic freedom in the 2013 Index, and another eight recorded no change in overall score. It remains to be seen whether the global economy is undergoing the leading edge of a fundamental realignment of countries along the continuum of economic freedom or whether the breaks in progress in many countries are just transitory manifestations of a loss of commit-ment to advancing economic freedom.

limiTed goveRnmenT enhances economic dynamism

A pleasant surprise in the Index rankings this year was the strong evidence that many coun-tries are putting substantial effort into getting their fiscal houses in order. The Index category that measures restraint in government spending showed one of the largest improvements of any of the 10 economic freedoms, with the world-wide average score rising from 59.8 to 61.1. Fiscal

freedom improved as well, with many countries continuing efforts to streamline tax systems and lower marginal rates.

Three years of data are now available on the impact of government stimulus on economic growth rates. The 2011 Index first reported the negative impact of government spending in the early days of the global recession for advanced economies that are members of the Organisa-tion for Economic Co-operation and Develop-ment (OECD). The full data set now available for a much greater number of countries shows a similar negative relationship between increases in government spending and economic growth.

Interestingly, the relationship is far more negative in the case of advanced economies than it is for developing and emerging economies

Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www.heritage.org/index; World Bank Group, World Development Indicators Online, http://econ.worldbank.org/WBSITE/ EXTERNAL/EXTDEC/0,,menuPK: 476823~pagePK:64165236~piPK: 64165141~theSitePK:469372,00.html (accessed November 5, 2012); and International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 5, 2012).


Higher Government Spending EqualsLower Economic Growth

–5%–20% –15% –10% –5% 0 5% 10% 15% 20% 25% 30%

10%

5%

0

Change in GDP, 2008–2011

Change in Government Spendingas a Percentage of GDP, 2008–2011

Trend Line, Advanced Economies

Trend Line, Developing Economies


(correlation coefficient –0.46 versus –0.09). Over the past three years, countries that have increased government spending have tended to record lower economic growth rates.

maRkeT-opening measuRes conTinue, buT RegulaToRy efficiency declines

The economic freedom category that improved the most in the 2013 Index is invest-ment freedom. Average scores in this category increased to 52.2 from 50.7 in the 2012 Index. Countries clearly continue to recognize the ben-efits of integrating as fully as possible into global economic markets.

Regulatory efficiency, by contrast, declined significantly. Average scores dropped in every economic freedom related to regulatory effi-ciency, with labor freedom suffering the most. Many countries apparently believe that improvements in well-being for poorer workers can be achieved through legislative fiat. Even top-ranked Hong Kong has experimented with

a minimum wage, and labor market rigidities and bureaucratic and costly business regula-tions continue to drive many people into infor-mal types of economic activity, particularly in developing countries.

The Rule of lawThe 2013 Index focuses on the impact on eco-

nomic growth and social well-being of the rule of law, one of the four pillars of economic freedom. The five essays included in a Special Focus Sec-tion provide a comprehensive overview of the subject. Measures in the Index related to the rule of law include indices related to the protection of property rights and corruption, and the com-posite of these two indicators is even more highly correlated than overall economic freedom scores with high levels of per capita GDP. Those coun-tries that have improved the rule of law over the past five years show an average growth rate of 4.4 percent over the period, while those economies where the rule of law has declined have grown less than 3 percent per year on average.

0

10,000

20,000

30,000

40,000

$50,000

Free

Freedom Category in the 2013 Index of Economic Freedom

Mostly Free Moderately Free Mostly Unfree Repressed

$44,488

$35,228

$15,822

$5,475 $5,462

Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www.heritage.org/index, and International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 6, 2012).


GDP per Capita (Purchasing Power Parity)

Greater Economic Freedom, Higher Standard of Living

Chapter 1 13

Not surprisingly, the rule-of-law indicators are highly correlated with high levels of invest-ment and job growth. Their impact is more striking within the developing and emerging countries than it is for more advanced econo-mies (coefficient of correlation 0.70 versus 0.53), perhaps because there is more variability in scores among the developing and emerging countries. The Index thus regards the rule of law as a foundational aspect of economic freedom, essential for achieving economic progress and societal prosperity.

economic fReedom and pRospeRiTy

The results of the 2013 Index reinforce the conclusion that advancing economic freedom in the areas of rule of law, limited government, regulatory efficiency, and open markets is the most effective way to generate broad-based eco-

nomic dynamism, creating more opportunities for people to work, higher levels of productivity, and gains from market opening and trade that elevate prosperity and reduce human poverty. This multidimensional relationship between economic freedom and true human progress has been empirically documented in the Index over the past 19 years, and other similar studies have confirmed its findings.

The most basic benefit of economic freedom, confirmed now with data covering 19 years, is the strong relationship between economic freedom and levels of per capita income. For countries that achieve scores that reflect even moderate levels of economic freedom (60 or above), the relationship between economic freedom and per capita GDP is highly signifi-cant. Countries moving up the economic free-dom scale show increasingly high levels of average income.

0

10,000

20,000

30,000

40,000

$50,000

Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www.heritage.org/index; World Bank Group, World Development Indicators Online, http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/0,,menuPK: 476823~pagePK:64165236~piPK:64165141~theSitePK:469372,00.html (accessed November 8, 2012); International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 8, 2012).

heritage.orgChart 4

Economic Freedom Promotes Prosperity

Five Freest CountriesFive Least Free Countries


Asia-Pacific Middle East/ North Africa

Europe Americas Sub-Saharan Africa

$43,140$41,577

$35,848 $35,403

$7,459$5,357

$7,732

$13,723

$8,948$5,093


Given the strength and empirical durability of the relationship between higher levels of eco-nomic freedom and greater prosperity, it can only be regarded as a human tragedy that the majority of the world’s people still live in countries where economic freedom is either repressed or heavily regulated. The governments of China and India bear a special responsibility in this regard. The policy environments that they set for economic

activity affect the lives of more than 2.5 billion people. Both economies are considered “mostly unfree.”

Greater levels of economic freedom have had a major positive impact on poverty lev-els over the past decade. Based on the United Nations Multidimensional Poverty Index, the intensity of poverty in countries whose econo-mies are considered mostly free or moderately

Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www.heritage.org/index; J.W. Emerson, A. Hsu, M.A. Levy, A. de Sherbinin, V. Mara, D.C. Esty, and M. Jaiteh, 2012 Environmental Performance Index and Pilot Trend Environmental Performance Index (New Haven: Yale Center for Environmental Law and Policy, 2012), http://epi.yale.edu/downloads (accessed November 7, 2012); and United Nations, Human Development reports, http://hdr.undp.org/en/reports (accessed November 7, 2012).


Variables Calibrated to 0-to-1 Scale

Overall Score in 2013 Index of Economic Freedom

Four Clear Trends: Economic Freedom Is Key to Overall Well-Being

1.0

0.5

0

0 25 50 75 100

Health

Per Capita Income

Education

Environment

This graphic shows trend lines for four variables related to the quality of life and economic freedom. Together they present a clear trend: nations with more economic freedom enjoy greater overall well-being. The first three trends are from the U.N.’s Human Development reports; the fourth is from Yale University’s Environmental Performance Index.

Chapter 1 15

free is only one-fourth the level in countries that are rated less free. Poverty rates have declined more significantly in freer countries as well.

The societal benefits of economic freedom extend far beyond higher incomes or reductions in poverty. Countries with higher levels of eco-nomic freedom enjoy higher levels of human development, including better education and more comprehensive health care. They live in cleaner environments and do a better job of mak-ing the most efficient use of energy and other nat-ural resources.

Regional vaRiaTionsEconomic freedom varies noticeably by

region, with inhabitants of North America and

Europe continuously enjoying greater levels of economic freedom on average than those who live in other regions of the world.

In the 2013 Index, Europe and North America were the only two regions that recorded score improvements from last year, with improve-ments of 0.5 point and 0.3 point, respectively. In the other four regions of the Index, economic freedom declined. The South and Central Amer-ica/Caribbean region recorded the largest aver-age loss of economic freedom: 0.6 point. The Middle East and North Africa region showed the second-largest decline: 0.3 point, a number that would likely have been even higher had grading been possible for Libya and Syria. Both the Asia–Pacific region and Sub-Saharan Africa lost one-tenth of a point of economic freedom.

First Quartile

Second Quartile

Third Quartile

Fourth Quartile

3.8%

2.9%

2.2%2.5%

Improvement in Overall Index ofEconomic Freedom Scores, 2003–2013

Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www.heritage.org/index; United Nations, Human Development Report 2011, Multidimensional Poverty Index, http://hdr.undp.org/en/reports/global/hdr2011/ (accessed November 7, 2012); World Bank Group, World Development Indicators Online, http://econ.worldbank.org/ WBSITE/EXTERNAL/EXTDEC/0,,menuPK:476823~pagePK:64165236~piPK:64165141~theSitePK:469372,00.html (accessed November 7, 2012); and International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 7, 2012).


10–Year Average Growth Rate in Per Capita Income, 2001–2011

Mostly Free and Moderately Free

Mostly Unfree and Repressed

0.06

0.24

Categories in the 2013 Indexof Economic Freedom

Poverty Intensity

Economic Freedom, Economic Growth, and Poverty


Property RightsFreedom from

Corruption

Fiscal FreedomGovernment

Spending

Business FreedomLabor FreedomMonetary Freedom

Trade FreedomInvestment FreedomFinancial Freedom

Score Changes

RULE OF LAW LIMITED GOVERNMENT

REGULATORY EFFICIENCY OPEN MARKETS

0+0.2

+0.3+1.3

–0.1–0.8–0.7

0+1.5

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Business FreedomLabor Freedom

Monetary Freedom

REGULATORY EFFICIENCY

OPENMARKETS

Trade FreedomInvestment Freedom

Financial Freedom

LIMITED GOVERNMENT

Fiscal FreedomGovernment Spending

RULE OF LAW Property RightsFreedom from Corruption

0 20 40 60 80 100

0 20 40 60 80 100

0 20 40 60 80 100

0 20 40 60 80 100

43.440.6

77.261.1

64.660.673.7

74.552.248.8

The Ten Economic Freedoms: A Global Look

Trade freedom remained essentially unchanged, with little apparent momentum for further liberalization. Investment freedom improved substantially as many countries sought to ease the foreign investment process. Progress in financial freedom was largely stagnant, reflecting a lack of reform in developing countries and uncertainty in advanced economies. The global financial system remains highly vulnerable to the ongoing European sovereign debt crisis.

While some countries have continued to streamline and modernize their business frame-works, reforms have stalled in many others, seemingly as a result of some combination of re-form fatigue and complacency. For the world as a whole, labor freedom has declined signifi-cantly. In a large number of countries, increases in the minimum wage have exceeded labor productivity growth. Inflationary pressures have inched up around the world.

Despite the challenging economic and political environments, tax-system reform has pro-gressed, and the growth of government spending was at least marginally restrained in a num-ber of countries. The average top individual income tax rate is 28.4 percent, and the average top corporate tax rate is 24.3 percent. The average overall tax burden as a percentage of GDP is 22.4 percent, and average government spending as a share of GDP is 35.1 percent.

The rule of law continues to be undermined by political instability, particularly in the Middle East and North Africa. Corruption has worsened in some countries as state interference in economic activity has grown, and perceptions of corruption in Europe and the South Amer-ica/Caribbean region have increased significantly. Respect for property rights declined in 16 countries; only nine countries improved their property rights scores.

Chapter 1 17

50

55

60

65

70

75

80

85

Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www.heritage.org/index; World Bank Group, World Development Indicators Online, http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/0,,menuPK: 476823~pagePK:64165236~piPK:64165141~theSitePK:469372,00.html (accessed November 7, 2012); and International Monetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessed November 7, 2012).



Economic Freedom by Region, with Population

3.7 billionPopulation:768 million

334million

813million

Asia-Pacific57.4

Asia-Pacific57.4

Central and South

America/ Caribbean

59.4

Middle East/ North Africa

61.8

460million

443million

Europe66.6

Sub-SaharanAfrica53.7

NorthAmerica

74.1

= 500 millionPopulation

Average Score in the 2013 Index of Economic Freedom

comparing Regional average scores to the global average

Table 1 heritage.org

North America Europe

Middle East/North Africa

South and Central

America/ Caribbean

Asia-Pacific

Sub- Saharan Africa

GLOBAL AVERAGE

Overall 74.1 66.6 61.8 59.4 57.4 53.7 59.6

Rule of Law Property Rights 75.0 61.2 43.7 40.2 38.5 30.9 43.4 Freedom from Corruption 62.7 55.3 42.3 38.1 36.7 29.9 40.6

Limited Government Fiscal Freedom 76.7 72.5 88.4 79.2 79.7 74.6 77.2 Government Spending 57.3 41.1 66.6 68.1 65.0 70.2 61.1

Regulatory Efficiency Business Freedom 87.9 77.6 67.5 61.7 65.2 51.2 64.6 Labor Freedom 79.2 61.2 63.1 59.7 65.4 54.3 60.6 Monetary Freedom 76.0 77.1 73.3 74.2 72.2 71.3 73.7

Open Markets Trade Freedom 85.1 85.5 74.8 73.5 71.0 67.1 74.5 Investment Freedom 71.7 71.2 49.3 51.6 38.9 46.4 52.2 Financial Freedom 70.0 63.3 48.7 47.9 41.7 40.7 48.8

Above Global Average

Below Global Average

Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2013), http://www.heritage.org/index.


United States

Canada

UnitedStates

Mexico

North America


Economic Freedom Scores80–100 Free70–79.9 Mostly Free60–69.9 Moderately Free50–59.9 Mostly Unfree0–49.9 RepressedNot Ranked

Map 1 heritage.org

In every region, however, the evidence con-tinues to show that economic freedom is the key to greater prosperity and overall human development.

noRTh ameRicaNorth America continues to be the world’s

economically freest region in the 2013 Index. The region recorded a score improvement of 0.3 point from last year, with Mexico’s notable score improvement outweighing economic freedom declines in Canada and the United States. With Canada continuing to be the region’s freest econo-my since 2010, the North American region has two

“mostly free” economies (Canada and the U.S.) and one “moderately free” economy (Mexico).

North America scores above the world aver-ages in rule of law, regulatory efficiency, and open markets but continues to lag in the pillar of limited government, which consists of fiscal freedom and the management of government spending. Compared to last year, on average, the region has improved in the areas of investment freedom, trade freedom, and the management of public spending while registering score declines in business freedom and monetary freedom.

euRopeNarrowing the gap with North America, the

European region has the world’s second-high-est level of economic freedom. Europe is the most improved region in the 2013 Index, with a

Chapter 1 19

score gain of 0.5 point. The scores of 32 coun-tries improved, while just nine countries lost economic freedom. Switzerland continues to be the only “free” economy in the region, and about 81 percent of the 43 European countries score between 60 and 80 and are considered either

“moderately free” or “mostly free.” Europe has two “repressed” economies that score below 50: Ukraine and Belarus.

There are five European countries whose economic freedom status has changed notably in the 2013 Index. Georgia, Norway, and the Czech Republic have become “mostly free” economies. Cyprus has dropped into the “moderately free” category, while Italy has regained that status. Georgia achieved the larg-est score improvement in the 2013 Index, and two other countries, Estonia and Poland, were among the world’s 10 most improved.

Taken as a whole, the European region scores higher than the world aver-ages in rule of law, regula-tory efficiency, and open markets. Despite some prog-ress in constraining govern-ment spending over the past year, European countries fall almost five points below the world average in fiscal

freedom and more than 20 points below the world average in government spending scores—a reflection of continuing problems in public finance management that result from years of financing the growth of the public sector.

Europe has been undergoing tumultuous and uncertain times epitomized by the ongoing sovereign debt crisis in the eurozone. Stagnant growth continues to exacerbate debt levels, leav-ing many European countries with no choice but to cut spending to reduce unsustainable fiscal deficits. In comparison to last year, Europe has improved on average in the areas of manage-ment of public spending and investment free-dom while showing deteriorations in monetary

Economic Freedom in North American Countries

6 1 Canada 79.4 -0.5 90.0 87.0 79.8 44.8 91.7 82.3 75.2 88.2 75.0 80.0

10 2 United States 76.0 -0.3 85.0 71.0 69.3 47.8 90.5 95.5 75.0 86.4 70.0 70.0

50 3 Mexico 67.0 1.7 50.0 30.0 81.1 79.4 81.4 59.7 77.7 80.6 70.0 60.0


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Economic Freedom in European Countries

5 1 Switzerland 81.0 -0.1 90.0 88.0 68.1 63.8 75.8 87.9 86.2 90.0 80.0 80.0

9 2 Denmark 76.1 -0.1 90.0 94.0 39.8 5.9 98.4 91.1 80.0 86.8 85.0 90.0

11 3 Ireland 75.7 -1.2 90.0 75.0 73.8 28.8 83.4 76.6 82.8 86.8 90.0 70.0

13 4 Estonia 75.3 2.1 85.0 64.0 79.7 56.2 78.2 56.0 77.1 86.8 90.0 80.0

14 5 United Kingdom 74.8 0.7 90.0 78.0 57.0 27.7 94.1 71.6 72.4 86.8 90.0 80.0

15 6 Luxembourg 74.2 -0.3 90.0 85.0 65.0 47.1 74.8 39.0 79.3 86.8 95.0 80.0

16 7 Finland 74.0 1.7 90.0 94.0 66.9 12.2 94.8 45.3 79.5 86.8 90.0 80.0

17 8 Netherlands 73.5 0.2 90.0 89.0 52.1 24.7 83.0 58.6 81.1 86.8 90.0 80.0

18 9 Sweden 72.9 1.2 90.0 93.0 39.6 21.0 93.2 53.6 82.1 86.8 90.0 80.0

19 10 Germany 72.8 1.8 90.0 80.0 61.8 37.3 92.1 43.8 81.2 86.8 85.0 70.0

21 11 Georgia 72.2 2.8 45.0 41.0 88.2 68.9 90.6 91.1 72.6 89.2 75.0 60.0

22 12 Iceland 72.1 1.2 90.0 83.0 72.7 36.2 91.5 58.9 75.8 87.8 65.0 60.0

23 13 Lithuania 72.1 0.6 60.0 48.0 92.8 53.6 77.6 64.1 78.3 86.8 80.0 80.0

25 14 Austria 71.8 1.5 90.0 78.0 51.1 23.5 73.6 80.4 79.3 86.8 85.0 70.0

29 15 Czech Republic 70.9 1.0 70.0 44.0 82.0 43.5 65.8 85.5 81.7 86.8 70.0 80.0

31 16 Norway 70.5 1.7 90.0 90.0 51.0 40.3 92.6 44.7 76.9 89.3 70.0 60.0

38 17 Armenia 69.4 0.6 30.0 26.0 88.0 82.1 87.6 77.1 73.0 85.4 75.0 70.0

40 18 Belgium 69.2 0.2 80.0 75.0 45.0 14.5 91.6 69.8 79.3 86.8 80.0 70.0

41 19 Cyprus 69.0 -2.8 70.0 63.0 79.8 32.7 80.7 62.8 84.1 81.8 75.0 60.0

42 20 Slovakia 68.7 1.7 50.0 40.0 84.7 58.0 71.0 72.2 79.1 86.8 75.0 70.0

43 21 Macedonia 68.2 -0.3 35.0 39.0 91.4 69.1 80.3 78.4 84.0 84.6 60.0 60.0

46 22 Spain 68.0 -1.1 70.0 62.0 53.9 43.0 80.3 54.3 79.9 86.8 80.0 70.0

47 23 Malta 67.5 0.5 75.0 56.0 61.2 44.1 61.1 65.4 80.4 86.8 85.0 60.0

48 24 Hungary 67.3 0.2 65.0 46.0 79.7 29.7 79.1 64.4 77.1 86.8 75.0 70.0

55 25 Latvia 66.5 1.3 50.0 42.0 84.4 53.6 75.7 64.4 78.3 86.8 80.0 50.0

57 26 Poland 66.0 1.8 60.0 55.0 76.0 43.0 64.0 62.9 77.7 86.8 65.0 70.0

58 27 Albania 65.2 0.1 30.0 31.0 92.6 75.1 81.0 49.0 78.4 79.8 65.0 70.0

59 28 Romania 65.1 0.7 40.0 36.0 87.9 62.2 70.4 63.5 74.7 86.8 80.0 50.0

60 29 Bulgaria 65.0 0.3 30.0 33.0 94.0 64.2 73.6 74.8 78.6 86.8 55.0 60.0

62 30 France 64.1 0.9 80.0 70.0 53.0 5.6 84.0 50.5 81.1 81.8 65.0 70.0


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freedom and financial freedom. Europe’s rule of law also has been undermined by a higher level of perceived corruption and the weakened protec-tion of property rights.

MIDDLE EAST/NORTH AFRICAThe Middle East/North Africa region has expe-

rienced widespread turmoil. The region’s overall economic freedom has decreased by 0.3 point since the 2012 Index, and grading of economic freedom for Libya and Syria has had to be sus-pended. Many of the region’s economies remain only “moderately free” or “mostly unfree.” Alge-ria and Iran are considered “repressed,” scoring below 50. Structural and institutional problems abound, and the regional unemployment rate, which averages more than 10 percent, is among

the highest in the world and is most pronounced among younger members of the labor force.

Many countries in the region have been undergoing political and economic upheaval since early 2011, and the gradual rise in econom-ic freedom observed in prior years has come to a halt. Unfortunately, economic problems will not be solved simply by holding elections or allowing greater expressions of dissent. Policies and prac-tices that restrict economic freedom are deeply ingrained, and it remains to be seen whether the region’s new political leaders have the political will to undertake the fundamental economic reforms that are needed.

Scores for most of the 15 countries in the region are concentrated between 50 and 70. In the 2013 Index, seven of the region’s 15 economies

Economic Freedom in European Countries (continued)

67 31 Portugal 63.1 0.1 70.0 61.0 61.6 28.3 82.8 31.0 79.4 86.8 70.0 60.0

69 32 Turkey 62.9 0.4 50.0 42.0 77.0 64.9 68.2 43.1 73.3 85.2 65.0 60.0

70 33 Montenegro 62.6 0.1 40.0 40.0 92.4 41.5 72.7 71.4 79.9 83.0 55.0 50.0

76 34 Slovenia 61.7 -1.2 60.0 59.0 65.7 22.3 80.7 40.4 81.6 86.8 70.0 50.0

78 35 Croatia 61.3 0.4 40.0 40.0 75.4 48.7 63.0 42.4 81.1 87.5 75.0 60.0

83 36 Italy 60.6 1.8 50.0 39.0 55.5 25.3 76.9 52.0 80.2 86.8 80.0 60.0

94 37 Serbia 58.6 0.6 40.0 33.0 84.2 40.3 60.2 70.4 65.3 77.9 65.0 50.0

103 38 Bosnia and Herzegovina 57.3 0.0 20.0 32.0 83.2 26.9 54.3 61.2 79.0 86.4 70.0 60.0

115 39 Moldova 55.5 1.1 40.0 29.0 87.2 50.1 69.7 40.9 73.4 80.0 35.0 50.0

117 40 Greece 55.4 0.0 40.0 34.0 66.2 24.7 77.1 42.1 73.4 81.8 65.0 50.0

139 41 Russia 51.1 0.6 25.0 24.0 86.9 54.4 69.2 52.6 66.7 77.4 25.0 30.0

154 42 Belarus 48.0 -1.0 20.0 24.0 88.8 43.5 75.2 76.9 40.7 80.8 20.0 10.0

161 43 Ukraine 46.3 0.2 30.0 23.0 78.2 29.4 47.6 49.9 71.0 84.4 20.0 30.0

N/A N/A Kosovo N/A N/A 30.0 29.0 93.5 73.0 52.4 77.7 N/A N/A 65.0 N/A

N/A N/A Liechtenstein N/A N/A N/A N/A N/A N/A 70.0 N/A N/A 90.0 N/A 80.0


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Chapter 1 23

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improved their economic freedom, and the same number of countries lost economic freedom. Five countries in the region recorded notable changes in their economic freedom status. The United Arab Emirates and Jordan have advanced into the “mostly free” category, while Lebanon and Morocco have slid back into “mostly unfree” status. Algeria has become a “repressed” econo-my for the first time in its Index history. While no countries in the region were among the world’s 10 most improved in the 2013 Index, Egypt recorded the third-largest score decline.

The Middle East/North Africa region has scores that are lower than the global average in half of the 10 economic freedoms, includ-

ing property rights, freedom from corruption, monetary freedom, investment freedom, and financial freedom. Reflecting the fragile foun-dations of economic freedom in the region, the scores for rule of law have continued to deteri-orate. Business freedom, labor freedom, trade freedom, and investment freedom have also declined.

souTh and cenTRal ameRica/caRibbean

With mixed progress toward greater eco-nomic freedom in the region’s individual coun-tries, the South and Central America/Caribbean region is ranked fourth out of the six regions in

12 1 Bahrain 75.5 0.3 55.0 51.0 99.9 72.4 75.8 90.4 72.5 82.8 75.0 80.0

27 2 Qatar 71.3 0.0 70.0 72.0 99.8 81.2 69.4 63.4 80.3 82.5 45.0 50.0

28 3 United Arab Emirates 71.1 1.8 55.0 68.0 99.9 85.1 74.0 77.6 83.9 82.6 35.0 50.0

33 4 Jordan 70.4 0.5 60.0 45.0 93.6 68.8 69.2 75.5 82.0 79.6 70.0 60.0

45 5 Oman 68.1 0.2 50.0 48.0 98.5 69.1 68.1 80.9 72.7 78.7 55.0 60.0

51 6 Israel 66.9 -0.9 70.0 58.0 60.2 39.3 66.1 63.7 78.6 83.0 80.0 70.0

66 7 Kuwait 63.1 0.6 50.0 46.0 99.9 61.5 57.7 62.8 71.6 76.8 55.0 50.0

82 8 Saudi Arabia 60.6 -1.9 40.0 44.0 99.6 52.2 68.2 69.2 65.7 77.3 40.0 50.0

90 9 Morocco 59.6 -0.6 40.0 34.0 71.4 64.3 76.4 30.1 78.9 70.8 70.0 60.0

91 10 Lebanon 59.5 -0.6 20.0 25.0 90.8 74.6 50.3 57.2 76.5 80.4 60.0 60.0

107 11 Tunisia 57.0 -1.6 40.0 38.0 74.5 63.7 82.8 70.1 77.8 58.1 35.0 30.0

113 12 Yemen 55.9 0.6 30.0 21.0 91.5 72.8 61.3 55.3 65.7 81.5 50.0 30.0

125 13 Egypt 54.8 -3.1 35.0 29.0 85.6 69.4 63.3 43.3 58.4 73.8 50.0 40.0

145 14 Algeria 49.6 -1.4 30.0 29.0 80.4 44.1 65.2 52.6 76.6 67.8 20.0 30.0

168 15 Iran 43.2 0.9 10.0 27.0 80.8 80.5 65.3 55.0 58.0 45.7 0.0 10.0

N/A N/A Iraq N/A N/A N/A 18.0 N/A N/A 47.0 70.1 N/A N/A N/A N/A

N/A N/A Libya N/A N/A 10.0 20.0 N/A N/A N/A N/A 64.8 85.0 10.0 20.0

N/A N/A Syria N/A N/A 20.0 26.0 86.2 N/A 59.3 48.9 71.5 72.8 10.0 20.0

Economic Freedom in Middle East/North African Countries


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Chapter 1 25

Brazil

Argentina

Peru

Chile

Bolivia

Colombia

Venezuela

Paraguay

Uruguay

Ecuador

Guyana

Cuba

Suriname

Nicaragua

HondurasGuatemala

Panama

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Costa Rica

Belize Dominican Republic

El Salvador

Jamaica

Trinidad & Tobago

The Bahamas

DominicaSt. LuciaBarbados


South and Central America/Caribbean

Note: French Guiana not depicted because it is French territory.

St. Vincent & The Grenadines


Map 4 heritage.org


7 1 Chile 79.0 0.7 90.0 72.0 77.6 83.7 70.5 74.2 84.6 82.0 85.0 70.0

32 2 Saint Lucia 70.4 -0.9 70.0 70.0 76.9 63.6 85.3 76.4 84.7 71.9 65.0 40.0

35 3 The Bahamas 70.1 2.1 70.0 73.0 97.0 84.9 71.3 81.6 75.8 47.0 30.0 70.0

36 4 Uruguay 69.7 -0.2 70.0 70.0 84.2 68.3 73.4 70.7 72.5 82.9 75.0 30.0

37 5 Colombia 69.6 1.6 50.0 34.0 76.1 75.2 90.2 79.3 78.7 72.2 70.0 70.0

39 6 Barbados 69.3 0.3 80.0 78.0 74.5 54.2 74.8 84.4 72.1 60.5 55.0 60.0

44 7 Peru 68.2 -0.5 40.0 34.0 79.9 89.1 72.3 67.1 84.3 85.0 70.0 60.0

49 8 Costa Rica 67.0 -1.0 50.0 48.0 82.9 90.1 58.3 60.4 75.4 85.1 70.0 50.0

52 9 Jamaica 66.8 1.7 40.0 33.0 77.5 67.7 84.3 69.3 76.1 75.0 85.0 60.0

53 10 El Salvador 66.7 -2.0 40.0 34.0 85.7 85.4 61.8 62.0 79.6 79.0 70.0 70.0

54 11 Saint Vincent and The Grenadines

66.7 0.2 70.0 58.0 74.2 67.1 77.6 76.6 80.3 73.3 50.0 40.0

64 12 Dominica 63.9 2.3 60.0 52.0 72.0 50.1 77.0 68.8 85.3 74.3 70.0 30.0

71 13 Panama 62.5 -2.7 30.0 33.0 86.2 77.8 72.5 40.1 75.9 74.8 65.0 70.0

72 14 Trinidad and Tobago 62.3 -2.1 50.0 32.0 84.9 60.4 55.1 76.7 73.7 69.9 60.0 60.0

80 15 Paraguay 61.1 -0.7 30.0 22.0 95.9 85.4 59.1 25.6 79.8 82.7 70.0 60.0

85 16 Guatemala 60.0 -0.9 30.0 27.0 79.6 93.6 50.8 48.7 75.5 85.2 60.0 50.0

87 17 Dominican Republic 59.7 -0.5 30.0 26.0 83.7 92.6 53.7 55.6 72.9 77.8 65.0 40.0

96 18 Honduras 58.4 -0.4 30.0 26.0 85.3 79.2 61.0 26.8 73.9 77.1 65.0 60.0

100 19 Brazil 57.7 -0.2 50.0 38.0 70.3 54.8 53.0 57.2 74.4 69.7 50.0 60.0

102 20 Belize 57.3 -4.6 30.0 0.0 82.2 72.6 72.6 71.4 77.3 77.2 40.0 50.0

110 21 Nicaragua 56.6 -1.3 15.0 25.0 78.7 65.1 51.2 62.2 73.2 85.4 60.0 50.0

129 22 Guyana 53.8 2.5 30.0 25.0 67.9 61.1 66.3 75.4 75.9 71.2 35.0 30.0

135 23 Suriname 52.0 -0.6 40.0 30.0 71.6 72.5 40.2 77.5 66.7 66.3 25.0 30.0

152 24 Haiti 48.1 -2.6 10.0 18.0 80.7 66.3 33.4 63.6 74.2 74.8 30.0 30.0

156 25 Bolivia 47.9 -2.3 10.0 28.0 88.8 64.1 55.8 30.8 67.4 74.3 10.0 50.0

159 26 Ecuador 46.9 -1.4 20.0 27.0 80.1 47.3 51.5 48.0 66.9 68.1 20.0 40.0

160 27 Argentina 46.7 -1.3 15.0 30.0 64.3 52.1 60.1 47.4 60.4 67.6 40.0 30.0

174 28 Venezuela 36.1 -2.0 5.0 19.0 75.6 50.6 45.6 34.5 47.3 58.8 5.0 20.0

176 29 Cuba 28.5 0.2 10.0 42.0 62.7 0.0 10.0 20.0 67.4 62.7 0.0 10.0

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Chapter 1 27

the 2013 Index. The eco-nomic freedom scores of 20 of the region’s 29 countries declined, and the region recorded the second-largest overall loss of economic free-dom (0.6 point) of any region. Half of the 10 largest declines in economic freedom regis-tered in the 2013 Index came from this region, recorded by Belize, Panama, Haiti, Boliv-ia, and Trinidad and Tobago.

Five countries in the region have changed their economic freedom status. Bolivia and Haiti are now considered “repressed.” The Bahamas has improved to

“mostly free,” while Belize and the Dominican Repub-lic have fallen from “mod-erately free” to the “mostly unfree” category.

On average, the countries in the South and Central America/Caribbean region perform better than the world averages in only three of the 10 components of eco-nomic freedom: fiscal free-dom, control of government spending, and monetary freedom. The region contin-ues to lag behind world aver-ages in the other seven areas of economic freedom, par-ticularly freedom from corruption and property rights, both of which are critical to sustaining the rule of law and stable long-term economic devel-opment. Corruption and a lack of protection for property rights are major problem areas, reflect-ing long-standing issues of poor governance and political instability in the region.

Noticeably, the South and Central America/Caribbean region’s countries are distributed throughout the rankings in a more balanced fashion than are the countries of any other

region, almost like a bell curve. All but nine countries receive an economic freedom score between 50 and 70, and 13 countries fall in the middle category of “moderately free.”

asia–pacificThe Asia–Pacific region is distinguished by

the extraordinary disparity in levels of economic freedom among its economies. Four of the world’s 10 freest economies—Hong Kong, Singapore, Australia, and New Zealand—are in this region,

20 30 40 50 60 70 80 90

Overall Score in the 2013 Indexof Economic Freedom

Correlation: 0.66R2 = 0.44

Trend Line

China

India

60 or less: “Mostly Unfree” or “Repressed”

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Asian Giants Lag in Economic Freedom

Each circle represents a nation in the Index of Economic Freedom

50025010010

Population (millions)


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1 1 Hong Kong 89.3 -0.6 90.0 84.0 92.9 88.9 98.9 86.2 82.1 90.0 90.0 90.0

2 2 Singapore 88.0 0.5 90.0 92.0 91.1 91.3 97.1 91.4 82.0 90.0 75.0 80.0

3 3 Australia 82.6 -0.5 90.0 88.0 66.4 62.8 95.5 83.5 83.8 86.2 80.0 90.0

4 4 New Zealand 81.4 -0.7 95.0 95.0 71.5 33.2 99.9 89.5 83.3 86.8 80.0 80.0

20 5 Taiwan 72.7 0.8 70.0 61.0 80.5 84.9 94.3 53.3 82.9 85.0 65.0 50.0

24 6 Japan 71.8 0.2 80.0 80.0 69.2 45.0 81.3 80.3 90.6 81.8 60.0 50.0

26 7 Macau 71.7 -0.1 60.0 51.0 73.5 91.5 60.0 55.0 81.3 90.0 85.0 70.0

34 8 South Korea 70.3 0.4 70.0 54.0 73.0 72.8 93.6 48.7 77.9 72.6 70.0 70.0

56 9 Malaysia 66.1 -0.3 55.0 43.0 85.1 73.5 79.9 72.3 79.8 77.0 45.0 50.0

61 10 Thailand 64.1 -0.8 45.0 34.0 78.9 83.7 73.2 72.9 68.3 75.2 40.0 70.0

68 11 Kazakhstan 63.0 -0.6 35.0 27.0 93.2 84.5 71.8 88.4 72.2 78.2 30.0 50.0

75 12 Mongolia 61.7 0.2 30.0 27.0 82.5 62.6 70.4 79.2 75.6 79.8 50.0 60.0

81 13 Sri Lanka 60.7 2.4 40.0 33.0 84.7 86.5 77.0 60.8 69.1 76.2 40.0 40.0

88 14 Azerbaijan 59.7 0.8 25.0 24.0 85.5 67.8 69.2 79.4 73.5 77.2 55.0 40.0

89 15 Kyrgyz Republic 59.6 -0.6 20.0 21.0 94.8 56.4 73.2 88.6 66.7 75.4 50.0 50.0

95 16 Cambodia 58.5 0.9 30.0 21.0 90.9 88.4 39.4 54.2 81.3 70.2 60.0 50.0

97 17 The Philippines 58.2 1.1 30.0 26.0 79.3 90.2 53.1 51.0 76.6 75.5 50.0 50.0

105 18 Fiji 57.2 -0.1 25.0 20.0 78.0 78.0 65.7 74.9 72.8 68.0 40.0 50.0

106 19 Samoa 57.1 -3.4 60.0 39.0 80.6 34.3 72.4 80.4 78.5 66.0 30.0 30.0

108 20 Indonesia 56.9 0.5 30.0 30.0 83.4 89.2 50.2 50.8 75.5 75.0 35.0 50.0

109 21 Vanuatu 56.6 0.0 40.0 35.0 97.3 80.5 56.4 57.7 81.4 48.0 30.0 40.0

112 22 Tonga 56.0 -1.0 20.0 31.0 87.1 64.7 76.6 84.4 71.1 75.6 30.0 20.0

119 23 India 55.2 0.6 50.0 31.0 78.3 77.9 37.3 73.6 65.3 63.6 35.0 40.0

121 24 Pakistan 55.1 0.4 30.0 25.0 80.5 89.0 70.7 47.9 67.0 66.0 35.0 40.0

122 25 Bhutan 55.0 -1.6 60.0 57.0 82.7 38.8 60.5 84.4 67.3 49.5 20.0 30.0

130 26 Papua New Guinea 53.6 -0.2 20.0 22.0 67.4 72.3 58.3 73.4 72.4 85.0 35.0 30.0

131 27 Tajikistan 53.4 0.0 20.0 23.0 92.8 78.1 61.7 55.5 64.6 78.2 20.0 40.0

132 28 Bangladesh 52.6 -0.6 20.0 27.0 72.7 92.1 68.0 51.9 65.4 54.0 55.0 20.0

136 29 China 51.9 0.7 20.0 36.0 70.2 83.3 48.0 62.6 71.6 72.0 25.0 30.0

140 30 Vietnam 51.0 -0.3 15.0 29.0 75.6 72.4 63.8 65.5 65.3 78.6 15.0 30.0




yet most of the other countries remain “mostly unfree.” Countries such as Turkmenistan and Burma have economies that are “repressed.” North Korea, which continues to reject any form of free-market activity, remains the least free economy in both the region and the world.

In comparison to last year, the region’s eco-nomic freedom has declined by one-tenth of a point. In the 2013 Index, the scores of 19 coun-tries in the region have improved, and those of 20 have declined. About 63 percent of the 41 coun-tries in the Asia–Pacific region score between 40 and 60 on the economic freedom scale, remain-ing either “mostly unfree” or “repressed.” Four countries have adjusted their economic freedom status. South Korea and Sri Lanka have moved up into the “mostly free” and “moderately free” cat-egories, respectively. On the other hand, both the Kyrgyz Republic and Samoa have become “most-ly unfree” economies. While Sri Lanka recorded

the third-largest score improvement in the 2013 Index, Samoa registered the second-biggest score decline.

Although its overall economic freedom score is below the world average of 59.6 in the 2013 Index, the Asia–Pacific region continues to score higher than the world averages in four of the 10 economic freedoms related to limited government and reg-ulatory efficiency: fiscal freedom, government spending, business freedom, and labor freedom. Typically lower government expenditures result in a regional government spending score that is over four points better than the world average. The region’s labor freedom score beats the world average by about five points, although many small Pacific island economies still lack fully developed formal labor markets.

India and China are ranked 119th and 136th, respectively, in the world, and both remain

“mostly unfree.” The two countries’ high econom-

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141 31 Nepal 50.4 0.2 30.0 22.0 85.8 89.2 57.2 44.3 75.1 60.8 10.0 30.0

143 32 Laos 50.1 0.1 15.0 22.0 79.7 85.8 62.1 54.7 73.0 58.7 30.0 20.0

144 33 Micronesia 50.1 -0.6 30.0 30.0 97.5 0.0 54.1 82.5 76.1 81.0 20.0 30.0

149 34 Maldives 49.0 -0.2 25.0 25.0 98.8 14.5 88.7 64.0 70.4 43.7 30.0 30.0

162 35 Uzbekistan 46.0 0.2 15.0 16.0 90.2 67.8 71.2 61.0 63.0 66.1 0.0 10.0

163 36 Kiribati 45.9 -1.0 30.0 31.0 71.2 0.0 59.2 78.5 78.4 55.4 25.0 30.0

165 37 Solomon Islands 45.0 -1.2 30.0 27.0 66.2 6.1 66.6 66.4 75.4 72.6 10.0 30.0

166 38 Timor-Leste 43.7 0.4 20.0 24.0 64.7 0.0 44.8 81.2 69.3 73.0 40.0 20.0

169 39 Turkmenistan 42.6 -1.2 5.0 16.0 94.0 91.7 30.0 30.0 70.6 79.2 0.0 10.0

172 40 Burma 39.2 0.5 10.0 15.0 81.9 96.8 20.0 20.0 65.1 73.6 0.0 10.0

177 41 North Korea 1.5 0.5 5.0 10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

N/A N/A Afghanistan N/A N/A N/A 15.0 N/A 83.2 59.7 75.8 69.5 N/A 65.0 N/A

Economic Freedom in Asia–Pacific Countries (continued)


Chapter 1 31


Note: Western Sahara is not depicted because its economy is not in the Index of Economic Freedom.

Sub-Saharan Africa

Sudan

MaliChad

Niger

Angola

DemocraticRepublic of

Congo

Ethiopia Somalia

SouthAfrica

Nigeria

Namibia

Mauritania

Zambia

Tanzania

KenyaUganda

BotswanaMozambique

Madagascar

Republic of Congo

Cameroon

Zimbabwe

Gabon

Ghana

Guinea

Coted'Ivoire Central African

Republic

Senegal

BurkinaFaso

Benin

Eritrea

Liberia

Malawi

TogoSierraLeone

Cape Verde

Lesotho

BurundiRwanda

Djibouti

Guinea-Bissau

Swaziland

Equatorial Guinea

The Gambia

Mauritius

ComorosSeychelles

Sao Tome& Principe


Map 6 heritage.org

ic growth has not been deeply rooted in policies that promote economic freedom. The founda-tions for long-term economic development con-tinue to be fragile in the absence of effectively functioning legal frameworks. Progress with market-oriented reforms has been uneven and has often backtracked under the influence of those with a political interest in maintaining the status quo.

sub-sahaRan afRicaSub-Saharan Africa’s overall level of eco-

nomic freedom remains weaker than that of any other region. With a score decline of 0.1 point that ended two years of steady improvement, the region’s movement toward greater economic freedom has stalled.

Unlike other regions that have a more diverse range of “free” economies, in Sub-Saharan


8 1 Mauritius 76.9 -0.1 70.0 51.0 92.1 81.9 78.2 72.3 75.4 87.9 90.0 70.0

30 2 Botswana 70.6 1.0 70.0 61.0 79.5 65.1 69.0 69.8 72.0 79.7 70.0 70.0

63 3 Rwanda 64.1 -0.8 30.0 50.0 80.4 75.9 65.6 80.3 75.5 78.0 65.0 40.0

65 4 Cape Verde 63.7 0.2 70.0 55.0 77.9 65.4 58.9 40.3 78.0 66.9 65.0 60.0

73 5 Madagascar 62.0 -0.4 40.0 30.0 90.0 94.6 63.5 47.4 74.9 74.6 55.0 50.0

74 6 South Africa 61.8 -0.9 50.0 41.0 70.5 69.2 74.7 55.6 75.8 76.3 45.0 60.0

77 7 Ghana 61.3 0.6 50.0 39.0 86.0 52.5 61.5 61.6 64.8 67.8 70.0 60.0

79 8 Uganda 61.1 -0.8 30.0 24.0 80.6 84.3 48.4 87.9 77.2 73.6 55.0 50.0

84 9 Namibia 60.3 -1.6 30.0 44.0 66.4 71.5 68.4 76.7 74.9 81.5 50.0 40.0

86 10 Burkina Faso 59.9 -0.7 30.0 30.0 81.4 82.0 61.2 56.4 80.6 72.5 55.0 50.0

92 11 The Gambia 58.8 0.0 30.0 35.0 75.1 82.7 59.5 59.3 71.1 60.5 65.0 50.0

93 12 Zambia 58.7 0.4 30.0 32.0 72.9 80.3 60.4 58.4 66.0 82.3 55.0 50.0

98 13 Tanzania 57.9 0.9 30.0 30.0 79.9 77.9 48.6 61.9 71.8 73.5 55.0 50.0

99 14 Gabon 57.8 1.4 40.0 30.0 74.2 80.1 56.5 63.1 77.5 61.1 55.0 40.0

101 15 Benin 57.6 1.9 30.0 30.0 76.1 86.1 45.4 49.7 79.9 59.3 70.0 50.0

104 16 Swaziland 57.2 0.0 40.0 31.0 74.4 51.3 66.0 70.3 74.7 69.7 55.0 40.0

111 17 Mali 56.4 0.6 30.0 28.0 69.6 83.9 50.1 64.6 79.9 73.2 45.0 40.0

114 18 Kenya 55.9 -1.6 30.0 22.0 77.5 73.5 58.0 57.1 73.8 66.7 50.0 50.0

116 19 Senegal 55.5 0.1 40.0 29.0 65.2 75.6 56.7 41.3 79.6 72.2 55.0 40.0

118 20 Malawi 55.3 -1.1 40.0 30.0 78.4 60.0 41.1 58.8 72.5 71.8 50.0 50.0

120 21 Nigeria 55.1 -1.2 30.0 24.0 82.6 74.6 55.7 67.2 73.3 63.9 40.0 40.0

123 22 Mozambique 55.0 -2.1 30.0 27.0 76.2 64.5 63.9 37.9 74.7 75.4 50.0 50.0

124 23 Seychelles 54.9 1.9 50.0 48.0 77.6 56.9 69.2 63.5 75.6 33.4 45.0 30.0

126 24 Côte d'Ivoire 54.1 -0.2 25.0 22.0 77.9 79.8 43.3 54.6 77.8 70.3 40.0 50.0

127 25 Djibouti 53.9 0.0 30.0 30.0 79.4 48.8 30.0 59.6 76.6 59.6 65.0 60.0

128 26 Niger 53.9 -0.4 30.0 25.0 77.0 80.1 35.2 39.3 85.4 71.7 55.0 40.0

133 27 Cameroon 52.3 0.5 30.0 25.0 69.3 87.1 46.8 55.5 69.9 54.9 35.0 50.0

134 28 Mauritania 52.3 -0.7 25.0 24.0 80.3 74.7 43.3 51.1 75.1 64.8 45.0 40.0

137 29 Guinea 51.2 0.4 20.0 21.0 69.6 82.6 46.1 63.8 62.8 61.2 45.0 40.0

138 30 Guinea-Bissau 51.1 1.0 20.0 22.0 89.1 82.0 41.3 54.0 72.7 65.3 35.0 30.0

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Economic Freedom in Sub-Saharan Africa Countries


Chapter 1 33

Africa, there are only distinctions among less free economies. A majority of nations in the region are ranked either “mostly unfree” with scores between 50 and 60 or “repressed” with scores below 50. Fifteen of the world’s 33

“repressed” economies are in Sub- Saharan Africa. Four countries in the region have made notable changes in their economic freedom status. Botswana has advanced to “mostly free,” but Burkina Faso regressed to “mostly unfree.” São Tomé and Príncipe and Ethiopia are now considered “repressed.”

Sub-Saharan Africa is ranked last in seven of

the 10 components of economic freedom. Some of the gaps between Sub-Saharan Africa’s scores and world averages are especially striking. The region lags by about 13 points in business free-dom and by over 10 points in both property rights and freedom from corruption. Labor free-dom is restricted, reflecting in part the region’s lack of progress in developing modern and effi-cient labor markets. The single factor for which the region scores higher than the world average is government spending. Ironically, however, the region scores worse than the global average in terms of fiscal freedom.

142 31 Central African Republic 50.4 0.1 20.0 22.0 65.1 92.4 35.2 47.9 78.1 57.8 55.0 30.0

146 32 Ethiopia 49.4 -2.6 30.0 27.0 74.2 89.6 52.4 46.9 64.7 64.0 25.0 20.0

147 33 Liberia 49.3 0.7 30.0 32.0 76.6 77.8 56.5 47.2 72.0 61.4 20.0 20.0

148 34 Burundi 49.0 0.9 20.0 19.0 71.5 22.6 58.4 66.4 68.7 78.9 55.0 30.0

150 35 Togo 48.8 0.5 30.0 24.0 68.5 81.6 39.9 44.2 78.5 56.7 35.0 30.0

151 36 Sierra Leone 48.3 -0.8 10.0 25.0 80.7 75.9 51.5 26.3 68.5 70.2 55.0 20.0

153 37 São Tomé and Príncipe 48.0 -2.2 20.0 30.0 86.9 45.3 53.5 38.6 66.0 60.0 50.0 30.0

155 38 Lesotho 47.9 1.3 40.0 35.0 48.2 0.0 63.7 62.8 75.7 69.1 45.0 40.0

157 39 Comoros 47.5 1.8 30.0 24.0 64.7 82.4 44.7 51.2 74.6 68.8 15.0 20.0

158 40 Angola 47.3 0.6 15.0 20.0 82.6 60.6 43.1 44.8 61.5 70.2 35.0 40.0

164 41 Chad 45.2 0.4 20.0 20.0 50.4 75.5 25.2 40.5 74.6 55.6 50.0 40.0

167 42 Congo, Rep. of 43.5 -0.3 10.0 22.0 61.4 80.3 31.5 44.8 74.3 60.7 20.0 30.0

170 43 Equatorial Guinea 42.3 -0.5 15.0 19.0 75.4 39.3 44.4 43.1 72.8 58.8 25.0 30.0

171 44 Congo, Dem. Rep. of 39.6 -1.5 10.0 20.0 71.4 60.1 38.7 36.3 56.5 63.0 20.0 20.0

173 45 Eritrea 36.3 0.1 10.0 25.0 57.0 54.6 17.3 54.6 55.5 69.1 0.0 20.0

175 46 Zimbabwe 28.6 2.3 10.0 22.0 71.8 66.4 33.4 21.9 0.0 50.4 0.0 10.0

N/A N/A Somalia N/A N/A N/A 10.0 N/A N/A N/A N/A N/A N/A N/A N/A

N/A N/A Sudan N/A N/A N/A 16.0 N/A 89.9 57.4 65.4 64.5 N/A 15.0 N/A

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Economic Freedom in Sub-Saharan Africa Countries (continued)



economic fReedom: The wellspRing of TRue pRogRess

Over the past year, a critical battle has been fought around the world between defenders and oppressors of economic freedom. Global economic uncertainty has emboldened critics of the free enterprise system, who have raised questions about the best policy framework for revitalizing economic growth, employment, and overall social progress.

The broad consensus supported by volumes of evidence-based research is that vibrant and lasting economic growth is achievable only when governments adopt economic policies that increase individual choice and opportunity, empowering and encouraging entrepreneurship.

In addition to the great levels of prosperity and human development induced by high levels of economic freedom, the higher growth rates spurred by advances in economic freedom tend to inspire a virtuous cycle of openness and resil-ience, triggering even further improvements in economic freedom. The result is a sort of com-pounding that has created in the countries with the highest levels of economic freedom a level of prosperity and human well-being unmatched in human history.

Greater economic freedom also provides more fertile ground for effective and democrat-ic governance. It empowers people to exercise

greater control of their daily lives. By increasing options, economic freedom ultimately nurtures political reform as well. Economic freedom makes it possible for individuals to gain the economic resources necessary to challenge entrenched interests or compete for political power, thereby encouraging the creation of more pluralistic societies.

Time To Renew commiTmenT To economic fReedom

The current period of uncertain and fragile global economic performance represents a criti-cal opportunity to ponder the principles that can revitalize economic growth. The results of the 2013 Index of Economic Freedom document economic policy stagnation in many countries around the world and record a general decline in the momentum for increasing freedom. If we are to restore economic growth, that decline is going to have to be reversed, most importantly in coun-tries like the United States and Ireland that once led the charge for greater freedom.

As Friedrich A. Hayek once observed, “If old truths are to retain their hold on men’s minds, they must be restated in the language and con-cepts of successive generations.” That need has never been more evident to those who carry on the fight for greater economic freedom and the broader understanding and acceptance of the fun-damental principles on which prosperity is based.

Documents

Chapter 1 Economic Freedom: Global and Regional Patterns · 10 2013 Index of Economic Freedom over the past five years, ... economic freedom again this year. ... Monetary Fund,