The 2014 Index of Economic Freedom
has been released by the Heritage
Notably, the United
States has fallen outside of the top 10 of the most economically free
countries, coming in at number 12.
The top spot is held by Hong Kong, which has held that spot
for 20 consecutive years. The top
ten countries are as follows:
- Hong Kong
- New Zealand
I think the rankings are somewhat subjective, although many
of the measurements are objective.
It is hard to say if the criteria used capture all of the important
factors of a free market economy and also if the weighting of each measure is
But overall, I think the index is a decent benchmark of
figuring out the degree of free markets and property rights in different
While the U.S. is now out of the top 10, it is important to
realize that it is still by far the richest country in the world. But if you measure on a per capita
basis, then the U.S. is not the richest.
For example, Singapore has a much higher GDP per capita.
Although government in general has grown beyond belief in
the U.S., there is still a lot of wealth from what was accumulated in the
past. And while taxes and
regulations are burdensome, there is still a strong rule of law, even if the
law isn’t always good. There is
also a strong tradition of property rights and a general appreciation for
entrepreneurship and free trade.
For these reasons, it is still an attractive place for investors.
I appreciate the Index of Economic Freedom because it is an
easy way to show that free markets work and socialist and centrally planned
economies don’t work.
It is always hard to show evidence of capitalism working
within a country, or the opposite, in showing that central planning is
destructive. In the U.S. there are
so many variables with monetary policy, taxation, government spending,
regulation, etc. They are often
all moving in different directions.
When something goes wrong in the economy (or something goes right), it
is hard to pin the blame or credit on any one particular thing.
With the Index of Economic Freedom, it is clear cut that the
countries that are more economically free are generally much better off. The people have a much higher standard
of living and there is far less poverty.
If you look at the places that are ranked worse than 100 on
the index, you can quickly realize that these are absolutely miserable places
to live, at least for the most part.
They are countries with little in the way of strong property rights and
they all have the characteristic of having oppressive governments.
It is not that all governments do not try to be oppressive,
but it is obvious that the economically free countries have governments that
are generally the least oppressive and kept somewhat in check.
The next time one of your friends is pushing for more
government central planning, point out this index and ask your friend where he
would rather live. The countries
in the “free” and “mostly free” categories are generally going to be the most
attractive places to most people with any sense.