Asian Jurisdictions Stand Proudly In Top Ten For Economic Freedom, US Loses Its Edge

Tom Burroughes

10 January 2013

Hong Kong remained the freest jurisdiction in the world in 2012 while Asia-Pacific nations such as Australia, Singapore and New Zealand featured in the top-ten rankings for economic liberty as listed by the CATO Institute, a Washington DC-based think tank.

The poll highlights how some of the most vibrant, pro-market economies are now in Asia, with the US, often regarded as the symbol of laissez faire capitalism, actually only managing 18^th place. Even so, China, now the world’s second-biggest economy, is still seen as a heavily regulated economy, with an index ranking of 107^th place, while India, another of the BRICs, is in 111^th place.

In this year’s index, Hong Kong takes an overall economic freedom ranking, out of a possible 10, at 8.90. The other top-10 nations are: Singapore, 8.69; New Zealand, 8.36; Switzerland, 8.24; Australia, 7.97; Canada, 7.97; Bahrain, 7.94; Mauritius, 7.90; Finland, 7.88; and Chile, at 7.84.

The Economic Freedom of the World: 2012 Annual Report examines 42 distinct variables, and five broad categories, to come up with its index score. The categories are: size of government; legal system and property rights; sound money; freedom to trade internationally and regulation.

The rankings (and scores) of other large economies in this year’s index are the UK, 12th (7.75); the US, 18th (7.69); Japan, 20th (7.64); Germany, 31st (7.52); France, 47th (7.32); Italy, 83rd (6.77); Mexico, 91st, (6.66); Russia, 95th (6.56); Brazil, 105th (6.37); China, 107th (6.35); and India, 111th (6.26).

The index scores of the bottom ten nations Venezuela, 4.07; Myanmar, 4.29; Zimbabwe, 4.35; Republic of the Congo, 4.86; Angola, 5.12; Democratic Republic of the Congo, 5.18; Guinea-Bissau, 5.23; Algeria, 5.34; Chad, 5.41; and, tied for 10th worst, Mozambique and Burundi, 5.45.

The US falls behind

“The United States, long considered the standard bearer for economic freedom among large industrial nations, has experienced a substantial decline in economic freedom during the past decade,” the CATO Institute said.

From 1980 to 2000, the US was generally rated the third freest economy in the world, ranking behind only Hong Kong and Singapore. After increasing steadily during the period from 1980 to 2000, the the economic freedom rating of the US fell from 8.65 in 2000 to 8.21 in 2005 and 7.70 in 2010, it said.

For the world as a whole, average economic freedom rose from 5.30 (out of 10) in 1980 to 6.88 in 2007. Economic freedom then fell for two consecutive years, resulting in a score of 6.79 in 2009 but has risen slightly to 6.83 in 2010, the report said.