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Chapter 3

Economic Freedom Around the World

Anthony B. Kim

O f the 179 economies graded in the 2011 Index, six are “free” economies that score above 80. With ratings between

70 and 80, the next 27 countries are “mostly free.” These 33 economies provide institu-tional environments in which individuals and private enterprises enjoy a substantial degree of economic freedom in the pursuit of greater prosperity and success. An equal number of countries are divided between “moderately free” and “mostly unfree,” accounting, in the middle of the distribution, for the largest share of the countries graded in the Index—114 coun-tries. With scores below 50, there are 32 coun-tries that remain economically “repressed.” (See Chart 1.)

Each of the world’s regions has registered at least one country that is ranked among the top 20 freest economies in the 2011 Index. Aver-age levels of economic freedom, however, vary widely among the regions, and there are some stark differences in regional economic perfor-mance. Indeed, countries often do share certain

Sources: Terry Miller and Kim R. Holmes, 2011 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2011), at www.heritage.org/index.

Number of Nations in Each Freedom Category

Chart 1 heritage.org

Global Distribution of Economic Freedom

Free Mostly Free

Moderately Free

Mostly Unfree

Repressed

6

27

57 57

32

30 2011 Index of Economic Freedom

characteristics—cultural, geographical, histori-cal, or others—with their regional neighbors that may help to shed light on the particular challenges to economic freedom that they face.

As shown in Chart 2, economic freedom varies noticeably by region, with inhabitants of North America and Europe enjoying greater lev-els of economic freedom than those who live in other regions of the world.

Despite varying degrees of economic freedom across the regions, the relationship between economic freedom and prosperity remains constant within the regions. Per capita incomes are much higher in countries that are economically free. (See Chart 3.)

Not surprisingly, overall human develop-ment also thrives in an environment that is economically free. Economic freedom is about more than a business environment in which

entrepreneurship and prosperity can flour-ish. Across all of the regions, as demonstrated in Chart 4, higher economic freedom induces greater overall human development as mea-sured by the United Nations Human Devel-opment Index, which assesses the combined progress of life expectancy, literacy, education, and the standard of living.

Previous editions of the Index have confirmed the tangible benefits of living in freer societies. Not only are higher levels of economic free-dom associated with higher per capita incomes and higher GDP growth rates, but those higher growth rates seem to create a virtuous cycle, triggering faster poverty reduction and further improvements in economic freedom. Over the decade, the countries with improvements in economic freedom achieved much better reduc-tions in poverty, almost by a factor of two, as

50

60

70

80

90

55

65

75

Sources: Terry Miller and Kim R. Holmes, 2011 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2011), at www.heritage.org/index; International Monetary Fund, World Economic Outlook Databases, at http://www.imf.org/external/ns/cs.aspx?id=28 (November 18, 2010)


Index of Economic Freedom Score

Economic Freedom by Region, with Population

3.7 billion

460 million 334 million

813 million

443 million

Circle sizes are relative to region’s population = 500 million people

768 million768 million

Sub-SaharanAfrica53.5

Asia–Pacific57.4

South andCentral

America/Caribbean

60.2

MiddleEast/NorthAfrica60.6

Europe66.8

NorthAmerica

75.5

31 Chapter 3

Sources: Terry Miller and Kim R. Holmes, 2011 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2011), at www.heritage.org/index; World Bank Group, World Development Indicators Online, at http://publications.worldbank.org/WDI/ (November 5, 2010); International Monetary Fund, World Economic Outlook Databases, at http://www.imf.org/external/ns/cs.aspx?id=28 (November 5, 2010).

Note: Trend lines are for all countries in the Index of Economic Freedom.


Economic Freedom and Prosperity by Region

Each dot represents a nation in the Index of Economic Freedom.

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

20 30 40 50 60 80 9070

Sub-Saharan Africa

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

20 30 40 50 60 80 9070

South and Central America/Caribbean

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

20 30 40 50 60 80 9070

North America

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

20 30 40 50 60 80 9070

Middle East/North Africa

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

20 30 40 50 60 80 9070

Europe

GDP per Capita (2000 Dollars)

2011 Index of Economic Freedom Score

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

20 30 40 50 60 80 9070

Asia–Pacific

Glo

bal T

rend

Lin

e


Sources: Terry Miller and Kim R. Holmes, 2011 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2011), at www.heritage.org/index; and Human Development Reports, United Nations Human Development Programme, at http://hdr.undp.org/en/reports (November 17, 2010).

Note: Trend lines are for all countries in the Index of Economic Freedom.


Economic Freedom and Human Development by Region

Each dot represents a nation in the Index of Economic Freedom.

Global Correlation = 0.70, R2 = 0.49

Sub-Saharan Africa

0

0.25

0.50

0.75

1.00

20 30 40 50 60 70 80 90


0

0.25

0.50

0.75

1.00

20 30 40 50 60 70 80 90

North America

0

0.25

0.50

0.75

1.00

20 30 40 50 60 70 80 90

Middle East/North Africa

0

0.25

0.50

0.75

1.00

20 30 40 50 60 70 80 90

Europe

0

0.25

0.50

0.75

1.00

20 30 40 50 60 70 80 90

Human Development Index

2011 Index of Economic Freedom Score

Asia–Pacific

Global

Trend

Line

0

0.25

0.50

0.75

1.00

20 30 40 50 60 70 80 90

33

measured by the United Nations Human Poverty Index. (See Table 1.)

In a recent study that estimates the world’s income distribution, Maxim Pinkovskiy of the Massachu-setts Institute of Technology and Xavier Sala-i-Martin of Columbia University also find that world poverty has indeed been disappear-ing faster than previously thought.1 As economic free-dom has advanced steadily over the past decades, the global poverty rate has been cut significantly. According to the two prominent scholars, “the percentage of the world population living on less than $1 a day went down to 5.4 percent in 2006 from 26.8 percent in 1970,” with poverty rates dramati-cally falling across all the regions.

Diverging Patterns of economic freeDom

While the global average score for the 2011 Index has improved since last year, progress has not been uniform across the regions. North America and Europe have lagged, while much of the developing world has surged ahead. (See Chart 5.)

The Sub-Saharan Africa region achieved the largest score improvement, with countries gaining over half a point on aver-age in the 2011 Index. The South and Central Amer-ica/Caribbean region gained the second most

1. Maxim Pinkovskiy and Xavier Sala-i-Martin, “Parametric Estimations of the World Distribution of Income,” National Bureau of Economic Research Working Paper 15433, October 2009, at http://www.nber.org/papers/w15433 (November 16, 2010).

freedom on average, exactly half a point. The Middle East/North Africa and Asia–Pacific regions also showed gains. Economic freedom held steady in Europe and actually declined in North America.

Table 2 shows components of economic freedom in which regions perform better or worse than the world averages.

Every region has two or more components in which the average level of economic free-dom falls below the world average. The North America region recorded drops in fiscal free-dom and government spending, which now trail the world averages. European countries fall over five points below the world average

Chapter 3

All countriesCountries that gained economic freedomCountries that lost economic freedom

–4.5–5.8–3.1

Change in Percentage of the Population in Poverty, from the 1999 HPI Index to the 2009 HPI Index

From 2001 Index of Economic Freedom to 2011 Index of Economic Freedom

Note: Data compiled from the Index of Economic Freedom, 2001 to 2011, and the Human Poverty Index, 1999 to 2009. Sources: Terry Miller and Kim R. Holmes, 2011 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2011), at www.heritage.org/index; and Human Development Reports, United Nations Human Development Programme, at http://hdr.undp.org/en/reports (November 17, 2010).

Table 1 heritage.org

Human Poverty Index (HPI)

North AmericaEurope

Middle East/North AfricaAsia–Pacific

South and Central America/CaribbeanSub-Saharan Africa

–0.1No change

+0.2+0.4

+0.5+0.6



One-Year Freedom Score Change

Change in Score Since 2010 Index of Economic FreedomRegion


in fiscal freedom and 20 points below the world average in government spending—a reflec-tion of their bloated government budgets that fund high levels of welfare spending. Rigid labor regulations also continue to hamper the region’s freedom, with negative results for job creation and employment growth.

South and Central America/Caribbean countries lag behind world averages in six components of economic freedom, particu-larly freedom from corruption and property rights. The Middle East/North Africa region has lower than average scores in six economic freedoms, the Asia–Pacific region is behind in six, and Sub-Saharan Africa lags in nine.

nortH americaNorth America’s three countries have been

linked by a regional trade agreement, the North American Free Trade Agreement (NAFTA), since 1994. NAFTA has been a positive force, connecting more than 400 million people in an economic area with about one-third of the world’s total GDP.

The North America region has long benefit-ed from its openness to international trade and

investment. Although the region enjoys the highest degree of economic freedom among the six regions, there has been a notable reordering within the region in the aftermath of the recent global financial and economic crisis. While Canada has solidified its status as a “free” economy, the U.S. and Mexico are seemingly stuck in the “mostly free” and “moderately free” categories, respectively. (See Table 3.)

The U.S. government’s policy responses to the crisis and economic slowdown have been far-reaching and implemented at the cost of cur-tailing economic freedom. Recent policy choices have included more intrusive and burdensome regulations, government bailouts of private firms, loose monetary policy, and increasingly protectionist trade policy.

North America scores above the world aver-age in eight areas of economic freedom. It has high levels of business freedom, trade freedom, monetary freedom, and labor freedom. Weak-nesses remain in property rights and freedom from corruption, as Mexico lags considerably behind its two northern neighbors in these two areas that are critical to long-term economic development.


Each Region’s Ten Economic Freedoms in Comparison to the World Average

Region Busi

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Fre

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North America +27.3 +10.4 –0.4 –0.4 +3.9 +21.5 +21.5 +31.4 +24.5 +17.9

Europe +12.7 +11 –5.2 –20 +4.4 +19.7 +15 +17.6 +15.5 +0.3

South and Central America/Caribbean –1.4 –0.3 +1.5 +8 +1 +0.1 –0.6 –2 –1.2 –0.4

Middle East/North Africa +2.4 +1.4 +11.2 +3.8 –0.6 –4.6 –2.6 –1.5 –0.4 –0.1

Asia–Pacific 0 –4.2 +1.9 +4.8 –1 –12.2 –7.3 –4.7 –4.2 +4.1

Sub-Saharan Africa –13.6 –7.4 –1.9 +8 –3.8 –7.3 –7.4 –12.4 –11.4 –5

Source: Terry Miller and Kim R. Holmes, 2010 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2010), at www.heritage.org/index.

35 Chapter 3

Economic Freedom in North American Countries


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6 1 Canada 80.8 0.4 96.4 88.1 78.0 52.7 78.8 75.0 80.0 90.0 87.0 81.7

9 2 United States 77.8 –0.2 91.0 86.4 68.3 54.6 77.4 75.0 70.0 85.0 75.0 95.7

48 3 Mexico 67.8 –0.5 87.3 81.2 81.3 83.1 75.7 65.0 60.0 50.0 33.0 60.9

United States

Canada

UnitedStates

Mexico

Map 1 heritage.org

North America

Economic Freedom Scores

80–100 Free70–79.9 Mostly Free60–69.9 Moderately Free50–59.9 Mostly Unfree0–49.9 RepressedNot Ranked


80–100 Free70–79.9 Mostly Free60–69.9 Moderately Free50–59.9 Mostly Unfree0–49.9 Repressed


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eUroPeThe Europe region consists of 43 countries

and, taken as a whole, is enjoying economic prosperity and stability. Extensive and long-established free-market institutions in most countries allow the region to score above the world average in seven of the 10 economic free-doms. It is over 15 points ahead in both prop-erty rights and freedom from corruption. The region’s business freedom and trade freedom lead world averages by slightly more than 10 points.

Despite the recent global financial and eco-nomic turmoil, such policy improvements as tax cuts, simplifying regulatory frameworks, and other structural reforms have continued,

resulting in overall score improvements in 26 reform-minded economies including Bulgaria, Moldova, Serbia, Lithuania, and Poland. By contrast, 16 economies (including Iceland, Ire-land, Italy, Greece, and the United Kingdom, each of which lost more than two points) have recorded significant erosion of their economic freedom.

Europe’s overall economic freedom rating is seriously undermined by weak scores in government spending, fiscal freedom, and labor freedom, reflecting the cost of wel-fare states that consume a large percentage of GDP. Burdensome labor regulations are plainly hindering both productivity growth and more dynamic job creation, causing

Chapter 3

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Economic Freedom in European Countries

5 1 Switzerland 81.9 0.8 80.2 90.0 68.4 69.3 83.8 80.0 80.0 90.0 90.0 87.8

7 2 Ireland 78.7 –2.6 92.0 87.6 72.1 47.1 80.7 90.0 70.0 90.0 80.0 77.5

8 3 Denmark 78.6 0.7 99.7 87.6 43.2 19.5 81.4 90.0 90.0 90.0 93.0 92.1

13 4 Luxembourg 76.2 0.8 76.4 87.6 66.7 58.5 82.1 95.0 80.0 90.0 82.0 44.1

14 5 Estonia 75.2 0.5 80.9 87.6 80.7 52.2 78.7 90.0 80.0 80.0 66.0 55.8

15 6 The Netherlands 74.7 –0.3 81.9 87.6 50.6 36.8 82.7 90.0 80.0 90.0 89.0 58.3

16 7 United Kingdom 74.5 –2.0 94.6 87.6 52.0 32.9 74.9 90.0 80.0 85.0 77.0 71.2

17 8 Finland 74.0 0.2 95.0 87.6 65.3 26.5 80.7 85.0 80.0 90.0 89.0 41.4

18 9 Cyprus 73.3 2.4 80.1 82.6 74.6 45.6 87.6 75.0 70.0 80.0 66.0 71.4

21 10 Austria 71.9 0.3 72.8 87.6 50.3 28.0 82.9 80.0 70.0 90.0 79.0 78.2

22 11 Sweden 71.9 –0.5 95.0 87.6 37.6 17.3 80.1 85.0 80.0 90.0 92.0 54.0

23 12 Germany 71.8 0.7 89.6 87.6 58.5 42.7 83.9 85.0 60.0 90.0 80.0 40.6

24 13 Lithuania 71.3 1.0 81.7 87.6 86.1 58.0 74.5 80.0 80.0 60.0 49.0 55.6

28 14 Czech Republic 70.4 0.6 69.8 87.6 81.0 44.8 80.0 70.0 80.0 65.0 49.0 77.0

29 15 Georgia 70.4 0.0 87.3 89.2 87.5 60.3 76.7 70.0 60.0 40.0 41.0 92.1



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Economic Freedom in European Countries (continued)

30 16 Norway 70.3 0.9 88.3 89.4 51.6 51.5 75.1 65.0 60.0 90.0 86.0 45.8

31 17 Spain 70.2 0.6 77.2 87.6 61.0 49.3 82.4 80.0 80.0 70.0 61.0 53.0

32 18 Belgium 70.2 0.1 92.6 87.6 41.8 25.0 82.5 80.0 70.0 80.0 71.0 71.0

36 19 Armenia 69.7 0.5 82.4 85.5 89.2 85.7 76.0 75.0 70.0 30.0 27.0 75.9

37 20 Slovak Republic 69.5 –0.2 73.4 87.6 84.2 63.7 81.6 75.0 70.0 50.0 45.0 64.5

44 21 Iceland 68.2 –5.5 92.7 88.2 69.8 0.0 68.6 65.0 60.0 90.0 87.0 60.7

51 22 Hungary 66.6 0.4 76.5 87.6 69.7 27.4 75.9 75.0 70.0 65.0 51.0 67.7

55 23 Macedonia 66.0 0.3 64.6 83.6 90.0 64.3 84.5 60.0 60.0 35.0 38.0 79.7

56 24 Latvia 65.8 –0.4 72.8 87.6 82.5 55.5 73.5 80.0 50.0 50.0 45.0 61.3

57 25 Malta 65.7 –1.5 70.0 87.6 62.5 39.8 80.1 75.0 60.0 70.0 52.0 60.0

60 26 Bulgaria 64.9 2.6 75.8 87.6 86.9 58.3 75.5 55.0 60.0 30.0 38.0 82.0

63 27 Romania 64.7 0.5 72.0 87.6 86.8 57.6 74.4 80.0 50.0 40.0 38.0 60.8

64 28 France 64.6 0.4 85.6 82.6 52.3 16.4 83.7 55.0 70.0 80.0 69.0 51.4

66 29 Slovenia 64.6 –0.1 83.6 87.6 65.1 41.1 80.5 70.0 50.0 60.0 66.0 41.8

67 30 Turkey 64.2 0.4 68.7 85.4 78.2 83.6 72.7 70.0 50.0 50.0 44.0 39.6

68 31 Poland 64.1 0.9 61.4 87.6 74.0 43.8 78.1 65.0 60.0 60.0 50.0 61.2

69 32 Portugal 64.0 –0.4 80.1 87.6 61.1 36.2 82.3 70.0 60.0 70.0 58.0 34.7

70 33 Albania 64.0 –2.0 67.1 79.8 92.1 68.7 79.9 65.0 70.0 35.0 32.0 50.4

76 34 Montenegro 62.5 –1.1 71.3 83.6 89.4 28.6 76.0 55.0 50.0 40.0 39.0 92.3

82 35 Croatia 61.1 1.9 65.2 87.6 74.6 50.3 78.5 70.0 60.0 40.0 41.0 44.1

87 36 Italy 60.3 –2.4 77.3 87.6 55.4 28.6 82.1 75.0 60.0 50.0 43.0 44.4

88 37 Greece 60.3 –2.4 76.2 82.6 65.9 34.3 80.6 60.0 60.0 50.0 38.0 55.2

101 38 Serbia 58.0 1.1 59.0 75.2 83.6 41.9 66.0 60.0 50.0 40.0 35.0 68.9

104 39 Bosnia and Herzegovina

57.5 1.3 60.4 86.0 83.9 24.1 80.6 70.0 60.0 20.0 30.0 60.2

120 40 Moldova 55.7 2.0 69.5 80.2 85.6 48.1 77.0 35.0 50.0 40.0 33.0 39.0

143 41 Russia 50.5 0.2 50.7 68.2 82.7 65.1 63.1 25.0 40.0 25.0 22.0 62.9

155 42 Belarus 47.9 –0.8 70.6 80.3 83.6 26.2 62.2 20.0 10.0 20.0 24.0 82.3

164 43 Ukraine 45.8 –0.6 47.1 85.2 77.3 32.9 63.2 20.0 30.0 30.0 22.0 50.0

n/a n/a Liechtenstein n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a



39

unemployment and slowing economic expansion. Stagnant growth has exacerbated debt levels, leaving many European coun-tries with no choice but to cut spending to reduce fiscal deficits.

Nine of the world’s 20 freest countries are in Europe. (See Table 4.) Ireland, whose glob-al ranking has fallen to 7th, is now behind Switzerland. Denmark passed the United States this year to move into 8th place. The United Kingdom now stands at 16th, fall-ing out of the top 15 in the Index for the first time. The British economy has undergone far-reaching adjustments in reaction to the global financial and economic turmoil, and a dramatic expansion of state ownership has taken place since late 2008. Luxembourg, the Netherlands, Estonia, Finland, and Cyprus all score in the top 20.

Denmark’s overall score is 0.8 point higher than last year. In addition to high transpar-ency and low corruption, the Danish econ-omy boasts an efficient regulatory regime and an independent judiciary. Both Bulgaria and Cyprus recorded score gains of over two points, largely because of improved invest-ment freedom, freedom from corruption, and labor freedom.

Around 80 percent of the 43 European countries score between 60 and 80, achiev-ing the status of either “moderately free” or “mostly free.” Only Ukraine and Belarus remain “repressed” with scores below 50.

soUtH anD central america/caribbean

The countries of the South and Central America/Caribbean region range from prosperous Chile and the developing eco-nomic colossus of Brazil to the small island economies of the Caribbean Sea. The region, which consists of 29 economies, is one of the world’s most diverse, economically as well as politically.

Although uneven, notable progress toward greater economic freedom has been made in many countries of the region as the

result of policy reforms. Twenty-five coun-tries in the region recorded gains in economic freedom, while only three had declines. With more than half of the region’s 29 economies implementing some form of business reform over the past year, regulatory systems are becoming more transparent and modern, and the overall climate for entrepreneurship is improving.

The countries in the South and Central America/Caribbean region perform better than the world average in four of the 10 com-ponents of economic freedom measured in the Index. Corruption and a lack of protection for property rights are the major problem areas, reflecting long-standing issues of poor gover-nance and weak rule of law.

The typical country in the region stands out positively in terms of limited taxation and government expenditures. The freedom to trade and invest is slightly better protected than in other parts of the developing world.

The region has maintained an overall level of economic freedom that is half a point higher than the global average of 59.7. Colombia is the most improved country in the region, gaining 2.5 points in the 2011 Index. (See Table 5.) It has become one of South America’s most stable economies. Improvements in its entrepreneur-ial environment, facilitated by openness to trade and investment, have led to steady eco-nomic growth. Recent reforms have focused on improving regulation and fostering a strong private sector.

One of the 29 countries in the South and Cen-tral America/Caribbean region ranks among the top 20 in the world: Chile (11th). Chile’s continuing commitment to economic freedom and its dynamic private sector have facilitated steady economic growth.

Noticeably, the region’s countries are dis-tributed throughout the rankings in a more balanced fashion than are the countries of any other region, almost like a bell curve. All but eight countries receive an economic freedom score between 50 and 70, and 15 countries fall in the middle category of “moderately free.”

Chapter 3


Brazil

Argentina

Peru

Chile

Bolivia

Colombia

Venezuela

Paraguay

Uruguay

Ecuador

Guyana

Cuba

Suriname

Nicaragua

Honduras

Guatemala

Panama

Haiti

Costa Rica

BelizeDominican Republic

El Salvador

Jamaica

Trinidad & Tobago

The Bahamas

DominicaSt. LuciaBarbados


Map 3 heritage.org


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



St. Vincent & The Grenadines

41 Chapter 3

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11 1 Chile 77.4 0.2 67.2 88.0 77.7 86.6 77.9 80.0 70.0 85.0 67.0 74.5

26 2 Saint Lucia 70.8 0.3 86.2 71.9 74.4 71.4 85.3 55.0 40.0 70.0 70.0 83.4

33 3 Uruguay 70.0 0.2 61.5 83.0 84.3 76.5 72.8 80.0 30.0 70.0 67.0 74.9

39 4 El Salvador 68.8 –1.1 65.5 85.0 85.8 88.0 79.9 75.0 70.0 40.0 34.0 64.9

41 5 Peru 68.6 1.0 71.9 86.0 79.4 91.0 83.1 70.0 60.0 40.0 37.0 67.7

42 6 Barbados 68.5 0.2 90.0 60.5 70.7 48.8 76.3 45.0 60.0 80.0 74.0 80.0

45 7 Colombia 68.0 2.5 86.1 73.2 74.5 78.9 75.8 65.0 60.0 50.0 37.0 79.3

46 8 The Bahamas 68.0 0.7 72.5 42.2 97.2 86.9 74.6 30.0 70.0 70.0 55.0 81.3

49 9 Costa Rica 67.3 1.4 58.2 85.2 82.3 86.9 70.7 70.0 50.0 55.0 53.0 62.1

50 10 Saint Vincent and the Grenadines

66.9 0.0 79.3 73.3 72.3 65.1 78.2 50.0 40.0 70.0 64.0 76.8

52 11 Trinidad and Tobago 66.5 0.8 58.4 81.7 83.7 75.8 71.8 60.0 70.0 50.0 36.0 77.1

58 12 Jamaica 65.7 0.2 86.3 72.2 75.9 64.7 72.5 85.0 60.0 40.0 30.0 70.2

59 13 Panama 64.9 0.1 75.1 75.8 82.6 88.6 77.1 65.0 70.0 40.0 34.0 41.1

71 14 Belize 63.8 2.3 73.7 71.5 82.3 76.1 78.8 50.0 50.0 40.0 29.0 86.5

72 15 Dominica 63.3 0.0 74.8 74.3 69.5 45.8 86.3 65.0 30.0 65.0 59.0 62.8

77 16 Paraguay 62.3 1.0 61.7 83.0 97.6 93.4 80.9 70.0 60.0 30.0 21.0 24.9

79 17 Guatemala 61.9 0.9 52.1 84.6 79.5 94.4 76.4 60.0 50.0 35.0 34.0 53.4

90 18 Dominican Republic 60.0 –0.3 56.4 79.8 85.3 89.1 77.1 55.0 40.0 30.0 30.0 57.1

98 19 Nicaragua 58.8 0.5 54.3 84.8 78.8 81.3 71.7 55.0 50.0 20.0 25.0 67.1

99 20 Honduras 58.6 0.3 62.1 77.0 83.5 85.7 73.2 60.0 60.0 30.0 25.0 29.7

113 21 Brazil 56.3 0.7 54.3 69.8 69.0 49.6 75.9 50.0 50.0 50.0 37.0 57.8

129 22 Suriname 53.1 0.6 40.7 66.4 68.1 80.3 76.4 10.0 30.0 40.0 37.0 81.8

133 23 Haiti 52.1 1.3 37.5 74.8 80.9 90.1 73.7 30.0 30.0 10.0 18.0 76.4

138 24 Argentina 51.7 0.5 62.4 69.5 68.7 81.7 63.2 45.0 30.0 20.0 29.0 47.9

147 25 Bolivia 50.0 0.6 57.2 77.6 83.9 63.7 68.8 20.0 50.0 10.0 27.0 41.5

151 26 Guyana 49.4 1.0 66.8 71.3 64.6 29.1 75.8 30.0 40.0 30.0 26.0 60.3

158 27 Ecuador 47.1 –2.2 53.5 76.0 78.9 50.1 64.9 25.0 40.0 20.0 22.0 40.1

175 28 Venezuela 37.6 0.5 47.8 61.2 75.0 65.3 47.0 5.0 20.0 5.0 19.0 31.1

177 29 Cuba 27.7 1.0 10.0 62.2 49.0 0.0 71.6 0.0 10.0 10.0 44.0 20.0

Economic Freedom in South and Central America/ Caribbean Countries

80–100 Free70–79.9 Mostly Free60–69.9 Moderately Free50–59.9 Mostly Unfree0–49.9 Repressed Table 5 heritage.org


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43

miDDle east/nortH africaThe Middle East/North Africa region

remains pivotal in world economic affairs. Encompassing some of the world’s most ancient civilizations, it consists of 17 countries. Although the region’s overall economic freedom has increased by 0.2 point since the 2010 Index, many of its economies remain only “moderately free” or “mostly unfree.” Cursed in some ways by the region’s enormous natural oil resources, many of the local populations suffer from extreme con-centrations of wealth and poverty.

Despite some progress in recent years, struc-tural problems abound. The regional unem-ployment 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. Despite the outflow of crude oil, the actual trade flows of the region’s coun-tries remain relatively low, indicating a lack of economic dynamism. The oil industry requires very little investment in labor or human capital and only a marginal amount of investment in the land. People need freedom to be produc-

Chapter 3


10 1 Bahrain 77.7 1.4 77.4 82.8 99.8 80.2 74.0 75.0 80.0 60.0 51.0 97.0

27 2 Qatar 70.5 1.5 70.3 82.4 99.8 78.1 71.9 45.0 50.0 70.0 70.0 67.0

34 3 Oman 69.8 2.1 69.4 83.6 98.5 68.1 69.5 55.0 60.0 50.0 55.0 89.1

38 4 Jordan 68.9 2.8 65.8 78.8 92.7 60.9 81.4 70.0 60.0 55.0 50.0 74.2

43 5 Israel 68.5 0.8 66.1 87.8 62.3 44.8 78.4 80.0 70.0 70.0 61.0 64.3

47 6 United Arab Emirates

67.8 0.5 67.3 82.6 99.9 79.1 76.5 35.0 50.0 50.0 65.0 72.4

54 7 Saudi Arabia 66.2 2.0 86.1 82.2 99.4 74.6 64.3 40.0 50.0 45.0 43.0 77.0

61 8 Kuwait 64.9 –2.8 64.4 81.6 99.9 69.7 69.3 55.0 50.0 50.0 41.0 67.9

89 9 Lebanon 60.1 0.6 57.5 80.5 91.0 64.9 77.7 60.0 60.0 25.0 25.0 59.0

93 10 Morocco 59.6 0.4 75.7 75.8 67.8 74.6 76.5 65.0 60.0 40.0 33.0 27.2

96 11 Egypt 59.1 0.1 64.5 74.0 89.6 65.3 60.8 65.0 50.0 40.0 28.0 53.6

100 12 Tunisia 58.5 –0.5 80.2 53.5 73.7 77.6 77.3 35.0 30.0 50.0 42.0 65.7

127 13 Yemen 54.2 –0.2 73.7 81.6 83.2 44.5 82.3 45.0 30.0 30.0 21.0 50.9

132 14 Algeria 52.4 –4.5 69.4 72.8 83.5 62.4 75.4 20.0 30.0 30.0 28.0 52.9

140 15 Syria 51.3 1.9 55.9 65.4 84.6 85.3 69.7 20.0 20.0 30.0 26.0 55.8

171 16 Iran 42.1 –1.3 69.4 44.8 81.1 76.0 60.7 0.0 10.0 10.0 18.0 50.7

173 17 Libya 38.6 –1.6 20.0 85.0 80.3 44.5 71.0 10.0 20.0 10.0 25.0 20.0

n/a n/a Iraq n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

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Economic Freedom in Middle East/North African Countries


tive, but oil does not generate the incentives needed for societies to embrace openness. To the contrary, an abundance of oil seems most often to inspire repression.

The region’s overall economic freedom score is slightly above the world average of 59.7, mainly due to a high degree of fiscal free-dom that reflects low income and corporate tax rates. However, other institutional problems pose serious impediments to private-sector development and economic diversification. Investment freedom, financial freedom, prop-erty rights, and freedom from corruption all score below world averages, degrading the region’s overall economic freedom and eco-nomic potential.

The ongoing transformation of innovative and reform-oriented states like Bahrain, Qatar, Kuwait, Oman, and Israel may pave the way for more robust and dynamic regional econom-ic growth. As Table 6 shows, scores for most of the 17 countries in the region are concentrated between 50 and 70. Jordan and Oman made the biggest leaps forward with gains of over two points in economic freedom. Improving the entrepreneurial environment and broadening the economic base beyond the energy sector, a series of economic reforms has made Jordan and Oman, respectively, the 6th and 15th most improved economies in the 2011 Index.

Bahrain, ranked 10th globally with an economic freedom score of 77.7, is the only Middle Eastern country among the world’s 10 freest economies. Structural reforms and openness to global commerce have made Bah-rain a financial hub and the regional leader in economic freedom. One of the region’s least oil-dependent economies, it has a competitive tax regime and a sophisticated financial sector that facilitates the flow of capital and foreign investment.

Qatar became a “mostly free” economy for the first time in the 2011 Index, with gains in areas such as freedom from corruption, proper-ty rights, and monetary freedom. Seven “mod-erately free” economies ranging from Israel to Saudi Arabia, while very different politically, share a common commitment to economic

freedom that is significantly greater than that of other countries in the region.

The lowest-ranking countries in the region continue to be Iran and Libya, bonded together by economic freedom scores that are among the worst in the world.

asia–PacificThe Asia–Pacific region contains over half

of the world’s population: one-third in China and nearly another third in India. Despite the challenging global economic environment, the region has achieved an average annual eco-nomic growth rate of around 8 percent over the past five years, largely driven by China, India, and other export-oriented economies.

The Asia–Pacific region is distinguished from other regions by the extraordinary dis-parity in levels of economic freedom among its countries. Four of the world’s 10 freest econo-mies—Hong Kong, Singapore, Australia, and New Zealand—are in this region, 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, both in the region and in the world. The region’s overall economic freedom score is above the world average of 59.7.

The Asia–Pacific region, which consists of 41 economies, scores higher than the world aver-age in three of the 10 economic freedoms: fiscal freedom, government spending, and labor free-dom. Lower government expenditures result in a regional government spending score that is about five points better than the world aver-age. The region’s labor freedom score is also better than the world average by four points, although many small Pacific island economies still lack fully developed formal labor markets.

The typical Asian country has notably lower scores in four components: investment freedom, financial freedom, property rights, and freedom from corruption. Asian countries could make the most progress by strengthening their bank-ing and investment institutions and by enhanc-ing transparency and corporate governance.

45 Chapter 3

Asi

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1 1 Hong Kong 89.7 0.0 98.7 90.0 93.3 89.6 87.1 90.0 90.0 90.0 82.0 86.2

2 2 Singapore 87.2 1.1 98.2 90.0 91.1 91.3 86.2 75.0 60.0 90.0 92.0 98.0

3 3 Australia 82.5 –0.1 90.1 84.4 61.3 64.7 85.0 80.0 90.0 90.0 87.0 92.2

4 4 New Zealand 82.3 0.2 99.9 86.6 64.7 49.3 84.8 80.0 80.0 95.0 94.0 89.2

19 5 Macau 73.1 0.6 60.0 90.0 76.6 93.3 83.4 85.0 70.0 60.0 53.0 60.0

20 6 Japan 72.8 –0.1 83.8 82.6 67.0 58.7 87.9 60.0 50.0 80.0 77.0 81.1

25 7 Taiwan 70.8 0.4 84.7 86.2 78.3 89.7 82.0 65.0 50.0 70.0 56.0 46.1

35 8 South Korea 69.8 –0.1 91.6 70.8 72.2 73.0 78.7 70.0 70.0 70.0 55.0 46.5

53 9 Malaysia 66.3 1.5 69.7 78.7 84.6 79.2 81.3 45.0 50.0 50.0 45.0 79.2

62 10 Thailand 64.7 0.6 69.9 75.9 74.8 90.6 70.8 40.0 70.0 45.0 34.0 76.3

78 11 Kazakhstan 62.1 1.1 74.3 80.9 87.3 78.5 69.9 30.0 50.0 35.0 27.0 88.4

83 12 Kyrgyz Republic 61.1 –0.2 75.4 63.2 92.6 74.2 68.6 55.0 50.0 25.0 19.0 88.1

84 13 Samoa 60.6 0.2 72.8 70.0 80.1 67.9 68.5 30.0 30.0 60.0 45.0 82.1

86 14 Fiji 60.4 0.1 63.2 69.8 78.1 81.3 76.1 30.0 60.0 30.0 40.0 75.7

92 15 Azerbaijan 59.7 0.9 72.9 77.1 83.9 71.0 72.6 55.0 40.0 20.0 23.0 81.1

94 16 Mongolia 59.5 –0.5 67.7 79.8 83.3 49.6 73.6 50.0 60.0 30.0 27.0 74.1

102 17 Cambodia 57.9 1.3 39.5 70.0 90.9 94.2 78.0 60.0 50.0 30.0 20.0 46.3

103 18 Bhutan 57.6 0.6 59.8 52.0 83.9 64.1 71.8 20.0 30.0 60.0 50.0 84.7

107 19 Sri Lanka 57.1 2.5 71.9 72.2 73.4 84.7 65.8 30.0 40.0 40.0 31.0 61.8

112 20 Vanuatu 56.7 0.3 68.8 55.1 96.1 79.1 76.5 30.0 40.0 40.0 32.0 49.8

115 21 The Philippines 56.2 –0.2 43.4 77.8 78.8 91.0 76.3 40.0 50.0 30.0 24.0 50.7

116 22 Indonesia 56.0 0.5 54.9 73.8 83.0 88.9 74.3 35.0 40.0 30.0 28.0 51.8

118 23 Tonga 55.8 2.4 77.4 56.2 83.1 73.2 71.1 30.0 20.0 25.0 30.0 92.1

123 24 Pakistan 55.1 –0.1 70.9 67.0 80.5 88.8 63.6 40.0 40.0 30.0 24.0 46.3

124 25 India 54.6 0.8 36.9 64.2 75.4 77.8 65.1 35.0 40.0 50.0 34.0 67.2

128 26 Tajikistan 53.5 0.5 60.7 82.5 88.6 77.3 64.5 20.0 40.0 25.0 20.0 56.4

130 27 Bangladesh 53.0 1.9 65.0 58.0 72.7 92.4 68.6 55.0 20.0 20.0 24.0 54.3

131 28 Papua New Guinea 52.6 –0.9 60.2 85.4 66.3 63.3 72.9 35.0 30.0 20.0 21.0 72.4

135 29 China 52.0 1.0 49.8 71.6 70.3 87.0 75.3 25.0 30.0 20.0 36.0 54.9

139 30 Vietnam 51.6 1.8 61.6 68.9 75.9 75.1 79.1 15.0 30.0 15.0 27.0 68.2

141 31 Laos 51.3 0.2 58.8 68.4 79.9 90.1 80.4 25.0 20.0 20.0 20.0 49.9




47

Leading the world in four of the 10 econom-ic freedoms, Hong Kong once again is the freest economy overall in the 2011 Index. (See Table 7.) Singapore is the top country in labor freedom and the second overall, both in the region and in the world. Singapore grants private firms the most flexibility in hiring and firing work-ers. New Zealand sets the standard for clean, corruption-free government and benefits sig-nificantly from its transparent and straightfor-ward business environment.

About two-thirds of the 41 countries in the Asia–Pacific region score between 40 and 60 on the economic freedom scale, remaining either “mostly unfree” or “repressed.” In the 2011 Index, the scores of 26 countries in the region have improved, while those of 13 are worse. Boosted by improved scores in trade freedom and investment freedom, Sri Lanka became the region’s most improved country. Nepal, by contrast, lost the most economic freedom

because of considerable deterioration in free-dom from corruption, property rights, and investment freedom.

India and China are ranked 25th and 29th, respectively, in the region, and both remain “mostly unfree.” Despite these seemingly low scores, however, there can be no denying that the winds of change are still blowing in Asia, particu-larly in these two economic leviathans. Notwith-standing their very slow progress domestically, both have taken good advantage of opportunities available as a result of improvements in global economic freedom, especially in the area of trade.

sUb-saHaran africaAfrica’s overall level of economic freedom

is weaker than that of any other region. Sub-Saharan Africa is ranked last in seven of the 10 components of economic freedom and per-forms especially poorly in terms of property rights and freedom from corruption.

145 32 Micronesia 50.3 –0.3 58.7 81.0 97.6 0.0 73.4 20.0 30.0 30.0 30.0 82.4

146 33 Nepal 50.1 –2.6 59.2 61.4 86.4 88.4 73.8 5.0 30.0 30.0 23.0 44.3

154 34 Maldives 48.3 –0.7 81.5 43.8 95.6 0.0 74.1 35.0 30.0 25.0 25.0 73.4

162 35 Solomon Islands 45.9 3.0 59.8 62.4 69.2 32.9 70.4 10.0 30.0 30.0 28.0 66.6

163 36 Uzbekistan 45.8 –1.7 66.8 66.2 90.5 71.0 61.7 0.0 10.0 15.0 17.0 60.2

166 37 Kiribati 44.8 1.1 62.9 55.4 60.3 0.0 71.1 25.0 30.0 30.0 28.0 85.1

169 38 Turkmenistan 43.6 1.1 30.0 79.2 93.6 95.5 69.6 0.0 10.0 10.0 18.0 30.0

170 39 Timor-Leste 42.8 –3.0 44.2 73.0 64.7 0.0 78.1 30.0 20.0 20.0 22.0 76.5

174 40 Burma 37.8 1.1 20.0 72.3 81.9 98.1 56.6 0.0 10.0 5.0 14.0 20.0

179 41 North Korea 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 5.0 0.0

n/a n/a Afghanistan n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a


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Economic Freedom in Asia–Pacific Countries (continued)

Chapter 3


Some of the gaps between Sub-Saharan Africa’s scores and world averages are espe-cially striking. The region lags by over 10 points in business freedom and by about 12 points in both property rights and freedom from corruption. Labor freedom is restricted, reflecting in part the region’s lack of prog-ress in developing modern and efficient labor markets.

However, the 2011 Index shows some encour-aging developments. No region has made greater strides in economic freedom than Sub-Saharan Africa. With a score gain of 0.6 point that reflects a net gain of economic freedom in 28 countries, the Sub-Saharan Africa region is the most improved region in the 2011 Index.

Mauritius remains among the world’s 20 freest economies. (See Table 8.) With an eco-


Note: Somalia and Western Sahara are not depicted because their economies are not in the Index of Economic Freedom.

Map 6 heritage.org

Sub-Saharan Africa

Sudan

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Chad

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Angola

DemocraticRepublic of

Congo

Ethiopia

SouthAfrica

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KenyaUganda

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Economic Freedom in Sub-Saharan Africa Countries

12 1 Mauritius 76.2 –0.1 82.0 88.0 91.9 80.0 76.1 90.0 70.0 60.0 54.0 70.4

40 2 Botswana 68.8 –1.5 70.5 75.2 78.4 51.5 70.9 75.0 70.0 70.0 56.0 70.0

65 3 Cape Verde 64.6 2.8 64.8 67.6 77.3 71.0 79.2 60.0 60.0 65.0 51.0 50.0

73 4 Namibia 62.7 0.5 72.9 86.4 67.9 74.8 70.9 55.0 40.0 30.0 45.0 84.6

74 5 South Africa 62.7 –0.1 72.3 77.2 69.6 77.5 71.9 45.0 60.0 50.0 47.0 56.7

75 6 Rwanda 62.7 3.6 76.9 77.8 76.9 78.6 68.5 50.0 40.0 35.0 33.0 89.9

80 7 Uganda 61.7 –0.5 50.3 74.8 80.6 90.5 73.2 45.0 60.0 30.0 25.0 87.8

81 8 Madagascar 61.2 –2.1 60.0 73.2 87.8 89.7 75.9 55.0 50.0 40.0 30.0 50.7

85 9 Burkina Faso 60.6 1.2 61.5 76.2 80.5 86.0 76.8 55.0 50.0 30.0 36.0 53.5

91 10 Zambia 59.7 1.7 62.2 82.4 72.4 81.8 77.3 55.0 50.0 30.0 30.0 56.3

95 11 Ghana 59.4 –0.8 63.4 67.8 83.3 46.1 63.3 65.0 60.0 50.0 39.0 56.1

97 12 Swaziland 59.1 1.7 66.4 79.8 67.2 65.9 71.0 55.0 40.0 40.0 36.0 69.4

105 13 The Gambia 57.4 2.3 57.8 60.4 73.2 79.7 71.4 55.0 50.0 30.0 29.0 67.2

106 14 Kenya 57.4 –0.1 62.2 72.8 77.6 72.8 73.2 50.0 50.0 30.0 22.0 62.9

108 15 Tanzania 57.0 –1.3 46.0 69.6 79.8 80.5 68.8 60.0 50.0 30.0 26.0 59.0

109 16 Mozambique 56.8 0.8 63.1 81.0 77.5 76.5 80.3 45.0 50.0 30.0 25.0 39.2

110 17 Gabon 56.7 1.3 57.3 61.0 74.5 87.9 73.8 45.0 40.0 40.0 29.0 58.8

111 18 Nigeria 56.7 –0.1 51.6 65.0 84.4 73.0 73.5 40.0 40.0 30.0 25.0 84.5

114 19 Mali 56.3 0.7 51.2 73.2 60.5 86.5 77.6 50.0 40.0 30.0 28.0 65.8

117 20 Benin 56.0 0.6 43.0 58.8 75.8 84.1 78.2 60.0 50.0 30.0 29.0 50.7

119 21 Malawi 55.8 1.7 42.4 71.0 79.3 56.7 71.6 50.0 50.0 45.0 33.0 59.1

121 22 Senegal 55.7 1.1 62.3 73.2 65.4 78.8 79.7 45.0 40.0 40.0 30.0 42.9

122 23 Côte d’Ivoire 55.4 1.3 43.3 72.2 78.5 88.4 80.2 35.0 50.0 30.0 21.0 55.7

125 24 Djibouti 54.5 3.4 32.9 59.6 79.6 50.5 76.6 60.0 60.0 30.0 28.0 67.7

126 25 Niger 54.3 1.4 36.9 71.8 77.5 83.0 80.0 55.0 40.0 30.0 29.0 40.3

134 26 Mauritania 52.1 0.1 48.3 69.9 81.1 73.9 77.4 30.0 40.0 25.0 25.0 50.3

136 27 Cameroon 51.8 –0.6 44.1 59.6 66.9 89.7 73.3 35.0 50.0 30.0 22.0 47.0

137 28 Guinea 51.7 –0.1 40.8 61.2 69.6 90.9 70.3 40.0 40.0 20.0 18.0 66.6

142 29 Seychelles 51.2 3.3 62.4 33.4 77.7 52.5 54.9 45.0 30.0 50.0 48.0 58.1

144 30 Ethiopia 50.5 –0.7 67.4 65.6 74.5 88.7 54.3 20.0 20.0 30.0 27.0 57.1

148 31 Burundi 49.6 2.1 36.8 78.8 72.3 52.0 66.1 55.0 30.0 20.0 18.0 67.1

Chapter 3



nomic freedom score of 76.2, it is both the 12th freest economy in the world and the leader in economic freedom in the region. It scores above the global average in eight economic freedoms, including trade freedom, invest-ment freedom, property rights, freedom from corruption, and fiscal freedom. Mauritius has also demonstrated its strong commitment to enhancing economic freedom by accelerat-ing major tax reforms. Botswana remains the region’s second freest economy, followed by Cape Verde and Namibia. Despite consider-able progress over the past decade, reform

in South Africa has been outpaced by other countries in the region.

Most notably, several of the most improved economies in the 2011 Index are in Sub-Saha-ran Africa. Rwanda, whose competitive-ness and entrepreneurial environment have been greatly enhanced by a series of recent reforms, is the most improved economy. Dji-bouti, Guinea–Bissau, and Cape Verde also improved notably. Trade facilitation and other regulatory reforms have strongly contributed to advancing economic freedom in these countries.

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Economic Freedom in Sub-Saharan Africa Countries (continued)

149 32 Sierra Leone 49.6 1.7 54.9 62.8 80.8 86.8 74.2 45.0 20.0 10.0 22.0 39.4

150 33 São Tomé and Príncipe

49.5 0.7 32.0 66.6 87.2 67.5 62.2 45.0 30.0 30.0 28.0 46.4

152 34 Central African Republic

49.3 0.9 36.8 58.1 65.4 92.8 71.3 50.0 30.0 20.0 20.0 48.2

153 35 Togo 49.1 2.0 36.8 62.2 68.1 88.6 78.1 25.0 30.0 30.0 28.0 43.7

156 36 Lesotho 47.5 –0.6 58.9 63.6 48.2 21.4 71.6 35.0 40.0 40.0 33.0 63.7

157 37 Equatorial Guinea 47.5 –1.1 44.2 58.9 75.5 80.5 74.4 20.0 40.0 20.0 18.0 43.1

159 38 Guinea–Bissau 46.5 2.9 25.5 63.6 88.7 54.8 72.2 30.0 30.0 20.0 19.0 61.4

160 39 Liberia 46.5 0.3 51.8 53.8 73.3 66.5 69.5 20.0 20.0 30.0 31.0 48.9

161 40 Angola 46.2 –2.2 41.4 70.2 84.5 48.1 61.8 35.0 40.0 20.0 19.0 42.3

165 41 Chad 45.3 –2.2 25.3 55.6 50.4 85.3 70.6 45.0 40.0 20.0 16.0 44.8

167 42 Comoros 43.8 –1.1 42.9 62.4 64.8 77.8 76.2 10.0 20.0 30.0 23.0 30.7

168 43 Republic of Congo 43.6 0.4 40.8 61.0 61.8 79.7 71.4 20.0 30.0 10.0 19.0 42.3

172 44 Democratic Republic of Congo

40.7 –0.7 37.8 63.0 73.3 84.5 46.7 15.0 20.0 10.0 19.0 37.3

176 45 Eritrea 36.7 1.4 18.2 69.1 73.0 31.5 46.0 0.0 20.0 10.0 26.0 73.4

178 46 Zimbabwe 22.1 0.7 32.1 45.0 70.3 0.0 0.0 0.0 10.0 5.0 22.0 36.8

n/a n/a Sudan n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a


51 Chapter 3

Despite some progress, Eritrea and Zimba-bwe remain the region’s two most “repressed” economies. Political instability and poor man-agement of macroeconomic policies severely impede overall economic development in these countries. Harsh regulatory environments and pervasive corruption undermine the business and investment climates.

Preserving anD aDvancing economic freeDom

The diversity of the world’s peoples and cultures implies that there will be many paths to economic development and prosperity. Indeed, the fundamental value that underpins an economically free and open society is the empowerment of individuals to choose their own paths to prosperity. The whole idea of eco-nomic freedom is to increase opportunities for diverse types of activities, with free and open markets as the ultimate arbiter of societies’ val-ues and desires.

As shown in the Index over the past 17 years, economic freedom is the indispensable link between economic potential and prosper-ous outcomes. Other systems lag far behind in terms of providing for broad-based growth or reduction in poverty. Those who are look-ing for solutions rather than excuses will find in this Index the economic policies and actions

that can promote entrepreneurship and dura-ble economic gains irrespective of history, resources, or level of development.

Today’s world economy can emerge stron-ger if the right policy choices are made at this critical juncture. The recent financial and eco-nomic turmoil vividly illustrates the interde-pendence of economies in different regions. Bad policy choices that hurt economic freedom and retard economic performance in one coun-try may have profoundly negative effects in others. By the same token, good policies in one country—for example, an openness to trade or investment flows—may have positive effects elsewhere.

A recurring theme of human history has been resilience and revival. The Index of Eco-nomic Freedom provides a road map for eco-nomic revival in the years ahead. The stories of countries that have created environments for human progress and development chart a positive course that others, who still face chal-lenges, can follow to their benefit. There are warnings, too, of the perils of conflict, autoc-racy, or simply the hubris of government plan-ners who think they have all the answers.

Every region has positive examples of coun-tries that have chosen freedom and reaped the rewards for their citizens. Their course is the one we extol in the Index of Economic Freedom.

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