In the Economic Freedom of the World: 2009 Annual Report released today by the Free Market Foundation, SA’s rating improved slightly from 7.03 to 7.06 (out of 10) and is ranked 57th out of 141 countries.
 
“This means that SA’s ranking has declined from 54th in the 2008 report to 57th but this is because we have been overtaken by Armenia, Botswana, the Czech Republic, Greece and Kenya. But, what is also revealed, is that we have overtaken Italy and Mongolia,” says FMF Executive Director, Leon Louw. 
 
The report ranks Hong Kong number one, followed by Singapore in second place and New Zealand in third. Zimbabwe once again has the lowest level of economic freedom among the 141 countries included in the study. Myanmar, Angola, and Venezuela are next to bottom in the rankings. The 2009 report is based on data from 2007, the most recent
year for which comprehensive data is available.
 
The annual Economic Freedom of the World report is produced by the Fraser Institute,Canada’s leading economic think tank, in co-operation with independent institutes in 75 nations and territories.
 
In the Economic Freedom of the World report 42 different measures are used to create an index based on policies that encourage economic freedom to rank countries around the world. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property. Economic freedom is measured in five different areas: (1) size of government; (2) legal structure and security of property rights; (3) access to sound money; (4) freedom to trade internationally; and (5) regulation of credit, labour and business.
 
Research shows that individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity, greater individual freedoms, and longer life spans.
 
“Economic freedom is the key building block of the most prosperous nations around the world. Countries with high levels of economic freedom are those in which people enjoy high standards of living and personal freedoms. Countries at the bottom of the index face the opposite situation; their citizens are often mired in poverty, are governed by totalitarian regimes and have few if any individual rights or freedoms,” Leon Louw observes.
 
The full report is available at http://www.freetheworld.com/
 
SA scores in key components of economic freedom (from 1 to 10 where 10 indicates the highest level of economic freedom) compared to last year’s report:
 
· Size of government: improved from 6.97 to 7.20
· Legal structures and security of property rights: dropped from 6.55 to 6.51
· Access to sound money: dropped from 7.89 to 7.75
· Freedom to trade internationally: improved from 6.71 to 6.77
· Regulation of credit, labour and business: improved from 7.02 to 7.09
 
Mauritius rose dramatically up the rankings from 41st to 16th, making it the most economically free country in the African sphere and one of the freest in the world. The improvement in Mauritius’ ranking results from deliberate policies adopted by its government to make the economy more investment friendly, attract investment and reduce unemployment.
 
Zambia 49th has once again achieved the top score in Sub-Saharan Africa, followed by Botswana 50th, Kenya 54th and South Africa 57 th. Fourteen of the twenty lowest ranking countries measured in the study are Sub-Saharan African with Zimbabwe 141st ranked last.
 
International Rankings
 
In this year’s main index, Hong Kong retains the highest rating for economic freedom, 8.97 out of 10. The other top scorers are: Singapore (8.66), New Zealand (8.30), Switzerland (8.19), Chile (8.14), United States (8.06), Ireland (7.98), Canada (7.91), Australia tied with the United Kingdom (7.89), and Estonia (7.81).
 
The rankings and scores of other large economies include Taiwan, tied for 16th with Finland and Mauritius (7.62); Germany, 27 th (7.50); Japan, 28 th (7.46); South Korea, 32nd (7.45); France, 33rd (7.43); Spain, 39th (7.32); Sweden, 40th (7.28); Italy, 61st (6.95); Mexico, 68th (6.85); Israel, 78th (6.69), China, 82nd (6.54), Russia, 83rd (6.50), India, 86th (6.45); Argentina, 105th (6.10), and Brazil, 111th (6.00).
 
Several countries have substantially increased their ratings and improved their relative levels of economic freedom during the past decade. Estonia has increased by nearly 2.0 since 1995 and it is now one of the freest economies in the world, ranking 11th overall. Lithuania and Latvia have increased their ratings by similar magnitudes since 1995 and their 2007 ratings are now greater than 7.0. The ratings of Cyprus, Hungary, Kuwait, and Korea have also improved substantially and their ratings are now 7.25 or more.
 
But not all of the news is good. Economic freedom is regressing in several other countries: since 1995 the rating of Zimbabwe has fallen by 3.18, Argentina by 0.80 and during the same period, those for Malaysia and the Philippines also declined. Since 2000, the rating of Venezuela has declined by more than 1.5, down to 4.07, and Nepal’s rating dropped from 5.62 to 5.18. The United States has also declined byalmost seven-tenths of a point from 8.55 in 2000 to 7.88, which has sent its accompanying ranking down from 2nd to 7th in this year’s report.
 
Economic Freedom and the Global Recession
 
The 2009 edition of the Economic Freedom of the World report includes new research that examines the likely impact of the global recession on levels of economic freedom.
 
The study looks at banking crises that took place in Norway and Sweden during the 1990s and found that although economic freedom may decline in the short term in response to crises, over a longer time, economic freedom has a tendency to increase after a banking crisis. In the case of Norway and Sweden, the banking crisis did not distract these countries from continuing with their market-based reform policies.
 
“Even though a banking crisis can be very painful, it is an illusion that they can be fully ruled out by better government regulation. In fact, a case can be made that perverse regulations in combination with the creation of too much liquidity played a key role in the creation of the current crisis,” says Fred McMahon, director of the Centre for Globalisation Studies at the Fraser Institute.
 
“The short-term response of governments will almost surely reduce economic freedom but history shows that this need not be the case over the long term. Several countries that have experienced financial crises have moved toward greater economic freedom in subsequent years. The impact on economic freedom depends on what we learn from the crisis. Will we move toward institutions and policies more consistent with economic freedom? Or will we politicise, micromanage, and expand the size and role of government? If we choose to follow the latter route, our destiny will be like the generation of 1930; we will face a lost decade of stagnation and decline.”
 
About the Economic Freedom Index
 
Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. This year’s publication ranks 141 nations representing 95% of the world’s population for 2007, the most recent year for which data are available. The report also updates data in earlier reports in instances where data have been revised.