Published by the Fraser Institute on September 19, the Economic Freedom of the World index shows Singapore take the apex position among nations with policies that are most supportive of economic freedom.
According to the report, “The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately owned property”.
More about the Economic Freedom Report 2023
The 2023 index by Economic Freedom of the World provides the most comprehensive data from 2021. With the decline in Hong Kong’s status to the second position for the first time, with a total score of 8.55 points, Singapore grabbed the highest rung, with an increase of 0.06 points. Its overall score stands at 8.56.
Although Singapore’s score remains similar to that of the previous year, its overall score is significantly higher than most other countries across the globe.
Since 1996, the Economic Freedom of the World report has mapped the countries with the most open and lucrative policies for personal growth and development. Contributing factors include stringent laws to protect property rights, effective enforcement of anti-corruption laws, easy tax rates and a transparent environment. Embracing global trade and commerce and allowing a more dynamic financial sector have acted as catalysts too.
According to the report, the “government imposed new and significant barriers to entry, limits on the employment of foreign labour, and increases in the costs of doing business, which drove a 0.25-point decline in Hong Kong’s Area 5 (regulation) component”. These served as factors leading to Hong Kong’s fall. It has a total score of 8.55 points.
The Lion City and Hong Kong are followed by Switzerland, New Zealand, the United States, Ireland, Denmark, Australia, the United Kingdom and Canada in the ensuing positions. Republic of Congo, Algeria, Argentina, Libya, Iran, Yemen, Sudan, Syria, Zimbabwe and, lastly, Venezuela, are the lowest-ranking countries.
Key areas of measurement
A total of 45 data points are taken into account to graph the economic freedom index, “along with a Gender Legal Rights Adjustment to measure the extent to which women have the same level of economic freedom as men”. The degree of economic freedom is then measured under five broad areas.
Area 1. Size of government: An increased government expenditure, taxation and the size of government-controlled segments, means a reduced scope of individual choices and economic freedom.
Area 2. Legal system and property rights: Lawful protection of individual and their legal property is the core essence of a sound government. Hence, if citizens and their property are not safe, and the power of the judiciary is limited, it would translate to limited economic freedom.
Area 3. Sound money: High inflation is a crucial factor that erodes one’s economy. Hence, establishing sound money is important for safeguarding property rights and enabling people to plan their future with the help of economic freedom.
Area 4. Freedom to trade internationally: The freedom to exchange, buy, sell and forge contracts makes up one of the main pillars of economic freedom. It is curbed when the government raises trading costs or makes it difficult to go global with business.
Area 5. Regulation: Not only does the government put checks on international trade, it also levies regulations on domestic trade. This limits the right to exchange, gain credit, hire or work for whoever one wishes, or freely operate one’s business. With the growing scope of such restrictions, economic freedom is curtailed.
Jurisdiction of study and related research
Around 165 points of jurisdiction are identified for this report. The historical empirical data from 2000 and 2019 is studied for past details, while the same is available for years ending with 0 or 5 till 1970. “This dataset makes it possible for scholars to analyse the impact of both cross-country differences in economic freedom and changes in that freedom across a time frame of several decades,” states the Economic Freedom of the World report.
Such meticulous and detailed study has also enabled certain related studies that have helped in gaining a holistic view of global development and its impact on the individual. The report states, “The strong balance of the evidence suggests that those who live in jurisdictions with greater economic freedom experience higher levels of well-being as measured by factors such as greater productivity, more rapid economic growth, higher income levels, less poverty, less corruption, and fewer conflicts”.
Authors of the 2023 Economic Freedom of the World report
The authors of the report are James Gwartney, professor of economics at Florida State University; Robert Lawson, clinical professor in economics and director of Bridwell Institute for Economic Freedom at Southern Methodist University; and Ryan Murphy, research assistant professor at SMU Cox School of Business.
(Hero image credit: Mike Enerio/ @mikeenerio/ Unsplash ; Feature image credit: Coleen Rivas/ @coleenr/ Unsplash)