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HK, Singapore, top 'economic freedom'
index
By Jim Lobe
WASHINGTON - Hong Kong, Singapore, and the
United States rank first, second and third,
respectively, in the latest edition of the Economic
Freedom of the World annual report released here on
Tuesday by the Cato Institute and more than 50 other
libertarian think-tanks around the world.
The
160-page report, which ranks 123 economies, concludes
that citizens and businesses in Africa, Latin America
and the former Soviet bloc comprise among the least
economically free countries in the world, with Myanmar
claiming the cellar position.
Besides the
overall two winners, Asian countries with high marks
included Japan and South Korea, tied in 26th place;
Thailand (44); the Philippines (51); Malaysia (60); and
Sri Lanka (64). Aside from Myanmar, the lowest-ranking
Asian countries included Indonesia (91), mainland China
(100) and Pakistan (101).
The report, which was
released on the same day as the United Nations'
celebrated Human Development Index (HDI), is based on 38
variables in five major categories designed to measure
economic freedom.
The five categories include
the size of government, as determined in part by
spending, taxes and state enterprises; the legal
structure and security of property rights; access to
sound money that is not weakened by high inflation
rates; the freedom to exchange goods and services with
foreigners unencumbered, for example, by tariffs or
quotas or currency controls; and the degree to which
business and credit and labor markets are regulated by
the government.
The basic philosophy guiding the
ratings is that of classical economic liberalism or, as
the third US president, Thomas Jefferson, famously put
it: "That government is best which governs least",
except perhaps insofar as it actively protects
private-property rights.
"Freeing people
economically unleashes individual drive and initiative
and puts a nation on the road to economic growth," said
Nobel Economics laureate Milton Friedman, whose basic
economic ideas have acted as guideposts for the report
and Cato and the other think-tanks, including the Fraser
Institute of Canada, the F A Hayek Foundation in
Slovakia, the Fundacion Libertad in Argentina, the
Center for Civil Society in India, and the Institute for
Advanced Strategic and Political Studies in Israel. "In
turn, economic prosperity and independence from
government promote civil and political liberty."
At the same time, the study asserted that
economic freedom is highly correlated with per capita
income, economic growth, and life expectancy and does
not necessarily lead to greater income inequality.
Of course, not everyone agrees with this rosy
assessment. For years, civil-society organizations
around the world have complained that unchecked
globalization and the "free trade" model being pushed by
multinational corporations is driving a race to the
bottom in environmental and labor standards. This
conflict will doubtless come to the fore in September
when the World Trade Organization meets in Cancun,
Mexico, where WTO officials hope to advance a new round
of "reforms" that will help corporations invest wherever
they like while avoiding government regulations.
The just-released Cato report, the seventh in an
annual series, should not be confused with the Index of
Economic Freedom published by the Wall Street Journal
and the right-wing Heritage Foundation here, although
the results are fairly similar. Like the Cato report,
the Index, the most recent version of which appeared
last autumn, rated Hong Kong and Singapore as the two
economies - out of a total of 156 - with the greatest
economic freedom.
According to the Cato report,
which covers 2001, the year for which the most
comprehensive data are available, economic freedom has
gained ground around the world over the eight-year
period since the first ratings were published for 1995.
The average rating for 2001 stood at 6.35, only slightly
higher than the previous year, but substantially more
than the 5.96 eight years ago.
The report's
authors, economists James Gwartney and Robert Lawson,
said the turning point over the past 30 years took place
in 1980 - coincidentally, perhaps, the same year that
the World Bank introduced structural adjustment programs
(SAPs), which were designed to reduce the impact of
government on the economy - when ratings averaged 5.36,
according to their calculations. "It has been on the
rise since then," the reporters said.
Out of a
10-point scale, Hong Kong gained the highest rating for
economic freedom at 8.6, closely followed by Singapore
at 8.5, the United States at 8.3, and New Zealand and
the United Kingdom, both at 8.2. The five other nations
in the top 10 were Canada, Switzerland, Ireland,
Australia, and the Netherlands.
Although the
rankings did not precisely follow those used in the Wall
Street Journal's Index, seven out of the 10 top nations
overlapped the two surveys. In the Journal's survey,
Luxembourg, Denmark and Estonia also made into the top
10 at the expense of the Netherlands, Switzerland and
Canada.
The rankings of other large economies in
the Cato survey included Germany, 20; Japan, 26; Italy,
35; France, 44; Mexico, 69, India, 73; Brazil, 82;
China, 100; and Russia, 112. In the Journal poll,
Germany ranked 19; Japan, 35; Italy, 29; France, 40;
Mexico, 56; India, 119; Brazil, 72; China, 127; and
Russia, 135.
The Journal poll's major categories
included trade policies; the government's fiscal burden;
its intervention in the economy; monetary policy;
foreign investment policies; banking and finance
policies; wage-to-price ratios; property rights;
regulations; and the black market.
Among
developing countries rated in the Cato poll, the United
Arab Emirates and Oman rated the highest at 16 and 18,
respectively, followed closely by Chile, the Latin
American leader, at 20, where it was tied with
Mauritius.
El Salvador and Panama tied for 23,
while Bahrain and Botswana, the African leader, tied
with Costa Rica and six other countries, including South
Korea and Trinidad and Tobago, at 26.
Other
major African countries included South Africa, which
tied with Zambia at 42; Uganda and Namibia at 44; Kenya
at 51; and Nigeria, which tied with Benin, Cameroon,
Chad, Madagascar, and Niger, at 91. Zimbabwe and the
Democratic Republic of Congo (DRC) placed last among the
Africans at 121 and 122, respectively.
Aside
from Chile, El Salvador and Panama, the highest-ranking
Latin American countries included Costa Rica (26); Peru
and Uruguay (44); the Dominican Republic (51); Argentina
and Bolivia (56); and Nicaragua (60). Lowest ranking
were Colombia (101), Venezuela (103) and Ecuador (112).
Aside from the above-mentioned emirates in the
Persian Gulf, highest-ranking Middle Eastern states
included Jordan and Kuwait (39); Egypt and Israel (56);
Tunisia (60); Morocco (82); and Iran (89). Lowest
ranking included Syria (106) and Algeria (120).
The results in the United Nations' HDI, which
measures social welfare, educational enrollment,
maternal and infant health, and political freedoms, as
well as per capita income, among many other criteria,
contrast fairly dramatically with the libertarian
findings.
Northern European and other developed
countries monopolize the top 25 rankings, while Hong
Kong, Barbados and Singapore rank 26, 27, and 28. The
top Latin American countries include Argentina (34),
Uruguay (40), Costa Rica (42), Chile (43), Cuba (50) and
Mexico (55).
Aside from Cape Verde (103), South
Africa tops the African list at 111, followed by
oil-producing states Equatorial Guinea (116), Gabon
(118), Namibia (124) and Botswana (125).
(Inter
Press Service)
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