The Index of Economic Freedom provides compelling evidence of the wide-ranging tangible benefits of living in freer societies. Now in its 23rd edition, the Index analyzes economic policy developments in 186 countries. Countries are graded and ranked on 12 measures of economic freedom that evaluate the rule of law, government size, regulatory efficiency, and the openness of markets.
Key Findings of the 2017 Index
- Per capita incomes are much higher in countries that are more economically free. Economies rated “free” or “mostly free” in the 2017 Index generate incomes that are more than double the average levels in other countries and more than five times higher than the incomes of people living in countries with “repressed” economies.
- Not only are higher levels of economic freedom associated with higher per capita incomes, but greater economic freedom is also strongly correlated to overall well-being, taking into account such factors as health, education, environment, innovation, societal progress, and democratic governance.
- No matter what their existing level of development may be, countries can get an immediate boost in their economic growth by implementing steps to increase economic freedom through policies that reduce taxes, rationalize the regulatory environment, open the economy to greater competition, and fight corruption.
The Growth of Economic Freedom
- Economic freedom has advanced in a majority of the world’s countries over the past year. Global average economic freedom increased by 0.2 point to a record level of 60.9 on the 0–100 scale used in the Index of Economic Freedom. Since the inception of the Index in 1995, average scores have increased by over 5 percent.
- In the 2017 Index, 103 countries, most of which are less developed or emerging economies, showed advances in economic freedom. Remarkably, 49 countries achieved their highest economic freedom scores ever. Two large economies (China and Russia) are included in this group.
- While two countries (Mauritius and the United Kingdom) recorded no change in score, 73 experienced declines in economic freedom. Sixteen of these 73 countries, including notably the Bahamas, Bahrain, El Salvador, Pakistan, Venezuela, and the United States, recorded their lowest economic freedom scores ever.
- The Asia–Pacific region is home to nine of the 20 most improved countries: Fiji, Kiribati, Kazakhstan, China, Turkmenistan, Uzbekistan, Vanuatu, Tajikistan, and the Solomon Islands all recorded score gains of four points or more. On the other hand, Sub-Saharan Africa has the most countries (Cabo Verde, Djibouti, Ghana, Guinea, Kenya, The Gambia, and Madagascar) recording notable score declines, followed by the Americas (Barbados, the Bahamas, Venezuela, Suriname, Saint Lucia, and Brazil).
- Of the 180 economies whose economic freedom has been graded and ranked in the 2017 Index, only five (Hong Kong, Singapore, New Zealand, Switzerland, and Australia) have sustained very high freedom scores of 80 or more, putting them in the ranks of the economically “free.”
- A further 29 countries, including Chile, the United Arab Emirates, the United Kingdom, Georgia, the United States, and Mauritius, have been rated as “mostly free” economies with scores between 70 and 80.
- A total of 92 economies, just over half of those graded in the 2017 Index, have earned a designation of “moderately free” or better. These economies provide institutional environments in which individuals and private enterprises benefit from at least a moderate degree of economic freedom in the pursuit of greater competitiveness, growth, and prosperity.
- On the opposite side of the spectrum, nearly half of the countries graded in the Index—88 economies—have registered economic freedom scores below 60. Of those economies, 65 are considered “mostly unfree” (scores of 50–60), and 23 are considered “repressed” (scores below 50).
The Intangible Benefits
of Economic Freedom
- Economic freedom is about much more than a business environment in which entrepreneurship and prosperity can flourish.
- With its far-reaching impacts on various aspects of human development, economic freedom empowers people, unleashes powerful forces of choice and opportunity, gives nourishment to other liberties, and improves the overall quality of life.
- It is true that in practice, each country’s path to growth and development must be tailored to its own conditions and even what is politically possible. However, there are some fundamentals to bear in mind. Nations with higher degrees of economic freedom prosper because they tend to capitalize more fully on the ability of the free-market system not only to generate economic growth, but also to reinforce dynamic growth through efficient resource allocation, value creation, and innovation.
in the 2017 Index?
The Index of Economic Freedom, The Heritage Foundation’s flagship product, has become an essential reference tool and policy guidebook for many leaders and scholars around the world over the past 23 years. During that time, a number of improvements have been made in data collection, evaluation, and display in an effort to enhance the substance and overall quality of the publication. Following that tradition, the 2017 edition of the Index incorporates a number of enhancements that are intended to ensure that it remains a practical resource that is both credible and relevant to a changing world while remaining true to its roots as an objective source of data-driven analysis and policy recommendations.
Specific enhancements this year include:
- New Country Page Design. Individual country pages of the Index are intended to provide both a quick visual snapshot of a country’s overall economic freedom and as much detailed information as space allows about developments and conditions in various aspects of that freedom. To improve the user-friendliness of the country pages, the 2017 Index incorporates a new page layout and full color charts that illustrate a country’s overall economic freedom score in a more intuitive and visually attractive way.
- Presentation of Country Pages by Region. The country pages in the 2017 Index are now grouped by region and presented in alphabetical order following a brief summary of regional developments. All countries of the Western Hemisphere are now grouped in a single Americas region.
- Enhanced Methodology. The number of components of economic freedom that are separately evaluated and graded has increased from 10 to 12. The increased reliability and availability of worldwide data from a variety of sources has permitted the incorporation of new components specifically addressing “Judicial Effectiveness” and “Fiscal Health.” The former Freedom from Corruption component has been refined, incorporating additional sub-factors and underlying data sources that are significantly more comprehensive than those formerly used, and renamed “Government Integrity.” Finally, the Fiscal Freedom component of the Index has been renamed “Tax Burden” to better reflect exactly what is being measured. Details of these methodological changes are provided in the Methodology Appendix.
- Equal Weighting. The four pillars of economic freedom—Rule of Law, Government Size, Regulatory Efficiency, and Open Markets—now carry equal weight in the computation of the overall economic freedom score. Each now includes three equally weighted components, presenting opportunities for new types of analytical comparisons reflecting the impact of reforms in broader policy areas.