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January 27, 2015

January 27, 2015 | News Releases on

Index: Economic Freedom Declines Slightly in North America

WASHINGTON, JAN. 27, 2015—The United States finally halted its five-year slide in the rankings of the annual Index of Economic Freedom, rising by 0.7 points in the 2015 edition, but retaining its No. 12 ranking among the world’s economies.

North America is still the world’s freest region. Yet Canada, which has led the region since 2010, lost 1.1 points last year and slid into the “mostly free” category. The United States, despite its rise, is also a “mostly free” economy. Mexico -- which suffered a small decline, due to lower scores in the management of government spending, fiscal freedom and business freedom -- is “moderately free.”

All three economies are linked by the North American Free Trade Agreement, which the Index editors call “the lynchpin of massive trade and investment flows” in the region.

Launched in 1995, the Index evaluates countries in four broad policy areas that affect economic freedom: rule of law; limited government; regulatory efficiency; and open markets. There are 10 specific categories: property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom. Scores in these categories are averaged to create an overall score.

Canada lost its status as a “free” economy last year, with declines in labor freedom and freedom from corruption. “Nonetheless,” the editors write, “Canada remains one of the world’s most stable business climates and an attractive investment destination. With the world’s second-best property rights regime buttressing openness to global commerce, Canada has a solid foundation of economic freedom.”

Mexico, the last-place finisher in the region, is performing well below its potential economically, the Index editors say. Organized crime is endemic, and broader-based reforms are necessary to improve the business climate and enhance the rule of law. Yet it charted rising scores in freedom from corruption and labor freedom, and its 59th place finish globally places it well above the world average.

The United States recorded modest gains in six of the 10 Index-measured freedoms, including control of government spending. But its tax and regulatory burdens have increased substantially, and it still has much work to do (in the area of business freedom, for example, which worsened last year) before it can regain a spot among the world’s 10 freest economies.

The world average score of 60.4 is only one-tenth of a point above the 2014 average, but represents a 2.8-point overall improvement since the inception of the Index in 1995. Thirty-seven countries, including Taiwan, Israel, Poland and Colombia, achieved their highest-ever Index scores. Among the 178 countries ranked, scores improved for 101 countries and declined for 73.

The 2015 Index was edited by Ambassador Terry Miller, director of Heritage’s Center for Trade and Economics and Center for Data Analysis; and Anthony B. Kim, senior policy analyst in the Center for Trade and Economics. Copies of the Index (492 pages, $24.95) may be ordered online at www.heritage.org/index or by calling 1-800-975-8625. The full text, including charts and graphs, also is available online.

 

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