World: Economic Freedom Advancing, Survey Finds

Women at work in Tajikistan, whose economy is judged to have become 'freer' in 2005 (file photo) (RFE/RL) Economic freedom made impressive gains throughout North America and Europe. That is the conclusion of an annual survey conducted by the U.S. newspaper "The Wall Street Journal" and the Heritage Foundation, an influential right-wing U.S. think tank.

Prague, 4 January 2005 (RFE/RL) – The only region to see a net decline in economic freedom in 2005 was North Africa and the Middle East, the authors of the survey concluded.

The survey's Index of Economic Freedom, which seeks to provide a portrait of economic freedom around the world and to indicate individual country's economic prospects, ranked 157 countries based on factors that included openness to trade and foreign investment, the degree of government intervention, the level of wage and price regulation, the size of the black market, and legal protections of property rights.

Ninety-nine countries saw their overall scores improve in 2005. By contrast, 51 economies became less free, particularly those of Iran and Italy.

Marc Miles, the editor of the report, says the trend toward more economic freedom is accelerating particularly because countries in the former Soviet bloc and Eastern and Central Europe are becoming laboratories for new economic ideas.

"These are countries that are adopting policies that Western European and the United States are only talking about," he says. "They've been opening up their foreign investment market. They've been opening up their labor markets. They're opening up their banking systems. So there has been a general freeing of the markets, and this has helped push the average economic freedom in the world even higher."

A World Of "Mostly Free" Economies

This is the first time in the survey's 12-year history that the average country in the report ranks as "mostly free," rather than "mostly unfree."

Overall, the survey classified 20 countries as "free." For the twelfth successive year, Hong Kong and Singapore were judged the world's freest economies. Behind them came Ireland, Estonia, Luxembourg, Iceland, Britain, Estonia and Denmark and -- jointly in ninth place -- Australia, New Zealand, and the United States, which had slipped out of the leading group in 2004.

Fifty-two countries are rated as "mostly free," including Armenia and Georgia, whose economies were among the 10 most "improved" during the year.

Seventy-three states, such as Russia, Ukraine, Romania, Moldova, and Azerbaijan, are listed as "mostly unfree."

The Least Free Economies

Twelve are classified as "repressed," including Iran, Belarus, Cuba, and Turkmenistan, though the Turkmen economy was judged to have become freer over the year.

Only North Korea ranked below Iran, whose economy was deemed as being characterized by heavy regulation, high unemployment, inflation, corruption, and government intervention.

In Belarus, about 80 percent of all industries remain in state hands, and more than 40 percent of industrial enterprises operate at a loss.

All Central Asian economies were assessed as being freer, though only Kyrgyzstan jumped to the "mostly free" category. Kazakhstan, Tajikistan, and Uzbekistan are classified as "mostly unfree" economies. Tajikistan moved from "repressed" into the "mostly unfree" category in the past year.

Several factors explain the "mostly not free" rating for most Central Asian countries. "The problem," Miles says, is that "unlike of some of the Eastern and Central European countries, these countries, for the most part, have not moved toward privatization, deregulation, and flat taxes."

The Costs Of Less Freedom

The authors of the index note the strong relationship between economic freedom and prosperity. They say citizens of countries classified as "mostly unfree" or "repressed" earn almost 70 percent less than citizens of "mostly free" countries.

In turn, the citizens of "free" countries enjoy a per-capita income that is more than twice as high as those of their counterparts in "mostly free" countries.

The director of the Heritage Foundation, Edwin J. Feulner, argues that improving and maintaining economic freedom is the only reliable way to generate a positive cycle of economic growth and prosperity.

Four countries -- Iraq, Sudan, Serbia and Montenegro, and the Democratic Republic of Congo -- are listed as unrated because of doubts concerning the accuracy or reliability of data.

Afghanistan appears nowhere on the lists.

Miles says Afghanistan is one of several countries excluded for lack of information.