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REPORTS: WORLD ECONOMY |
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Hong
Kong, Singapore, U.S. Top
"Economic Freedom" Index
Jim
Lobe
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 by the Cato Institute and
more than 50 other libertarian think
tanks around the world.
WASHINGTON, (IPS) - 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 Tuesday by the Cato
Institute and more than 50 other
libertarian think tanks around the
world.
The 160-page report, which ranks a
total of 123 nations, concludes that
citizens and businesses in Africa,
Latin America and the former Soviet
bloc states comprise among the least
economically free countries in the
world, with Burma, also known as
Myanmar, claiming the cellar position.
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 labour markets
are regulated by the government.
The basic philosophy guiding the
ratings is that of classical economic
liberalism or, as the third U.S.
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 the Slovak Republic, the Fundacion
Libertad in Argentina, the Centre 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 organisations around the world
have complained that unchecked
globalisation and the "free
trade" model being pushed by
multinational corporations is driving
a race to the bottom in environmental
and labour standards. This conflict
will doubtless come to the fore in
September when the World Trade
Organization meets in Cancún, 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 fall, rated Hong
Kong and Singapore as the two
countries -- 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 is 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 that
the turning point over the past 30
years took place in 1980 --
coincidentally, perhaps the same year
that the World Bank introduced
structural adjustment programmes (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 Britain,
both at 8.2. The five other nations in
the top 10 were also heavily tilted
toward Anglo influence. They included
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 emirates in the 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).
Besides the overall two winners, Asian
countries with high marks included
Japan and South Korea, at 26; Thailand
(44); the Philippines (51); Malaysia
(60); and Sri Lanka (64). Aside from
Burma, the lowest-ranking Asian
countries included Indonesia (91),
China (100), and Pakistan 101).
The results in the U.N.'s 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 monopolise 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),
followed by Namibia (124) and Botswana
(125).
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