South Africa has improved its economic freedom ranking, rising to 90th out of 162 countries and territories, compared to 101st last year.
The Economic Freedom of the World: 2020 Annual Report was released by the Free Market Foundation in conjunction with Canada’s Fraser Institute.
The improved ranking this year results from a small positive movement in the South African rating, and the fact that countries such as Belarus, Ghana, Greece and Surname lost ground against South Africa.
In 2000 South Africa ranked 58th and was among the top 37% of the most economically free countries in the world.
Hong Kong and Singapore again top the index, continuing their streak as first and second respectively. New Zealand, Switzerland, the US, Australia, Mauritius, Georgia, Canada and Ireland round out the top 10.
The report, based on 2018 data (the most recent comparable data), warns that recent events in Hong Kong will likely cause its score to fall as data become available for 2019 and 2020.
“Intrusion on the rule of law, the foundation of economic freedom, by the Chinese Communist Party is negatively affecting economic freedom in Hong Kong,” says Fred McMahon, Dr Michael Walker, research chair in economic freedom at the Fraser Institute.
Leon Louw, CEO of the Free Market Foundation, comments: “Hong Kong has, for many years, been an example to the rest of the world of how a country or a territory can be governed in an enlightened manner that allows a free people to build an economy that leads to a high level of wealth creation and general prosperity.
“It is most unfortunate that the Chinese government has decided to meddle in its affairs.”
The report was prepared by James Gwartney of Florida State University; Robert Lawson and Ryan Murphy of Southern Methodist University; and Joshua Hall of West Virginia University. It measures the economic freedom (levels of personal choice, ability to enter markets, security of privately owned property, rule of law, etc) by analysing the policies and institutions of 162 countries and territories.
The 10 lowest-rated countries are Central African Republic, Democratic Republic of Congo, Zimbabwe, Republic of Congo, Algeria, Iran, Angola, Libya, Sudan and Venezuela. Despotic countries such as North Korea and Cuba can’t be ranked due to lack of data.
Other notable rankings include Japan (20th), Germany (21st), Italy (51st), France (58th), Mexico (68th), Russia (89th), India (105th), Brazil (105th) and China (124th).
According to research in top peer-reviewed academic journals, people living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer lives.
For example, countries in the top quartile of economic freedom had an average per-capita GDP of $44 198 in 2018 compared to $5 754 for countries in the bottom quartile.
Moreover, in the top quartile, the average income of the poorest 10% was $12 293 compared to $1 558 in the bottom quartile. Interestingly, the average income of the poorest 10% in the most economically free countries is more than twice the average per-capita income in the least free countries.
“Where people are free to pursue their own opportunities and make their own choices, they lead more prosperous, happier and healthier lives,” McMahon says.
The Fraser Institute produces the annual Economic Freedom of the World report in cooperation with the Economic Freedom Network, a group of independent research and educational institutes in nearly 100 countries and territories. It’s the world’s premier measurement of economic freedom, measuring and ranking countries in five areas–size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally and regulation of credit, labour and business.
South Africa’s scores in key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom) are:
* Size of government: changed to 6.11 from 5.77 in the last year’s report.
* Legal system and property rights: changed to 5.68 from 5.05.
* Access to sound money: changed to 8.20 from 8.17.
* Freedom to trade internationally: changed to 6.44 from 6.87.
* Regulation of credit, labour and business: changed to 7.24 from 7.20.
“The harm caused to economies worldwide by the Covid-19 lockdowns will have to be restored when normality returns,” says Eustace Davie, a director of the Free Market Foundation. “The most rapid restoration possible will occur in countries and territories where the value of the Economic Freedom of the World Reports is fully realised and economic principles and policies drawn from them are implemented.”