The Heritage Foundation and the Wall Street Journal have released the yearly Index of Economic Freedom for over three decades. Adam Smith's "The Wealth of Nations" is used in the index to quantify "liberty, prosperity, and economic freedom," according to the index's creators. From its significant 2021 rankings, here are the top five.
Singapore
For the second year in a row, Singapore was named the most economically free country in the world, with an overall score of 89.7. The city-state gained 0.3 points over the previous year, largely due to improvements in property rights, trade freedom, and government investment in the multilingual metropolis. It was noted in the survey that Singapore's efficient government helps to keep business expenses and taxes low. The country rates highly and promotes free commerce in terms of investment and financial independence. To avoid unduly interfering with the free market, the government is heavily involved in "managing economic growth."
New Zealand
As the second-freest country, New Zealand earns an overall score of 83.9 points partly because of the country's strong ratings for government honesty. However, property rights and free trade freedoms saw a 0.2-point drop in the country's 2020 rankings. The former British colony's exceptional reaction highlighted a coronavirus epidemic that took just 25 lives in the first year of the pandemic. The Heritage Foundation says that New Zealand's freedom score might be raised by decreasing taxes and cutting spending. It's doubtful that the center-left administration will be reelected in 2020.
Australia
Australia ranked third on the yearly list with a score of 83.1 out of 100. Despite the country's loss of 0.2 points from the previous year, this was owing to the country's strong rankings in the categories of judicial effectiveness, financial independence, and government integrity. On the other hand, Australia scored only 58.1 out of 100 when it comes to government expenditure. The country's highest tax rate of 45 percent and public spending, which accounts for 37 percent of GDP, are mostly to blame for this income disparity. The Heritage Foundation, a conservative think tank, views taxes as an infringement on people's right to self-sufficiency.
Switzerland
Despite Switzerland's 0.1-point drop from the previous year, the country has risen one place in the rankings to 81.9. Geneva, Switzerland, has been named the freest European nation and the fourth freest in the world. The Heritage Foundation has declared that Switzerland's economic freedom is "well established and institutionalized," with comparably high ratings in fiscal health, financial independence, and government integrity in its rankings. Switzerland achieved at least 70 points out of 100 in nearly every other area, making it one of the best free countries in the world. With a 67.6 out of 100, Switzerland received the lowest mark for its tax load.
Ireland
For the first time in 2021, Ireland has risen into the top five of the index, mostly due to Hong Kong's withdrawal. There was a 0.5-point gain in Ireland's total score to 81.4, attributable to an increase in judicial performance. Investment freedom and fiscal soundness were notably high on the country's strengths. The score was the lowest in terms of financial independence, with only 70 out of a possible 100.
Being Economically Free: What Does It Mean?
In the Heritage Foundation's Index of Economic Freedom, twelve separate measures are used to measure economic freedom, including the freedom to trade and do business, taxes, the number of government regulations, and trade obstacles. Individuals are free to work, create, consume and invest in whatever way they like. Governments are free to enable labor, capital, and products to flow freely and refrain from coercion or limitation of freedom beyond what is required to defend and sustain freedom itself.
How Independent Is the United States Economy?
On the Heritage Foundation's economic freedom ranking, the United States ranks 20th, scoring 74.8. Even though this was the lowest score ever for the country, it is still considered "largely free" by the UN. "Excessive government expenditure, unsustainable levels of debt, and invasive regulation of the health care and banking sectors" are to blame, according to the foundation.
What Are the Poorest Countries in the World?
North Korea (24.7), Venezuela (28.1), and Cuba all scored below average for economic freedom on the Heritage Foundation's 2021 ranking (5.2). There are stringent regulations on private industry, substantial trade barriers, and extensive government interference in each country. Six nations, including Libya, Syria, and Somalia, did not get a ranking in this year's report.
The Bottom Line
This is based on the Heritage Foundation's rankings, which only include these five nations as "free." To be classified as "largely free," the next level of classification, albeit still a prestigious group of countries, needs a persistent commitment on the part of their governments to strive for the openness, efficiency, and freedom from corruption of their economies.
