The countries of the world have diverged sharply in their responses to the global recession. Some are unwavering in their pursuit of economic freedom, proven over decades to be the surest way to increase wealth and fight poverty. Others have turned away, seeking economic security through government programs or controls. Which path is better? The early results are in.

The 2010 Index of Economic Freedom finds that countries that have held true to the principles of economic freedom are recovering more quickly, forging ahead in the global quest for prosperity. For others, their policies of government intervention and regulation have, so far at least, simply not worked.

PREFACE
In the concluding chapter of their book Free to Choose, the late Milton and Rose Friedman were optimistic that freedom would prevail:

Fortunately, we are waking up. We are again recognizing the dangers of an over-governed society, coming to understand that good objectives can be perverted by bad means, that reliance on the freedom of people to control their own lives in accordance with their own values is the surest way to achieve the full potential of a great society.

Though published in 1980, this observation is astonishingly relevant today.

Over the past year, many have wondered whether the global system of free enterprise could survive what has turned out to be the deepest recession of the post–World War II era. Certainly, anyone looking at the massive stimulus spending undertaken in the United States, coupled with government bailouts or takeovers of financial firms and auto manufacturers, could be forgiven for doubting the future of capitalism in America. Proposals for nationalization of health care and an energy cap-and-trade program put the United States on a path that diverges sharply from its historical leadership in the quest for greater freedom, both economic and political. ...

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Paperback: 471 pages
Publisher: The Heritage Foundation/The Wall Street Journal (January 20, 2010)
Language: English
ISBN-10: 0891952810
ISBN-13: 978-0891952817

The Index of Economic Freedom is a joint publication of The Heritage Foundation and The Wall Street Journal.

The complete text of the Index, which includes individual country pages, component scores, regional analysis, and essays highlighting particular issues related to economic freedom, is available online at heritage.org/index, or may be purchased in hard copy from The Heritage Foundation Bookstore, 214 Massachusetts Avenue, NE, Washington, DC 20002–4999, 1-800-544-4843.

Download Highlights of 2010 Index of Economic Freedom

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Highlights of the 2010 Index of Economic Freedom
The 2010 Index of Economic Freedom covers 183 countries around the world, ranking 179 of them with an economic freedom score based on 10 measures of economic openness, regulatory efficiency, the rule of law, and competitiveness. The basic principles of economic freedom emphasized in the Index are individual empowerment, equitable treatment, and the promotion of competition.

The results of the 2010 Index include the following:

❏ Four Asia–Pacific economies continue to lead the world in economic freedom. Hong Kong maintains its position as the world’s freest economy, a distinction it has enjoyed for 16 consecutive years. Singapore remains close, ranked as the world’s second freest economy. Australia and New Zealand, ranked 3rd and 4th this year, have solidified their position at the top of the rankings. As in 2009, a total of seven economies have attained “free” status in the Index rankings, although the composition of this group has changed a bit, with Switzerland moving in and the United States dropping out.

❏ Every region continues to maintain at least one of the top 20 freest economies, but there has been noticeable reshuffling within this highly ranked group. With its economic freedom score dropping by 2.2 points, Iceland’s ranking slid to near the bottom of the top 20, while Switzerland moved up three places to 6th place. The United Kingdom is now out of the top 10. Nine of the 20 freest economies are European, led by Ireland, Switzerland, and Denmark.

Six of the top 20 are from the Asia–Pacific region, and two are from North America. The U.S. dropped two spots in the rankings and now trails Canada. The other regions are represented by one country each: Chile (South and Central America/Caribbean region); Mauritius (Sub-Saharan Africa region); and Bahrain (Middle East/North Africa region). Mauritius recorded impressive progress and is now ranked as the world’s 12th freest economy.

❏ The positive relationship between economic freedom and prosperity is confirmed yet again in the 2010 Index. Gross domestic product per capita is much higher in countries that score well in the Index. The positive relationship holds true at all levels of economic freedom but becomes even more dramatic as economic freedom increases. Chart 1 shows a strong positive relationship between the level of economic freedom and GDP per capita.

❏ Economic freedom improves the overall quality of life, promotes political and social progress, and supports environmental protection. The 2010 Index provides strong evidence that economic freedom has farreaching positive impacts on various aspects of human development. Economic freedom correlates with poverty reduction, a variety of desirable social indicators, democratic governance, and environmental sustainability.

With respect to the economic crisis of 2008–2009, the evidence in the Index supports several preliminary conclusions:

❏ Countries diverged sharply in their response to the global crisis: Many continued to promote economic freedom; others did not. Regrettably, attacks on the free market, fueled by the economic slowdown and the political appeal of quick interventionist remedies, gained strong momentum in some countries— and with far-reaching effects.

Exactly half of the major economies curtailed economic freedom to some degree through various interventionist measures. Perhaps more significant for the long-term progress of economic freedom, the other half did not.

❏ As a result of increasing government interference in economic activity in many countries, overall progress toward greater economic freedom has been interrupted. The average economic freedom score for the 2010 Index is 59.4, down 0.1 point from 2009. This is only the second time in the history of the Index that average scores for countries measured in successive years have declined.

❏ Increased government spending did not improve economic crisis performance. In light of the global financial and economic storm, many advanced economies’ governments have stepped up spending to promote growth and employment. The early evidence is that such spending has not worked.

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