The Economic Freedom of the World: 2021 Annual Report, released today by the Fraser Institute and co-published in the United States by the Cato Institute, documents a slight rise in global economic freedom, continuing a notable, long-term, though decelerating, trend over the past several decades. The study is based on data through 2019, the most recent year for which there is internationally comparable data, so it does not account for the effects of the coronavirus pandemic.
Although the United States maintained its rank at 6th in this year’s index, it is worrisome that its long-term decline since 2000, when its level of economic freedom was considerably higher, has only partially been offset by an unsteady improvement in recent years that has begun again to deteriorate. See the contrast in U.S. and world economic freedom trends in the figure below.
We continue to rank Hong Kong in the index despite its recent loss of autonomy in the face of Chinese government interventions because we think it’s an important case study worthy of careful attention. In 2019, Hong Kong again ranked first in economic freedom, but authors James Gwartney, Robert Lawson, Joshua Hall, and Ryan Murphy warn that increased insecurity of property rights and a weakened rule of law will likely cause the city’s score to fall in future indexes.
Other top 10 countries were Singapore (2), New Zealand (3), Switzerland (4), Georgia (5), Ireland (7), Lithuania (8), Australia (9), Denmark (10). This year’s report ranked 165 jurisdictions, with Libya, Sudan and Venezuela placing last in descending order.
A chapter in the report by Justin Callais and Vincent Geloso tests the notion that higher levels of inequality lead to low social mobility. The authors incorporate the institutions of economic freedom into their examination of how strongly low income constrains mobility. They find that economic freedom does indeed promote upward social mobility and that a sound rule of law has an especially powerful effect.
Other chapters look at economic freedom in the Kurdistan region of Iraq (by Nijdar Khalid) and the dangers of expropriating private property as proposed in South Africa by the ruling party (by Martin van Staden). See the complete findings here.