WASHINGTON, JAN. 16, 2007—Overall the Western Hemisphere boasts a higher-than-average degree of economic freedom. However the Americas' historic march toward greater freedom largely stalled last year, according to the 2007 "Index of Economic Freedom."
Published annually by The Wall Street Journal and The Heritage Foundation, the new index uses a revised methodology to provide an even more precise snapshot of economic freedom than its predecessors. The new index incorporates the best and latest economic information, including World Bank Data previously unavailable to outside researchers. It also uses a new rating system in which economies are ranked on a 100-point scale, with a higher score representing greater freedom.
The new report pegs the region's average level of economic freedom at 62.3. That's solidly ahead of the world average 60.6.
The United States received the highest ranking in the region: 82.0, good enough for a 4th place finish worldwide. The U.S. led the region in four of the 10 categories examined in the Index: investment freedom, financial freedom, labor freedom and protection of property rights.
Canada was the only other country from the region to rank in the top 10 globally. Canada led the region in three categories: free trade, ease of opening and closing businesses, and freedom from corruption. It overall score of 78.7 was good for 10th place, worldwide.
But many of the region's smaller nations seem to be "stuck in poverty traps," Index co-author Tim Kane says. Since higher levels of economic freedom lead to higher GDP per capita, "the way to break out of those traps would be for nations to promote more economic freedom. But that's not what's happening."
"The recent rise of populists like Evo Morales (Bolivia) and Hugo Chavez (Venezuela) threatens to widen the freedom gap in the Americas even more," warn Index authors Tim Kane, Kim Holmes and Mary Anastasia O'Grady.
For now, however, the economic freedom is distributed in a more balanced fashion in the Americas than in any other region, the Index found. The U.S. and Canada are far and away the leaders, while Cubaand Venezuela are the only countries ranked as economically "repressed." The other 25 economies are clustered in the middle of the scale.
Compared to a year earlier, 19 countries in the region received lower scores while 10 others received higher ratings for economic freedom. Only Chile dropped into a lower category, falling from "free" to "mostly free." Two climbed: Honduras from "mostly unfree" to "moderately free" and Haitifrom a "repressed" to a "mostly unfree" rating of its economy.
As in previous years, the Index ratings reflect an analysis of dozens of economic variables, grouped into 10 categories, although this year those categories have been revised. The 10 freedoms measured are: business freedom, trade freedom, fiscal freedom, freedom from government, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom. Ratings in each category are averaged to produce the overall Index score.
Worldwide, the average rating for economic freedom held essentially steady, with "much room for improvement" the Index editors write. Of the 157 countries ranked, only seven are classified as "free" (a score of 80 or higher). Another 23 are "mostly free" (70-79.9). The bulk of countries—107 economies—are either "moderately free" (60-69.9) or "mostly unfree" (50-59.9). Some 20 countries have "repressed" economies, with total freedom scores below 50 percent.
The Heritage Foundation and The Wall Street Journal have published the Index for 13 consecutive years. It's edited by Tim Kane, director of Heritage's Center for International Trade and Economics, Kim Holmes, Heritage's vice president for foreign affairs, and Mary Anastasia O'Grady, a member of the Journal's editorial board and editor of the "Americas" column.
Print versions of the 2007 Index of Economic Freedom (408 pp., US$24.95) can be ordered by calling 1-800-975-8625. Additionally the full text, along with all charts and graphs, is available via the Internet at www.heritage.org/index. A Spanish language version will be available online in March.
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