Since 1995, the Index of Economic Freedom https://www.heritage.org/index/ranking?version=406 started to be an annual report by The Heritage Foundation and The Wall Street Journal. The Index draws its inspiration from economist Adam Smith and references to his book, “The Wealth of Nations,” to measure his theories concerning economic freedom, liberty, and prosperity.
The Index ranks the countries through these criteria: the rule of law, government size, open markets, and regulatory efficiency.
Here are the top countries with the freest economy in the world:
Singapore has the world’s freest economy in the 2020 Index of Economic Freedom, with a score of 89.4. The country has a highly-developed, free-market economy. Its overall score is unchanged since 2019, with a small improvement in business freedom. It’s the only country in the world that is considered economically free for every Index category. It also has one of the world’s highest per capita incomes and solid GDP growth.
Despite being a small Asian country, Singapore is one of the world’s most prosperous nations, with a very low unemployment rate and a business-friendly regulatory environment. Though the government has been ruled by one party for many decades and certain civil liberties are restricted, the state has won economic liberalization and international trade. The country is a major manufacturer of chemicals and electronics and operates one of the world’s largest ports. Singapore’s main exports include computers, refined petroleum, and circuits.
Being the Special Administrative Region of the People’s Republic of China, Hong Kong has a high degree of autonomy in all matters except defense and foreign policy. Hong Kong has an economic freedom score of 89.1, making its economy the second freest in the 2020 Index of Economic Freedom.
Hong Kong’s economy is the freest from 1995 to 2019, but its score decreased by 1.1 points due to a decline in the investment freedom score. The ongoing political and social turmoil in the country eroded its reputation as one of the best places to do business. The country’s GDP has been steadily growing over the past years, but it experienced a recession in 2019, partly due to political unrest and huge protests in the country. Its open and market-driven economy became more integrated into the mainland through tourism, trade, and financial links.
With an economic freedom score of 84.1, New Zealand ranks as the third freest economy in 2020. The steady GDP growth reflects the outstanding improvement of the country, as it is ranked as one of the freest in the world over the past 25 years. The only big area for improvement for New Zealand is the problem of too much government spending.
New Zealand is one of the most prosperous countries in the world. It steadily progressed in its freedom level since 1996. The policies of the new government – the hung parliament – had a direct impact on the business community, shocking business confidence in 2018 with plans for a higher minimum wage, fewer immigrant visas, union-friendly labor code reforms, ban on housing purchases for foreigners, and higher taxes.
Australia wasn’t far behind its smaller neighbor, New Zealand. Gaining a score of 82.6, Australia gains the 4th spot. It’s one of the wealthiest Asia-Pacific nations that has enjoyed more than two decades of economic expansion. Internationally, the country’s economy is competitive, as it leads to offering technologies, financial and insurance services, and high value-added manufactured goods. Its biggest exports also include mining and agriculture products.
Australia has also been a leader in economic freedom since 1995. Its GDP sees some steady gains, though the growth rate is expected to slow down in the coming years because of faltering investment and slower world trade growth.
The only non-Asian country in this list, Switzerland has the freest economy in the West. It has a score of 82.0, and the country excels in government integrity and property rights. The Swiss economy is categorized as a highly-developed, free-market economy for several decades. However, GDP growth has been slowing down in recent years, due to risks from escalating trade war between the United States and China, and the economic slowdown in Germany.
Switzerland is known to have a highly skilled labor force. The Swiss economy relies mostly on its metals, financial services, pharmaceuticals, electronics, precision manufacturing, and chemicals. Not to mention trade, making Swiss products like chocolates and cheese to be known all over the world.