For the last 14 years, the Heritage Foundation and the Wall Street Journal have documented the march of economic freedom around the world with an informative Index of Economic Freedom. Since 1995, the Index has brought Adam Smith’s theories about liberty, prosperity and economic freedom to life by creating 10 benchmarks that gauge the economic success of 162 countries around the world. With its user-friendly format, the Index lets readers see how 18th-Century theories on prosperity and economic freedom are realities in this century. (For the list of the 10 freest economies, see “Top 10” in the February 11 issue.)
The 2008 Index reveals that with an average economic freedom of 60.3, global economic freedom continues to hold steady. In pursuing sustainable prosperity, both the direction of policy and commitment to economic freedom are important. For the complete rankings, visit this website.
1. North Korea Overall Score: 3.0
The Democratic People’s Republic of Korea has maintained a Communist system since its founding in 1948. All aspects of business operations are controlled and dominated by the government. Normal foreign trade is almost zero. No courts are independent of political interference, and private property is strictly regulated by the state.
2. Cuba Overall Score: 27.5
A one-party Communist state with a command economy, Cuba depends heavily on external assistance and a captive labor force. The Communist government dictates economic policy, and all aspects of business are tightly controlled. In recent years, Venezuelan oil has enabled Cuba to retreat on the limited reforms undertaken in the mid-1990s, recentralizing the economy.
3. Zimbabwe Overall Score: 29.8
Zimbabwe has transformed itself from the “breadbasket of Africa” into a starvation-ridden, destitute tyranny. All areas of economic freedom score below or far below the world average. Economic mismanagement and political repression designed to strengthen Mugabe’s hold on power have led to chaos and severe economic decline.
4. Libya Overall Score: 38.7
Oil revenues generate almost all export earnings in Libya’s state-dominated economy. The country has suffered from more than 30 years of socialist economic policies. The top income and corporate tax rates are moderate, but surtaxes can be extremely high. Inflation is also moderate, although price controls distort the market.
5. Burma Overall Score: 39.5
Despite significant natural resources, restrictive economic policies and international sanctions still impede economic development. It is hard to conduct formal private-sector activity with official approval. The almost complete lack of a judicial system forces companies to negotiate directly with the government to resolve disputes.
6. Turkmenistan Overall Score: 43.4
Turkmenistan is ranked 28th out of 30 countries in the Asia-Pacific region. The overall freedom to start, operate and close a business is very limited by a regulatory environment. The system is non-transparent, and enforcement is inconsistent. Personal relations with government officials often help to determine how regulations are applied.
7. Iran Overall Score: 44.0
Iran’s economy still suffers from long-standing economic mismanagement. Mahmoud Ahmadinejad became president in 2005 and halted tentative efforts to reform the state-dominated economy. High world oil prices have raised export revenues and helped to service Iran’s large foreign debt, but the economy remains burdened by high unemployment, inflation, corruption, costly subsidies and a public sector that is both bloated and inefficient.
8. Belarus Overall Score: 44.7
Belarus’s statist economy and policy of international isolation have discouraged foreign investment and development of the high-tech sector. Foreign investment in all sectors faces hurdles, from outright restrictions to bureaucratic incompetence. Weak rule of law allows for significant corruption and insecure property rights.
9. Bangladesh Overall Score: 44.9
One of the world’s poorest nations, Bangladesh had made some progress in recent years with growth in its export sector, particularly in the garment industry. The formal financial system remains weak, and the majority of Bangladeshis work in agriculture, reflecting little economic dynamism in the country.
10. Venezuela Overall Score: 45.0
Hugo Ch??¡vez confiscated control from private-sector oil companies and nationalized the largest electricity supplier and the biggest telephone company. He is spending billions on an international, anti-American petro-diplomacy campaign. Venezuela has one of the world’s highest inflation rates. Price controls on food, medicines, and basic services discourage private production and result in shortages.