Hong Kong Still Freest Economy
China’s takeover of Hong Kong has not damaged the former British colony’s standing as the world’s freest economy, says an analysis of the economies of 156 nations released today.
The top five places in a survey compiled by the Heritage Foundation, a conservative Washington think tank, and The Wall Street Journal were unchanged from last year. They are held by Hong Kong, Singapore, Bahrain, New Zealand and the United States and Switzerland, which tied for fifth.
“Countries that have the most economic freedom also have higher rates of economic growth and are more prosperous than those having less economic freedom,” the analysis said.
The annual study rates the freedom of national economies on a scale of 1 to 5 in several categories: trade, tax, monetary and banking policy; government intervention in the economy; capital flows and foreign investment; wage and price controls; property rights; regulation, and size of the black market.
Countries were classified into four categories according to their average score: free, mostly free, mostly unfree and repressed. China, which placed 120th, fell into the “mostly unfree” category.
“So far, there is little evidence that becoming part of China will alter Hong Kong’s economic structure significantly,” the report said. Hong Kong scored 1.25, with 1 being a perfect score and 5 the worst.
The report summed up freedom in Hong Kong’s economy by declaring: “There continues to be little government interference in the marketplace, taxes remain low and predictable, increases in government spending are linked closely with economic growth, foreign trade still is free, and regulations, in addition to being transparent, continue to be applied both uniformly and consistently.”
North Korea, Laos and Cuba had the world’s least-free economies, all scoring 5 on the analysts’ scale, followed closely by Iraq, Bosnia, Vietnam, Libya and Iran.
In Vietnam’s case, enthusiasm by the international investment community has been unable to overcome a combination of official corruption, inadequate foreign investment laws and minimal protection of private property, the report said.
Regionally, economic freedoms posted their largest gain in Latin America, with 12 of the 20 nations listed in the study becoming more free during the past year.
In contrast, sub-Saharan Africa remained the economically least free area of the world, with only seven of the 38 nations ranked in the “mostly free” category. Swaziland had the freest economy on the continent, the survey found.
But the world’s poorest nations need not resign themselves to inferior economic growth rates.
“Poverty is largely a condition governments impose on people with ill-conceived and repressive economic policies,” said Heritage Foundation analyst Bryan Johnson, a co-author of the report.