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The East: Survey Measures Progress Toward Economic Freedom

  • Julie Moffett

Washington, 1 December 1997 (RFE/RL) -- According to a new survey on economic freedom around the world, Estonia has the freest economy of the former communist countries of Eastern Europe and the Soviet Union, while Azerbaijan, Bosnia and the Central Asian nations have the least free.

The survey called the "1998 Index of Economic Freedom" was jointly produced by The Heritage Foundation, a Washington-based non-profit research organization, and the "Wall Street Journal," a U.S.-based international business newspaper.

The annual survey, now in its fourth year, measures how well 156 countries score on a list of ten broad economic factors: trade policy, taxation, government intervention in the economy, monetary policy, capital flows and foreign investment, banking, wage and price controls, property rights, regulation, and the black market.

According to the authors of the survey, these factors, if taken cumulatively, offer a snapshot of a country's level of economic freedom.

The countries were then ranked according to their overall score and put in one of four categories: "free", "mostly free", "mostly unfree" and "repressed."

The major finding of the survey is that slowly, but perceptibly, the nations of the world are embracing economic freedom. Yet despite the trend toward more economic freedom, the survey also determines that there are still more countries in the world with economies that are considered "mostly unfree" or "repressed," than "free or "mostly free."

Overall, the survey ranks Hong Kong as having the freest economy in the world, followed by Singapore and Bahrain. The U.S. tied for fifth place with Switzerland.

The survey says Cuba, Laos and North Korea have the least free economies in the world.

The country making the biggest improvement in economic freedom since 1995 is Moldova (96). The survey says that Moldova has made steady progress in stabilizing the economy and laying the groundwork for the creation of a market infrastructure.

Belarus (135) was among those nations suffering the biggest declines since 1995. The survey said Belarus had dramatically increased price control and business regulations and decreased the protection of private property.

Overall, Estonia (17) ranked the highest of the countries of the former Communist Bloc, while the Czech Republic (20) followed close behind. Both countries were ranked higher than the Netherlands, Denmark, Finland, Germany, France, Spain Norway and Sweden, to name a few.

The survey also said Latvia (62), Hungary (66), Poland (69), Lithuania (74) and Romania (94) were making steady progress toward economic freedom.

Russia also showed some improvement, moving up in its ranking from last year (120 to 104), thanks to a 37 percent drop in its average tariff rate, and to the fact that countries once rated above it saw their scores drop.

Armenia (104) and Georgia (114) also made slight improvements in their ranking from last year although both still fall in the category of "mostly unfree." The survey cited both nations as struggling with high inflation and an active black market.

Slovakia (77) and Slovenia (80) are among the few countries that neither improved or declined its ranking from last year.

According to the survey, the Slovak government has made important progress on reducing inflation, but has also increased trade barriers, negating the progress. Slovenia, too, had uneven economic progress, according to the survey.

The survey praised Slovenia for opening its borders to foreign investment and improving protection of private property, but criticized the government for increasing its control over certain industries.

Among those nations showing a decline or no improvement in economic freedom are Bulgaria (114), Croatia (120) and Ukraine (125).

Azerbaijan (143) and Bosnia (152) also fared poorly, their economies ranking as "repressed." Both countries scored even lower than some of the poorest countries in Africa.

According to the survey, the nations of Central Asia performed "disappointingly."

In their first appearance on the survey, Kyrgyzstan (132), Kazakhstan (136), Tajikistan (143), Turkmenistan (145) and Uzbekistan (146) all ranked at the bottom of the survey and are considered to have "repressed" economies.

Melanie Kirkpatrick, an assistant editor at the Wall Street Journal and a co-author of the survey, told reporters that she was "surprised" by the low level of economic freedom in the nations of Central Asia.

Kirkpatrick said she had interviewed a number of Central Asian leaders over the past few years and was impressed by their articulate and ambitious plans for their economies.

Says Kirkpatrick: "But when I read the finding this year on the various Central Asian economies, I was surprised that they had made so little progress toward opening their economies."

On a positive note, Kirkpatrick added that it wouldn't surprise her to see the countries of Central Asia move up in the ranking over the next few years.

Says Kirkpatrick: "I think there are a lot of people there who understand what they have to do, but they haven't formed the political will yet to do it."