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ECONOMIC FREEDOM
SA economy 47th most free
3 July 2002
South Africa has climbed to 47th out of 123 countries ranked in the Economic Freedom of the World 2002 Annual Report, which evaluates economies in terms of personal choice, voluntary exchange, freedom to compete, and protection of persons and property – beating such countries as Brazil, China, India, Mexico and Russia.
South Africa shares 47th place in the index with Israel, Latvia and Uruguay with a rating of 6.8 out of a possible 10. SA's ranking was at its worst in 1990, when it placed 67th with a rating of 5.2.
The sixth global economic freedom report, released on 25 June 2002, compares 123 nations in terms of 37 variables, with data provided at five-year intervals back to 1970. The current ratings are based on 2000 data, the latest year for which comprehensive information is available.
The first Economic Freedom report was published in 1996 after a decade-long research project involving over 100 scholars, including several Nobel
Laureates. The lead publishers are Canada’s Fraser Institute and the US-based Cato Institute, supported by a network of independent institutions in 54 other nations, including South Africa’s Free Market Foundation.
The report gauges economic freedom in terms of personal choice, voluntary exchange, freedom to compete, and protection of persons and property. Satisfying these criteria “requires the rule of law, property rights, limited government intervention, freedom to trade, and sound money”, the Fraser Institution said in a statement.
“A legal system capable of protecting property rights and enforcing contracts in an even-handed manner is central to both economic freedom and progress. So too is the freedom to compete in business.”
South Africa's overall rating improved from 5.3 in 1990 to 6.3 in 1995 and 6.8 in 2000, out of a possible total of 10. Its ranking improved from 67th to 56th to 47th. Of all African countries, only Mauritius (30th) and Botswana (35th) are
rated as having greater economic freedom than South Africa.
South Africa’s greatest SA improvements since 1990, according to the report, are in the following areas:
- A reduction in government consumption expenditure.
- Improved legal security and security of property rights.
- Improved access to sound money.
- A reduction in taxes on international trade and in regulatory trade barriers.
- An increase in the size of the trade sector.
- Reduced restrictions on capital markets.
- Abolition of military conscription.
- Avoidance of negative real interest rates.
- Increased freedom to own foreign currencies.
“Although South Africa has not moved up the rankings significantly, it is holding its own against many other countries that are liberalising their economies”, Eustace Davie, a director of the Free Market Foundation, wrote on the organisation’s web site.
“Economic freedom continues to gain ground globally. The average
economic freedom rating was 6.39 for 2000; up from 5.99 in 1995, so SA remains above the world average. Economic freedom decreased through the 1970s, falling from 5.98 in 1970 to 5.32 in 1980. It has been on the rise since then.”
The report again ranks Hong Kong as the most economically free jurisdiction in the world, followed by Singapore (2nd), the United States (3rd), the United Kingdom (4th), and New Zealand jointly with Switzerland (5th). Ireland, Australia, Canada and the Netherlands round out the top 10. Rankings of other large countries include Germany, (15), Japan (24), Italy (35), France (38), Mexico (66), India (73), Brazil (82), China (101), and Russia (116).
The Democratic Republic of Congo, Myanmar, Guinea-Bissau, Algeria, the Ukraine, Togo, Russia, Malawi, Zimbabwe and Romania rated the lowest among the countries for which data were available. “However, other countries for which information is not available, such as North Korea and Cuba, may have less
economic freedom”, Davies noted.
“Free economies have higher per person incomes and grow more rapidly. They also have less poverty and political corruption, achieve higher scores on the United Nations Human Development Index, and their citizens live 22 years longer”, Davies argues.
“South Africa falls into the second 20% of most economically free countries, but has some way to go to equal the economic performance of other countries in that group. The second quintile countries have an average per capita GDP of $12,390 (PPP, US$2,000) and an average economic growth rate of 1.57% since 1990. If South Africa can retain its economic freedom ranking, the figures indicate that growing prosperity will follow.”
SouthAfrica.info reporter. Source: Free Market Foundation
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