SA’s ranking in terms of economic freedom in the world declined in 2020, the year when the Covid-19 pandemic and its restrictions were prevalent around the globe.
Its ranking fell to 99th out of 165 countries measured in the Fraser Institute of Canada’s Economic Freedom of the World: 2022 Annual Report, released Thursday in SA by the Free Market Foundation (FMF). This continued a downward trend in economic freedom from 2000 when SA was ranked 47th. In 2019, SA was ranked 93rd.
The Fraser Institute produces the Economic Freedom Report in co-operation with a group of independent research and educational institutes in nearly 100 countries and territories.
The report, launched in 1996, measures economic freedom — the ability of individuals to make their own economic decisions — by analysing several indicators including regulation, size of government, property rights, government spending and taxation.
Unprecedented drop in freedom
The lockdowns and restrictions on economic activity that governments imposed to respond to the Covid-19 pandemic meant that 146 of the 165 countries recorded an unprecedented drop in freedom in 2019.
The categories measured are the size of government where SA ranked 117th and where its score declined to 5.99 from 6.14; the legal system and protection of property rights where SA ranked 56th and its score improved to 5.95 from 5.09; access to sound money where SA ranked 101st and its score declined to 8.21 from 8.24; freedom to trade internationally where SA ranked 123rd and its score declined to 5.8 from 6.6; and regulation of credit, labour and business where SA ranked 104th and its score declined to 6.78 from 7.16.
According to FMF director Eustace Davie the reason for the deterioration in SA’s ranking is clearly visible in the deterioration in economic activity in the country. “Mass unemployment is a particularly significant and tragic consequence of that deterioration” he said.
“When jurisdictions increase taxes and regulations, the people become less economically free, which means slower economic growth and less investment,” said Fred McMahon of the Fraser Institute.
Mass unemployment is a particularly significant and tragic consequence of [deterioration in SA’s economic freedom].
— Eustace Davie, FMF director
Hong Kong and Singapore were again top of the index, continuing their streak as first and second respectively, while Switzerland, New Zealand, Denmark, Australia, the US, Estonia, Mauritius and Ireland followed in the top 10.
The 10 lowest-rated countries are Democratic Republic of the Congo (DRC), Algeria, Republic of Congo, Iran, Libya, Argentina, Syrian Arab Republic, Zimbabwe, Sudan and Venezuela. Despotic countries such as North Korea and Cuba can’t be ranked due to lack of data.
The rankings of other major countries include Japan (12th), Canada (14th), Germany (24th), Italy (43rd), France (54th), Mexico (65th), India (90th), Russia (94th), Brazil (114th) and China (116th).
McMahon said “where people are free to pursue their own opportunities and make their own choices, they lead more prosperous, happier and healthier lives.”
This was confirmed according to research in top peer-reviewed academic journals, which showed that people living in countries with high levels of economic freedom enjoyed greater prosperity, more political and civil liberties and longer lives.
For example, countries in the top quartile of economic freedom had an average per-capita GDP of US$48,251 in 2020 compared to US$6,542 for bottom quartile countries. And poverty rates are lower. In the top quartile, 2.02% of the population experienced extreme poverty (US$1.90 a day) compared to 31.45% in the lowest quartile. Life expectancy is 80.4 years in the top quartile of countries compared to 66.0 years in the bottom quartile.
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