Graph of the week

This week I look at the Heritage 2012 Index of Economic Freedom. (click on the graph to get a better view)

Source: 2012 Index of Economic Freedom, Heritage Foundation and The Wall Street Journal
The current index shows an apparent worldwide decrease in business freedom and government spending, for obvious reasons. Ever since the start of the financial crisis, the total World average has decreased from 60.3 to 57.9, mostly due to the growing levels of government spending, rising accumulation of debt, unsustainable fiscal deficits of more and more countries and rising constraints in banking and business regulation. 

The traditionally low average scores are still investment freedom, financial freedom and in particular freedom from corruption. The problem of corruption is what is making all the dark red and orange countries remain in relatively unfree or repressed regimes. The 'heat map' in Europe shows particularly worrying signs where Italy and Greece have ended up in the mostly unfree (orange) category (in both countries the downturn is due to low scores in government spending, property rights, freedom from corruption and labour freedom), Ukraine has turned into a repressed state, and France, Spain, Portugal and Belgium have ended up in the moderately free category (again government spending, labour freedom, fiscal freedom and somewhat corruption seem to be the main culprits). 

What is also interesting to notice is the change in the average freedom score from the US and the UK during the financial crisis and the subsequent recovery. In the figure below, I compare the US and UK yearly scores with the World average and the score of Mauritius, one country that has experienced a significant rise in economic freedom over the past few years. Now it is ranked higher (no.8) than both the US (no.10) and the UK (no.14), with a point above the US, and three points above the UK (77, compared to 76.3 to 74.1, respectfully). They are both still ranked high enough, but the fiscal stimuli and high budget deficits have hurt their positions in fiscal freedom and government spending. 

Source: 2012 Index of Economic Freedom, Heritage Foundation and The Wall Street Journal

You can play with all sort of data between and within each country, region or category of freedom.
Go and check it out at http://www.heritage.org/Index/

Comments

  1. kyle814 January 2012 at 13:39

    I would debate the relative economic freedom of the United States right now. We have a Treasury, who along with the Fed is daily manipulating both currency and markets. We have an ongoing nationalization of the health insurance industry and a partial nationalization of the auto industry. We have a growing army of new business regulations, particularly in the energy sector.

    Increasingly, political connections are the only way to make or grow a business.

    ReplyDelete
    Replies
    1. Vuk Vukovic14 January 2012 at 16:26

      I agree, the level of freedom in America is rapidly decreasing, which shows in the index - maybe not yet, but the consequences of the current situation, as you described it, will show themselves soon enough..if nothing changes, that is.

      btw, have a look at this video, I think you'll like it

      Delete
  2. kyle816 January 2012 at 22:47

    Dr. Vukovic, I noticed that you frequent many of the same blogs I lurk in. Have you ever been to Newmark's Door?

    http://newmarksdoor.typepad.com/mainblog/economics/

    Craig Newmark has been very friendly to me for some years now, and has helped me in my research.

    ReplyDelete
    Replies
    1. Vuk Vukovic17 January 2012 at 00:20

      No, I haven't seen it yet, thank you for letting me know.
      It seems very interesting. I'll keep an eye on it from now on


      And, btw, I don't hold a phd yet, but thank you very much for the compliment :)

      Delete

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