Whether I’m writing about a rich country or a poor country, my research starts with a visit to Economic Freedom of the World. Published by the Fraser Institute in Canada, EFW uses five major factors (fiscal, regulatory, monetary, trade, and quality of governance) to rank nations based on the overall amount of economic liberty.
The rankings go as far back as 1970, so you can see how a country has changed over time (and the good news is that scores have improved in most nations).
Today, let’s look at a history of the freest nations. We’ll start with the table from 1970.
Unsurprisingly, Hong Kong was at the very top. But who would have guessed that Luxembourg would be second? Canada ranked #3 and the United States was in 4th place, followed by Japan and four European nations.
Perhaps the most shocking bit of news is that Venezuela was ranked #10.
All the more reason that Venezuela’s last-place status in the most-recent edition is so depressing. That must be a record for the biggest-ever decline for a country.
If we look at the data for 1975, 1980, and 1985. Luxembourg continues to get very high scores, along with Hong Kong and the United States.
Panama and Guatemala ranked amazingly high in 1975, while the United Kingdom finally appears in 1985 (thanks to Margaret Thatcher’s reforms).
Here’s the data for 1990, 1995, and 2000. You’ll notice that New Zealand and Australia enter the top 10 while Luxembourg begins to drop (at least relatively speaking) and Singapore begins to climb.
Now let’s look at what has happened this century.
Hong Kong and Singapore have a lock on the top-two slots, with New Zealand and Switzerland controlling the third and fourth positions. Luxembourg, meanwhile, has vanished.
In 2010 and 2015, we see some nations appear from the developing world and the post-communist world. Most notably, Chile, Estonia, and Georgia.
For a policy wonk, these are fascinating numbers. I enjoy looking how relative rankings have changed, as well as what’s happening to absolute scores.
It’s such good source of data that I’ve always wished there were pre-1970 numbers as well.
Well, my wish has been granted. Ryan Murphy and Robert Lawson, two of the scholars who put together Economic Freedom or the World, have cranked out estimates for the entire post-World War II era.
Based on their retroactive assessment, they show that the United States had the world’s freest economy back in 1950.
Switzerland was in second place, followed by a bunch of European and Anglosphere nations.
If you want to understand why Luxembourg, Belgium, Norway, and Sweden are rich today, notice that they have a history of being among the world’s most pro-market nations.
Incidentally, due to inadequate data, Singapore wasn’t included in the retroactive data until 1960 and Hong Kong is complete absent from this historical dataset.
We don’t have top-10 lists for the other years, but the authors shared a table with all their numbers, so I created my own versions for 1955, 1960, and 1965.
As you can see, congratulations to Switzerland and Luxembourg (twice). The United States and Canada get very high marks. And Belgium and the Netherlands get good scores as well.
There are so many implications to this data, but I’ll close with three simple observations.
- First, these numbers help to explain why Europe is a relatively rich continent. European nations traditionally have dominated the top-10 rankings. It’s not a good continent for fiscal policy, but those countries dominate the scores in other policy areas.
- Second, you can fall behind by standing still. If you take a close look at data for Luxembourg, Belgium, and the Netherlands, you’ll notice their absolute scores haven’t really changed. But all of those nations have dropped out of the top 10 because other countries improved.
- Third, global economic liberty is increasing. The top scores in the 1950s and 1960s wouldn’t get a country into the top 10 this century.
P.S. A Spanish academic also has produced some very interesting historical estimates for economic freedom, but his numbers are only averages for western nations.
[…] is a separate measure of economic freedom for the years before 1970, so the orange and blue lines are […]
[…] is a separate measure of economic freedom for the years before 1970, so the orange and blue lines are […]
[…] a look at the most pro-market nations in the decades after the war. Germany (outlined in red) was never at the top of the list, but it was almost always in the top […]
[…] is a separate measure of economic freedom for the years before 1970, so the orange and blue lines are […]
[…] is a separate measure of economic freedom for the years before 1970, so the orange and blue lines are […]
[…] Venezuela’s decline is particularly sad because it had the world’s 10-freest economy back in 1970, but it’s been all downhill since […]
[…] Venezuela’s decline is particularly sad because it had the world’s 10-freest economy back in 1970, but it’s been all downhill since […]
[…] my concern is that it is drifting in the wrong direction (it was ranked in the top 10 for economic freedom in the mid-1950s) and the country is dealing with grim […]
[…] la política se desplazó hacia la izquierda y Argentina se convirtió en una de las naciones menos orientadas al mercado del […]
[…] the bright side, Germany rejected socialism by getting rid of price controls and allowing markets to flourish (the video overstated the degree to which a welfare state was imposed). But that was the exception […]
[…] But beginning in 1946 under Juan Peron’s statist presidency (much beloved by Pope Francis for inexplicable reasons), policy shifted to the left and Argentina become one of the world’s least market-oriented nations. […]
[…] a chart based on data from Economic Freedom of the World, including research extending estimates back to 1950. It shows that – notwithstanding various crises – there has not been a decline in […]
[…] today and it’s been true in the past. Compared to other nations, the U.S. historically has enjoyed very high scores for economic […]
[…] ranged between a low of 7.27 and a high of 7.88. Going back further in time, it’s even been ranked in the top 10 a couple of […]
[…] years ago, Venezuela was ranked #10 for economic liberty and enjoyed the highest living standards in Latin […]
[…] kept pointing out that Japan deserved some praise for its post-WWII shift to markets, but that the country’s economy was being undermined by corporatism, intervention, and […]
[…] was ranked in the top-10 back in 1990, but now it’s dropped to […]
[…] It’s hard to believe, given the pervasive statism that now exists, but Venezuela in 1970 was ranked in the top 10 for economic […]
[…] in West Germany and East Germany diverged dramatically because one had good policy (West Germany routinely scored in the top 10 for economic liberty between 1950 and 1970) and one suffered from […]
[…] performance of Hong Kong and Singapore is particularly impressive because the United States historically has been a top-10 nation for economic liberty (notwithstanding all my grousing about bad policy in […]
[…] desea una vida mejor para sus hijos y nietos, probablemente elija una nación como Singapur, que habitualmente obtiene altas calificaciones del Economic Freedom of the […]
[…] big increases include Finland (up 14 spots to #8), Luxembourg (the world’s freest economy as recently as 1985, moves up 14 spots to #11), Sweden (up 30 spots to #13), Norway (up 11 spots to #14), and […]
[…] for your children and grandchildren, you’d presumably pick a nation such as Singapore, which routinely gets very high grades from Economic Freedom of the […]
[…] which was ranked #1 as recently as 1985, is now […]
[…] which was ranked #1 as recently as 1985, is now […]
[…] we have the obvious result that property rights, rule of law, and other market-based policies are needed to help the […]
[…] we have the obvious result that property rights, rule of law, and other market-based policies are needed to help the […]
[…] of which is sad since Japan used to be one of the world’s most market-oriented […]
yes .. The Human Freedom Index, available from https://www.cato.org/human-freedom-index
Is there a similar publication for overall freedom, i.e. freedom of speech, right to self defense, right to privacy, etc ?
Eliminate that webwork of Leftist anti-business rules, regulations and taxes shoved on us by the American Left, Obama and like-minded stooges and the US would be buoyed to the top again. BTW, I’d still rather be here than in any one of those other countries.
Very interesting. But depressing. After peaking in 2000, the US fell in both absolute and relative terms and exited the top 10. One reason for the miserable non-recovery from 2008-9 recession.
Thank you Washington bureaucrats for dragging the United States from number one in the world in 1950 to number 11 in 2015. The founding fathers would be so proud.