SA drops further in economic freedom index

2010-09-21 08:07

It has taken less than a decade for South Africa to slide 40 places in the Economic Freedom of the World Annual Report rankings, the Free Market Foundation (FMF) said.

South Africa is ranked 82nd in the Economic Freedom of the World: 2010 Annual Report released by the FMF yesterday.

Last year, South Africa ranked 70th, and in 2002, 42nd.

“It has taken less than a decade to slide 40 places down the rankings. This is a matter of grave concern,” the FMF said.

This year’s report showed that economic freedom experienced its first global downturn in a quarter century, with the average score falling to 6.67 in 2008 (the most recent year for which data is available) from 6.74 in 2007.

Of the 123 countries with economic freedom rankings dating back to 1980, 88 (71.5%) saw their rankings decrease, while only 35 (28.5%) recorded increases.

“In response to the economic decline of 2008, many countries opted for perverse credit expansion and regulatory policies, damaging economic freedom and hindering future growth,” FMF executive director Leon Louw said.

“Even in the wake of recession, the quality of life in nations with free and open markets is vastly superior to that of countries with government-managed economies.”

The report ranked Hong Kong number one, followed by Singapore and New Zealand.

Zimbabwe once again had the lowest level of economic freedom among the 141 jurisdictions included in the study, followed by Myanmar, Angola, and Venezuela.

The annual peer-reviewed Economic Freedom of the World report is produced by the Fraser Institute, a Canadian public policy think-tank, in co-operation with independent institutes in 80 nations and territories.

The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property.

Economic freedom is measured in five different areas – size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally, and regulation of credit, labour, and business.

More freedom, more success
Research showed that individuals living in countries with high levels of economic freedom enjoyed higher levels of prosperity, greater individual freedoms, and longer life spans.

“Commitment to economic freedom is a common theme among the world’s most prosperous nations,” Cape-based FMF director Temba Nolutshungu said.

“While residents of these countries enjoy the highest standards of living and greatest personal freedoms, people in countries at the bottom of the rankings are typically impoverished and subject to oppressive governments that recognise few – if any – individual rights or freedoms,” he said.

Louw said world experience showed that the direction of change was more important than the economic system.

“After 1994, the ANC steered SA in the right direction, and we were rewarded with steady growth after a generation of stagnation.

“The 2010 report shows that there has been deterioration in every component, which is potentially catastrophic.

“Unless we return to increasing freedom, we can expect a decline and another round of stagnation,” Louw said.

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