Economic Freedom is Advancing Around the World
The Heritage Foundation and WSJ released the 2011 Index of Economic Freedom today. Here's the Top Ten (U.S. ranks #9, with a slight drop from last year's index level). From the Executive Summary:
"Economic freedom advanced this year, regaining much of the momentum lost during the fiscal crisis and global recession. Many governments around the world have rededicated themselves to fiscal soundness, openness and reform, and the majority of countries are once again on a positive path to greater freedom."
41 Comments:
Isn't it interesting that the countries that are at the top of the economic freedom list tend to be wealthier, healthier, and more secure while those at the bottom of the list are poor?
Freedom for businesses, protection against regular individuals.
No thanks.
Hong Kong is #1 and is a semi-autonomous region of China. Where does China rank? #135!
For those that have the image of China as a progressive economic environment here is what the authors of the report state on the subject:
"The Communist Party, though allowing some economic movements in response to market forces, still maintains ultimate authority over virtually all economic decision-making."
Markets may not have borders but market transactions are not individual to individual and so, only optimal theory with regards to China.
Good news...still, I wonder how you measure economic freedom in Russia? China?
They say more market reforms in China, but on the other the CP of China owns controlling gshares of every listed Chinese stock....
Hong Kong is #1 and is a semi-autonomous region of China. Where does China rank? #135!
China does not score well using the Heritage Foundation's methodology. Hong Kong does.
For those that have the image of China as a progressive economic environment here is what the authors of the report state on the subject:
"The Communist Party, though allowing some economic movements in response to market forces, still maintains ultimate authority over virtually all economic decision-making."
This would be news to the Communist Party. The Chinese are quite resilient and many fo the 'decisions' made by the CP bureaucrats are often very ineffective in controlling the market players.
Markets may not have borders but market transactions are not individual to individual and so, only optimal theory with regards to China.
Nonsense. I should be able to buy from anyone that I want to. Period. End of story. There is no way for you to justify someone else getting in the way.
VangelV's: "Nonsense. I should be able to buy from anyone that I want to. Period. End of story. There is no way for you to justify someone else getting in the way.
Yes. Individual transactions are the optimal and I may have been awkward in stating this. What I was trying to state is that the Chinese government gets in the way of most transactions because it is likely the other side of the transaction.
Yeah! It just gets better and better...
Pretty soon it'sll be a sethstorm paradise...
US ranks #5 in 2008
US ranks #6 in 2009
In 2010 the U.S. Drops from "Free" to "Mostly Free": For the first time in the history of the Index for Economic Freedom, the United States is no longer in the top category of economically free countries and is even second in the North American region (behind Canada). This year's score of 78, though high in global standards, is 2.7 points lower than last year and bumps it to a second-tier country of freedom...
juandos said...
It's a hit piece for Heritage, not an impartial measurement. If it doesn't go their way, they just knock the US down.
If mainland China is #135, and its economy is booming, what does that say about the need for economic freedom?
"It's a hit piece for Heritage, not an impartial measurement. If it doesn't go their way, they just knock the US down"...
Well sethstorm you of course have something credible to back your little statement up, right?
Are you going to trot it out for us to see?
Jaundos-
How do you explain mainland, commie, fascist China at #135, and yet an economy that sailed through the recession, and is growing by nearly 10 percent a year, for decades?
Is there is flaw in Heritage Foundation methodology?
Or just top-down commie control work, if you have smart enough bureaucrats?
"How do you explain mainland, commie, fascist China at #135, and yet an economy that sailed through the recession, and is growing by nearly 10 percent a year, for decades?"...
Well pseudo benny China is either communist or facist, so which is it to you?
Second question, how do YOU know China sailed through the recession for decades?
Where is the credible source for that?
Lesson for benny
Lesson for benny
Could the contents of either of these lessons be valid or factual?
Could either of these lessons explain the possibly skewed the books for China and their resulting (supposed) lack of a recession?
I don't pseudo benny but I still have questions regarding China's free sailing...
Yes. Individual transactions are the optimal and I may have been awkward in stating this. What I was trying to state is that the Chinese government gets in the way of most transactions because it is likely the other side of the transaction.
Who cares if the Chinese government interferes? If I find that my preferred choice is to buy a Chinese product because that provides me with the highest benefit why should the government stop me from what is best for me?
If mainland China is #135, and its economy is booming, what does that say about the need for economic freedom?
It could say a lot about the methodology being used. The Heritage people may be looking at what the rules say rather than the way that they are followed in a particular country. Most companies would argue that they have far more freedom in China than in the US because there is a much lower regulatory burden.
How do you explain mainland, commie, fascist China at #135, and yet an economy that sailed through the recession, and is growing by nearly 10 percent a year, for decades?
If you look at the methodology you will see why China scores so low. There is no convertible currency so you lose a huge amount. The state has a big part to play in the banking system so it loses points. The US, in which the Fed has the same role as the BoC gets points for independence even though the actions are the same. China loses points for explicit corruption even though the US and most Western nations are similarly corrupt just in different ways.
What matters is how much effective freedom producers and consumers have. If you pay attention to that you will have all of the information that you need.
VangelV states: "Most companies would argue that they have more freedom in China than in the U.S. because there is much lower regulation burden."
Heritage Foundation states: "The government has allowed some business freedom, but the overall regulatory framework lacks transparency and remains complex, arbitrary, and unevenly implemented. Enforcement of regulations can be ineffective, hampered by petty corruption and bureaucracy."
The burden of regulations in China is that they complex, not transparent and arbitrary. Hmmmm, does anyone think (other then VangelV) that private companies get better treatment then government companies by the bureaucrats in China?
Buddy-
Maybe China is so corrupt, that the reg burden is reduced. You pay people to go away. And obviously they do not reg pollution. There are no property rights either.
The key (in part) to their success is a robust money supply.
They have been boosting their money supply and running moderate inflation, which has been great for their economy.
Japan has had a tight money supply for 20 years, and their economy is shrinking and deflating.
If you want a stable currency go to Japan--the yen has appreciated against all major currencies in the last 20 years--and the results have been an abject failure.
Sad, when you let central bankers pettifog about inflation and put a monetary noose around the necks of risk-taking and productive peoples.
"In 2010 the U.S. Drops from "Free" to "Mostly Free": For the first time in the history of the Index for Economic Freedom, the United States is no longer in the top category of economically free countries and is even second in the North American region (behind Canada). This year's score of 78, though high in global standards, is 2.7 points lower than last year and bumps it to a second-tier country of freedom..."
Is anyone surprised at this?
The burden of regulations in China is that they complex, not transparent and arbitrary. Hmmmm, does anyone think (other then VangelV) that private companies get better treatment then government companies by the bureaucrats in China?
That is not what I said. I said that companies get better treatment in China than they do in the US. And what is ignored by people who look at the 'rules' is how easily they are broken. When the government cut off electricity from some producers as an attempt to reduce pollution the producers cranked up the generators and got electricity from other sources. I used to work with a Chinese company that was supposedly going to follow a schedule and plan made up by bureaucrats in Beijing. They ignored the requests of the bureaucrats and only acted when it was in their own interest to do so. The phrase used to explain the behaviour was a very old one, "the mountains are high and the emperor is far away."
Ron H.-
The Heritage Foundation is just a bunch of catamites and barking dogs for plutocrats. Why should anything they write surprise me?
The key (in part) to their success is a robust money supply.
No, their money supply is creating a crisis that threatens to blow up the economy. You could not be more wrong if you tried.
They have been boosting their money supply and running moderate inflation, which has been great for their economy.
Moderate inflation? The price of many vegetables has gone up by a factor of three in the last two years and a tall Frappuccino at Starbucks in Shanghai costs you $4.50. With the floods in Australia and the Russian winter wheat problems threatening food supplies we will see massive inflation in China that may force the government to revalue the RMB by at least 15% against the USD.
Our President would like to move the United States out of the top 100.
Note to juandos: There's no real difference between communist and fascist.
"If mainland China is #135, and its economy is booming, what does that say about the need for economic freedom?" - The village idiot
Per capita GDP in China #135: $7,518
Per Capita GDP in Hong Kong #1: $45,277
Per capita GDP in United State #9: $47,123
Per Capita GDP in Singapore #2: $57,238
China will not get from where they are today to the level of the U.S. Hong Kong, or Singapore without raising there level of economic freedom.
Would you rather live in a free country with great wealth and slower growth, or a non-free country with low wealth, but faster economic growth?
VangelV goes on to state: "That is not what I said. I said that companies get better treatment in China than they do in the US."
No VagelV that is not what you stated that I responded to. This is your statement:
" "Most companies would argue that they have more freedom in China than in the U.S. because there is much lower regulation burden."
Please, at least back up your own statements -- "...more freedom in China because.... much lower regulation burden."
"Japan has had a tight money supply for 20 years, and their economy is shrinking and deflating."
Yes of course, robust economies require a printing press on fire! Just ask Germany in the 1930's, the United States in the 1970's, and Brazil in the 1980's.
Good times.
Paul-
The happy medium is moderate inflation.
Look at the USA 1990s. Man, oh man, I will take that decade again.
Japan shows what can happen when you let a bunch of weenie central bankers decide that price satbility is the bank mission, not economic growth.
Some people have such a fetish for money they think real sacrifice to keep prices stable is a good trade off. Self-denial is buried deep in the human DNA, usually surfacing in religious or nationalistic sentiments. For some, it surfaces in the honor of enduring deflation for the amorphous greater good (a good never realized or even explained).
If an economy grows by 5 percent a year and has 5 percent inflation, that if fine, and better than 2+2. Not to you or central bankers, becuase you have lost perspective.
Japan's economy has expanded by 15 percent in the last 20 years, and the USA's by 150 percent. I won't bother to look up Korea and China, they much be off the charts.
Worse, Japan is shrinking again, and bond traders expect another decade or so of deflation.
Japan is defetaed by the BoJ. Young Japanese have stopped having families, and are giving up on careers. Everything you own in Japan will be worth even less in 10 years.
The Nipponistas in America are the biggest threat to US prosperoty going. The Taliban look like pikers next to the tight moey crowd.
"Look at the USA 1990s. Man, oh man, I will take that decade again."
Yeah, the dot com bubble was nice while it lasted.
"The happy medium is moderate inflation."
~Benji, the guy who wants the Fed to run the presses until the plates melt.
Benji, how about your boyfriend lay off his war on capitalism? Wouldn't job creation be a better route to bailing out your real estate portfolio than money mischief?
"How do you explain mainland, commie, fascist China at #135, and yet an economy that sailed through the recession, and is growing by nearly 10 percent a year, for decades?"
China's high level of growth only started in 1980 after severe liberalization of the market.
They were starting from a pretty low level. China starved 20 million of its people to death due to farm collectivization in 1959-1960. Until about 1978, China was highly anti-capitalist, and any free market activity or suggestion of such could get you branded as a "rightist" and you would be subject to a "struggle session" in which they were taunted and ridiculed for days by members of the Red Guard until confessing, then sent to jail or killed.
Today, it is a great and respected thing to be a businessman in China.
By 1970, GDP per capita of China was still only $148, and much of its population existed in extreme poverty (under $1.25 per day). Between 1981 and 2005 it is estimated that the poverty rate fell from 85% to 15%, roughly 600 million people.
Even with 30 years of high GDP growth (often near 10%) for a developing country, China's Real 2005 GDP per capita is only $2,800 - on par with Turkmenistan, Ecuador, Guatemala.
If you compare Guatemala with China on the Heritage ratings, you see that there is actually little difference between them, except for "fiscal freedom" and "investment freedom".
Still hundreds of millions of Chinese wait in rural areas to join the global economy, so expect more growth.
State Owned Enterprises still account for 60% of Chinese GDP, but 40% of GDP is private, and 4% comes from Foreign Direct Investment.
I suspect there will come a time when China's economy will be unable to grow through simple access of its poorest to global jobs. At that point, the stifling effect of government control on State Owned Enterprises will begin to limit the ability of the country to innovate new technological and business solutions.
Now a real communist country is Cuba. It is too bad they don't liberalize to the level that China has.
Mr Econotarian-
I actually agree with everything you write--I also wonder how long an economy that does not allocate resources by price signal can prosper. China may shudder at some point.
That said, recall the USA allocated $3 trillion to Iraqistan follies, and every year 5 percent of GDP to "Defense," Homeland Security, VA and State Department.
Toss in heavy rural subsidies, and who knows? We may be misallocating more than China.
Our federal government is spending at 25 percent of GDP, most of it waste.
It will be interesting couple of nations to watch.
PS I asked about the #135 ranking to suggest Heritage Foundation didn't really know what it was doing. Vietnam, another growth nation, is at #139.
The Communists have turned China into the world's biggest garbage dump.
China has been polluting and eroding the countryside at an alarming rate, has imported the worst industries in the world (e.g. oil-intensive industries and industries with declining prices), pays its workers slave wages and then exports at cheap prices, etc.
The Communists have spent hundreds of billions of dollars building impressive facades to hide the massive economic and environmental catastrophes that affect over 95% of the country, while the central government and relatively few communist elites benefit enormously.
Paul-
Right now, I think we should dump wheelbarrows of fresh bills in big stacks in every lower-income neighborhood in the counrty, in the dead of night.
That would get demand going again.
The problem with QE is that money may just sit on the their bach, leave it inert in banks.
Some say the Fed should charge interest on bank reersves, to prod them to lend.
I like the cash in wheelbarrows idea more.
BTW, have you ever looked at the amount of cash in circulation? It is enormous--and evidently, much of it is overseas. But no one really knows.
Just to keep you happy, I would also be glad if we dropped gold bricks off in lower-income neighborhoods.
Sorry, China, There Is No Short Cut To Economic Greatness
Jan. 26, 2010
The government that magically managed to report 6-8% GDP growth in the midst of the financial crisis, when its exports were down over 25%, tonnage of goods shipped through its railroads was down by double digits, and its electricity consumption was falling like a rock. It is hard to manufacture 8% more widgets with a lot less electricity...China did not suddenly become energy efficient during the financial crisis.
This is a government that will go to great length to maintain appearances to keep its ideology going. After all, it censors what its citizens may or may not read and imprisons the ones that write anti-government articles.
China will do anything to grow its economy, as the alternatives will lead to political unrest...Since China lacks the social safety net of the developed world, unemployed people are not just inconvenienced by the loss of their jobs, they starve (this explains the high savings rate in China) and hungry people don’t complain, they riot.
The Chinese government controls the banks, thus it can make them lend, and it can force state-owned enterprises (a third of the economy) to borrow and to spend. Also, since the rule of law and human and property rights are nascent in its economic and political system, China can spend infrastructure project money very fast – if a school is in the way of a road the government wants to build, it becomes a casualty for the greater good.
China has spent a tremendous amount of money on infrastructure over last decade and there are definitely long-term benefits to having better highways, fast railroads, more hospitals, etc. But government is horrible at allocating large amounts of capital, especially at the speed it was done in China. Political decisions (driven by the goal of full employment) are often uneconomical, and corruption and cronyism result in projects that destroy value.
Infrastructure and real estate projects are where you get your biggest bang for the buck if your goal is to maintain employment, since they require a lot of unskilled labor; and this is where in the past a lot of Chinese money was spent. This also explains why, in 2009, new floor space constructed was up 100% and residential real estate prices surged 25%. And this explains why they keep building skyscrapers even though the adjacent ones are still vacant.
To make things worse, before the financial crisis and enormous stimulus ($586 billion), China was already suffering from what I call late-stage-growth obesity, inefficiencies that are a byproduct of high growth rates sustained for a long period of time. Though Chinese growth in the past was high, in its late stages the quality of growth has been low.
For example, in an echo of past Chinese government asset-allocation decisions, China built the largest shopping mall in the world, the South China Mall, that is 99% vacant, years after construction. China also built a whole city, Ordos, in Inner Mongolia, on spec for million residents who never appeared.
The inefficiencies are also evident in industrial overcapacity. According to Pivot Capital, Chinese excess capacity in cement is greater than the combined consumption by the US, Japan, and India combined. Also, Chinese idle production of steel is greater than the production capacity of Japan and South Korea combined. Similarly disturbing statistics are true for many other industrial commodities. The enormous stimulus amplified problems that already existed to financial-crisis levels. China is a less shiny but more drastic version of Dubai.
"I also wonder how long an economy that does not allocate resources by price signal can prosper."
Instead, you advocate distorting price signals via inflation. Genius, stuff, Benji. Japan has relatively tight money, ergo all Japan's problems stem from that...
"Right now, I think we should dump wheelbarrows of fresh bills in big stacks in every lower-income neighborhood in the counrty, in the dead of night."
I have two thoughts in response to that idiocy:
a)Your boyfriend's stimulus did essentially that via the stimulus.
How'd that work out?
b)You're the same Benji who is disturbingly obsessed with every penny given to farmers, yet you want to hand out stacks of bills
to the inner city denizens. Only real difference I can figure is the ghetto residents are highly likely to vote for your boyfriend again.
Look at the USA 1990s. Man, oh man, I will take that decade again.
You mean an era of bubble expansion? But don't all bubbles have to pop sometime?
The Communists have turned China into the world's biggest garbage dump.
China did that a long time ago. Mao had many trees cut down as people tried to make iron in neighborhood smelters. Most of China is cleaner now than it was a year ago.
China has been polluting and eroding the countryside at an alarming rate, has imported the worst industries in the world (e.g. oil-intensive industries and industries with declining prices), pays its workers slave wages and then exports at cheap prices, etc.
Slave wages? I take it that you have never been to China and seen how much better workers are living than they used to be before its industrialization.
The Communists have spent hundreds of billions of dollars building impressive facades to hide the massive economic and environmental catastrophes that affect over 95% of the country, while the central government and relatively few communist elites benefit enormously.
Try going to China some time and tell me how it is that only the elite benefits.
Paul-
I would drop off stacks of cash in Beverly Hills, but they would tend to save it, not spend it. We have a glut of savings, globally. We need demand.
Besides, dropping off stacks of money would just get you arrested for littering. Even Benjamins are too small to pick up.
As for the 1990s, review the whole decade. Moderate inflation, huge job growth, a federal surplus, real wage gains, huge profits. Yes, it got heady towards the end, but so what?
The dot.com meltdown, mostly equity, was peanuts next to the Great Bush jr. Train Wreck into a Sewage Treatment plant. When IOUs are destroyed, it takes down banks with it.
The dot.com meltdown was over quickly. Bush jr. broke the economy's legs.
"I would drop off stacks of cash in Beverly Hills, but they would tend to save it, not spend it. We have a glut of savings, globally. We need demand."
We need jobs. Ask your boyfriend to take his boot off the neck of the risk takers and we'll get some.
"As for the 1990s, review the whole decade. Moderate inflation, huge job growth, a federal surplus, real wage gains, huge profits. Yes, it got heady towards the end, but so what?"
Whatever, I'm missing your point. Was it all manufactured by the Fed? I thought it was your hero Bill Clinton all by himself.
"Bush jr. broke the economy's legs."
Tell us how beyond your usual "happened on his watch" gibberish.
I would drop off stacks of cash in Beverly Hills, but they would tend to save it, not spend it. We have a glut of savings, globally. We need demand.
A glut? Really? Then why are so many people defaulting on their mortgages and so many of the states near bankruptcy? You do know what the world 'glut' means, don't you?
As for the 1990s, review the whole decade. Moderate inflation, huge job growth, a federal surplus, real wage gains, huge profits. Yes, it got heady towards the end, but so what?
Actually, it was a decade of massive inflation that showed up as an asset price bubble. Job growth was moderate given the huge liquidity, and most of the 'profits' were made by the brokers and financials thanks to the accounting tricks they used to report on their activities.
"There's no real difference between communist and fascist"...
Well actually rand there are some very distinct differences but for the individual on the street your point is quite valid...
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