Global economic freedom up slightly; Ethiopia ranks 145 among 159 jurisdictions

Ethiopia ranks 145 out of 159 countries and territories included in the Economic Freedom of the World: 2016 Annual Report, released today by TEAM in conjunction with Canada’s Fraser Institute. TEAM is a member of the Economic Freedom network and the official co-publisher of the Economic Freedom of the world reports in Ethiopia.

Last year, Ethiopia ranked 141.

In the Sub-Saharan Africa, Ethiopia is the second-most populous state, with an estimated population of 97 million. With a per capita income of $ 550, it is among the world’s poorest countries, due to substantially lower per capita income as compared to the regional average. The extent of economic freedom is directly associated with the entrepreneurship and represents the enhancement of economic growth of a country. 

Economic freedom is every human’s fundamental right to control his property and labor. Economic freedom of a state reflects the growth and happiness associated with the living standards in terms of robust and positive outcomes. Research study shows that there must be economic freedom if a state is willing to attain maximum growth in its economy.

Hong Kong again tops the index, continuing its streak of number one rankings, followed by Singapore, New Zealand, Switzerland, Canada, Georgia, Ireland, Mauritius, and United Arab Emirates. Australia and the United Kingdom tied for 10th.

“Hong Kong is still number one, but because democracy is the best safeguard of freedom, if China, which ranks low in economic freedom, encroaches on Hong Kong, we can expect Hong Kong’s ranking to fall,” said Fred McMahon, Dr. Michael A. Walker Research Chair in Economic Freedom with the Fraser Institute.

The 2016 report was prepared by James Gwartney, Florida State University; Robert A. Lawson, Southern Methodist University; and Joshua Hall, West Virginia University.

It is based on data from 2014 (the most recent year of available comparable data) and measures the economic freedom (levels of personal choice, ability to enter markets, security of privately owned property, rule of law, etc.) by analyzing the policies and institutions of 159 countries and territories.

“Economic freedom leads to prosperity and a higher quality of life, while the lowest-ranked countries are usually burdened by oppressive regimes that limit the freedom and opportunity of their citizens,” McMahon said.

The 10 lowest-ranked countries are: Iran, Algeria, Chad, Guinea, Angola, Central African Republic, Argentina, Republic of Congo, Libya and lastly Venezuela. Some despotic countries such as North Korea and Cuba can’t be ranked due to lack of data.Other notable rankings include Germany (30), Japan (40), France (57), Russia (102), India (112), China (113) and Brazil (124).

According to research in top peer-reviewed academic journals, people living in countries with high levels of economic freedom enjoy 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$41,228 in 2014, compared to US$5,471 for bottom quartile nations. Moreover, the average income in 2014 of the poorest 10 per cent in the most economically free countries (US$11,283) dwarfed the overall average income in the least free countries (US$5,471). And life expectancy is 80.4 years in the top quartile of countries compared to 64 years in the bottom quartile.

The Fraser Institute produces the annual Economic Freedom of the World report in cooperation with the Economic Freedom Network, a group of independent research and educational institutes in nearly 100 nations and territories. It’s the world’s premier measurement of economic freedom, measuring and ranking countries in five 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.

Ethiopia  scores in key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom):

  • Size of government: changed to 6.11 from 6.71 in the last year’s report
  • Legal system and property rights: changed to 4.96 from 4.97
  • Access to sound money: changed to 5.47 from 5.16
  • Freedom to trade internationally: changed to 4.97 from 5.28
  • Regulation of credit, labour and business: changed to 6.50 from 6.27

Ethiopia suffers from a number of structural constraints. The government takes no legal or political measures to prevent the emergence of monopolistic structures in the economy. Market competition in Ethiopia functions under a weak institutional framework, with uneven and non-transparent rules for market participants. This is one of the reasons why the country still has not managed to fulfill all conditions for membership in the World Trade Organization (WTO). Civil-society traditions are very weak. The current government controls all sectors of the economy and political life. In general, Ethiopia under the present government lacks a vivid civil society like that found in neighboring Kenya or Tanzania.

International Rankings

Hong Kong has the highest level of economic freedom worldwide, with a score of 9.03 out of 10, followed by Singapore (8.71), New Zealand (8.35), Switzerland (8.25), Canada (7.98), Georgia (7.98), Ireland (7.98), Mauritius (7.98), United Arab Emirates (7.98), Australia (7.93), and United Kingdom (7.93). Other notable countries include the United States (7.75), Germany (7.55), Japan (7.42), Russia (6.66), India (6.50) and China (6.45).

About the Economic Freedom Index

Economic Freedom of the World measures the degree to which the policies and institutions of countries support economic freedom. This year’s publication ranks 159 countries and territories. See the full report at www.freetheworld.com.