France continues to fall in the annual ranking of economic freedom. Since 1995, the Heritage Foundation (Editor’s note: American think tank with liberal and conservative leanings) has analyzed the evolution of economic freedom in the world every year. The current ranking covers 176 countries and is based on twelve specific criteria.
France, which occupied fifty-seventh place last year, lost another five places and is now sixty-second in the world. The Heritage Foundation explains France’s poor ranking as follows: “Labor regulations are rigid and the labor market lacks the capacity to generate more dynamic employment growth. The government has partially or fully privatized many large companies, but maintains a strong presence in sectors such as electricity, public transport and defense.
According to this index, only four countries (Singapore, Switzerland, Ireland and Taiwan) are considered “free” in the broadest sense of the term, while twenty-two countries are considered “mostly free”. The United States barely ranks in this group with a score of 70.1 points out of 100 possible; with 0.2 points less, the United States would lose its status as an “essentially free” country. According to the Heritage Foundation, “government spending continues to increase and the regulatory burden on businesses has increased. Returning the U.S. economy to ‘free’ status will require significant changes to to reduce the size and scope of government. Over the years, uncontrolled deficit spending and public debt have accelerated, and inflation has undermined economic livelihoods. Uncertainty and poor policy choices have left the economic prospects of the United States on hold.”
Scandinavian countries among the most capitalist in the world
Today, no less than fifteen European countries are more economically free than the United States. The ranking refutes the preconceived notion that the United States is the country of “pure capitalism” and that a system resembling “democratic socialism” would prevail in Europe, particularly in the Scandinavian countries. In fact, Norway, Sweden and Denmark are among the ten most capitalist countries in the world. While the United States has lost almost seven points since 1995, Sweden has gained sixteen points over the same period and now sits in ninth place; Denmark even climbs to seventh place.
Among European countries, Germany has also lost ground. In the 2023 index, Germany was in fourteenth place. In the space of a year, the country has lost four places and is now ranked eighteenth. The United Kingdom also continues to decline. Last year it fell to twenty-eighth place (and is therefore no longer in the “mostly free” category), and this year it fell further, to thirtieth place. This point is important because it is not so much the rank of a country that is decisive as its relative evolution over time.
The rise of Vietnam
In the long term, since 1995, Vietnam has particularly stood out. This state occupies only fifty-ninth place out of 176 countries, but it is closing the gap by leaps and bounds: Vietnam has gained thirteen (!) places compared to the previous year. I explore the reasons for this success in my new book How Nations Escape Poverty. Market economy reforms initiated by Vietnam in the late 1980s helped reduce the number of people living in extreme poverty from nearly 80 percent to just 5 percent. This country obtains very good results, particularly in the categories “fiscal health”, “public expenditure”, “tax burden” and “commercial freedom”, while it still has a lot of catching up to do in the areas of “integrity of government” and “judicial efficiency.”
The link between economic freedom and living standards is confirmed by the Heritage Foundation’s analysis of 176 countries. In “repressed” or “largely unfree” countries, more than 15 percent of the population lives in poverty, compared to less than 2 percent in economically free countries. GDP per capita in economically free countries is $103,869, while in “mostly free” countries it is $61,052. In countries considered “majority unfree” and “repressed,” it is less than $11,000. The least economically free countries this year are once again North Korea, Cuba and Venezuela.
There is also a clear link between economic freedom and environmental standards, as shown by a comparison between the Economic Freedom Index and the Environmental Performance Index: the more capitalist a country is, the higher the environmental standards.
* Historian and sociologist, Rainer Zitelmann has just published How Nations Escape Poverty in English.
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