NZ third freest, but… [updated]

The United States continues to plunge down the Fraser Institute’s World Index of Economic Freedom, out today, while ironically New Zealand continues to ride high. [Hat tip Stephen Hicks]

After ranking 2^nd in 2000, the U.S. falls to 18^th in this year’s report. [T]he United States has fallen precipitously from second in 2000 to eighth in 2005 and 19th  in 2010 (unadjusted ranking of 18th). By 2009, the United States had fallen behind Switzerland, Canada, Australia, Chile, and Mauritius, countries that chose not to follow the path of massive growth in government financed by borrowing that is now the most prominent characteristic of US fiscal policy. By 2010, the United States had also fallen behind Finland and Denmark, two European welfare states. Moreover, it now trails Bahrain, the United Arab Emirates, Estonia, Taiwan, and Qatar, countries that are not usually perceived of as bastions of economic freedom.

The Economic Freedom Index scores countries according to a subjective scale on the size of their government; their legal system and property rights;  sound money (or not); freedom to trade internationally (or not); and regulation (and how much or little of it).  I say a subjective scale because with a whopping 9.03 out of 10 for property rights (tell that to land and business owners in Christchurch, arseholes) and 9.73 out of 10 for sound money (almost as good as gold, really) New Zealand comes in third in the world, in a top ten looking like this:

1. Hong Kong, with a score of 8.90 out of 10
2. Singapore  8.69
3. New Zealand  8.36
4. Switzerland, 8.24
5. Australia, 7.97
6. Canada, 7.97
7. Bahrain, 7.94
8. Mauritius, 7.90
9. Finland, 7.88
10. Chile, 7.84.

If New Zealand is nearly as good as it gets, there really is something wrong with the world. (Insert obvious comments here.) It might be more accurate to say these places are about as good as it gets, but are very far from being as good as things could be or should be. On that basis, with a more objective scale used, New Zealand might still be third, but with a score of maybe half what the Fraser Institute gives us… (insert non-obvious responses here).

Curious to note that around half of the top ten places are those in which the British came, saw and then buggered off, leaving behind them rule of law and the British legal and common law system. Thank Galt for the Brits, eh.

And notice too, as the authors did, that nations that are economically freer out-perform less-free nations in wealth and other indicators of well-being.

• Nations in the top quartile of economic freedom had an average per-capita GDP of $37,691 in 2010, compared to $5,188 for bottom quartile nations in 2010 current international dollars
• In the top quartile, the average income of the poorest 10% was $11,382, compared to $1,209 in the bottom in 2010 current international dollars
  Interestingly, the average income of the poorest 10% in the most economically free nations is more than twice the overall average income in the least free nations
• Life expectancy is 79.5 years in the top quartile compared to 61.6 years in the bottom quartile
• Political and civil liberties are considerably higher in economically free[r] nations than in unfree nations

By the way:

The scores of the bottom ten nations in this year’s index are: Venezuela, Myanmar, Zimbabwe, Republic of the Congo, Angola, Democratic Republic of the Congo, Guinea-Bissau, Algeria, Chad, and, tied for 10th worst, Mozambique and Burundi.

Look for Libya, Egypt and Syria to join them next year.

The Fraser Institute’s full report is available on the Economic Freedom Network website.

UPDATE: Liberty Scott has much, much more on this, including discussion about NZ’s place in the world rankings.

NZ might be third overall, but it is 95th on size of government (i.e., 95th smallest out of 144), which shows how highly ranked NZ is on most other measures. 
    Yet NZ was ranked far more highly on size of government recently (i.e., our government was much smaller).  In 2009, the year after the Key government stopped the Helen Clark juggernaut, we were ranked 73rd on size of government.   Now we are 95th. So National has led the growth in the state, relative to others…
    On freedom to trade internationally we now score the lowest since the 1980s, with compliance costs on trade, foreign investment limits and limits on capital flows reducing the score.
    The overall regulatory score is the best it has been since it has been measured, but on labour market regulations NZ is ranked 9th, its lowest ranking besides size of government.
    So what does this mean?  Simple.  Any claim this National-led government is implementing radical free market reforms falls flat on the evidence—it has grown the state.  In relative terms, NZ has been retreating from such reforms for around 17 years now.  The state grows faster under Labour, slower under National.
    Yet despite slipping on some measures, especially size of government, NZ ranks well largely because others have slipped as well.   It becomes more apparent if one looks at key comparators like Australia, the US and the UK.

And this gives you some more idea of how bizarre some of the measurements are:

On monetary policy the leaders are the likes of Japan (yes really!), Portugal, Albania and the USA…

Yes. Really.