America’s Declining Position in World Economic Freedom Rankings
Singapore, Switzerland, Ireland, Taiwan, New Zealand, Estonia, Luxembourg, Netherlands, Denmark and Sweden are the top ten countries on the Global Economic Freedom rankings.
The United States dropped to the 25th position on the Global Economic Freedom rankings due to its ballooning debt, deficit and rising inflation.
Sudan, Venezuela, Cuba, and North Korea are some of the most repressed countries in terms of economic freedom.
Introduction
For a long time, global organizations like the The Heritage Foundation have been making comparisons of how various national economies are performing. These comparisons are based on established criteria such as the extent to which countries honor property rights and essential freedoms.
In this article, we will use The Index of Economic Freedom to uate how countries like the United States and Singapore are performing based on factors like the rule of law, fiscal health, regulatory efficiency and open markets.
America Slips on the World Economic Freedom Rankings
The United States has dropped significantly on the global economic freedom rankings. It is now ranked 25th among the more than 170 countries that were considered. America’s current position is surprising considering that it used to occupy the fourth position a few years ago.
According to the 2023 Index, the United States’s economic freedom score is 70.6, about 1.5 points lower than its 2022 one. Overall, the country is ranked number 3 out of the 32 countries in the American region. However, its score is above regional and world averages.
United States Ranked Number 25- HeritageOrg
There are several reasons for the United States’ declining on the Global Economic Freedom rankings. For example, the Biden administration increased the size and scope of the US Federal government which has resulted in high expenditure and national debt.
In particular, high government deficit and public debt have negatively affected productivity in the country as well as retarding its economic development. That has created fear of recession which has reduced business confidence. According to some estimates the United States’ deficit is in the region of $3 trillion annually while its debt is around $30 trillion.
Poor national policies and regulation have created a great burden on businesses operating in the country. In addition, there has been regulatory uncertainty in some areas such as the crypto industry where the laws that the regulators use restrict individual freedoms.
As an example, since the beginning of 2023 the country has been cracking down on cryptocurrency activities. So far, it has sued several crypto firms like Binance, accusing them of failing to abide by the country’s securities laws. The regulators have become more hostile after designating 68 cryptocurrencies as crypto securities.
Its current thrust against cryptocurrencies and crypto firms means that it is restricting retail traders from investing in cryptocurrencies, which is a new class of asset.
Also, The United States’ economic and financial position has been weakening since 2022 as a result of several factors like the Russia-Ukraine war. After Russia’s invasion of Ukraine, the United States and its allies imposed economic sanctions on Russia which led to drastic increases in prices of many commodities such as fuel which has negatively affected the global economy.
Further, the United States has been grappling with high inflation since the start of 2022. For the greater part of that period the Federal Reserve has been hiking interest rates in a bid to control the spiraling inflation.
Nonetheless, it is important to note that the United States is performing very well in several areas. For instance, there is high respect for the rule of law. In this respect, its property right score and its judicial effectiveness score are above average global scores. As expected, the United States has a high government integrity score.
Singapore Leads in Economic Freedom Score Ranking
Singapore is the number one country in terms of economic freedom rankings due to its business-friendly regulations and infrastructural development. With the economic freedom score of 83.9, Singapore is ranked first among the 39 Asia-Pacific region countries. Its overall score is far higher than both the regional and global averages.
Singapore Ranked Number One- HeritageOrg
There is no doubt that Singapore is one of the leading economies in the world. This is because it has a vibrant service industry as well as a highly productive manufacturing sector. As an example, it is known for manufacturing electronics and industrial chemicals which are in high demand globally.
The country also protects property rights and individual freedoms. It also enforces anti-corruption laws making it an investment destination of choice. Generally, it has transparent and fair laws that promote business development and investment. In addition to a competitive financial sector, it welcomes foreign businesses in different sectors of its economy.
In addition, Singapore has straightforward and streamlined procedures to start business in the country. The country is known for its fair business practices that do not discriminate foreign companies which facilitate its economic growth.
Singapore Attracts American and Fintech Firms
The truth is that several high profile American crypto firms and other FinTech companies have been opening businesses in Singapore. As an example, Circle (the stablecoin issuer), Ripple and Coinbase have been granted business licenses in the country.
There are several reasons why Singapore is a good destination for crypto and fintech companies. First, the country has emerged as a top global cryptocurrency hub due to its business-friendly crypto regulation. For instance, the Monetary Authority of Singapore (MAS), the country’s financial regulatory agency, enacted consumer protection laws which are suitable for crypto investors.
Again, in 2020 the country introduced the Singapore’s Payment Services Act which contains the updated Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) provisions. In other words, the country has clear guidelines for registering and operating crypto and other fintech businesses.
The country’s low taxation rates attract many firms. This is because Singapore has double tax agreements (DTAs) with many countries which prevents double taxation and lowers the tax burden for many companies.
Many fintech companies choose to establish their businesses in Singapore because there is a talented workforce. This is because over the years, the country has managed to attract highly skilled workers from other countries. As such, Singapore has one of the most productive and motivated workforces in the region.
More importantly, Singapore is one of the most stable and prosperous countries in Asia. It has a very peaceful political environment, advanced service industry and high infrastructure which supports established as well as emerging businesses.
Top Ten Ranked Countries in Terms of Economic freedom
Generally, there has been a great setback in terms of global economic freedom. This is because the world’s average economic freedom score has decreased from 60 in 2022 to 59.3 this year. The increase in national debts and deficits have been the major causes for this.
Also, there were several changes within the top 10 countries in terms of economic freedom rankings. Singapore, Switzerland, Ireland, Taiwan, New Zealand, Estonia, Luxembourg, Netherlands, Denmark and Sweden are the top ten ranked countries as the following table indicates.
Top 10 Ranked Countries - GFMAG
As the table denotes, Singapore, with a score of 83.9, occupies the first position, followed by Switzerland, Ireland and Taiwan. On the other hand, Sudan, Venezuela, Cuba, and North Korea are the most repressed countries.
Conclusion
While Singapore has retained its position as the top ranked nation in terms of Global Economic Freedom, the United States has dropped to the 25th position mainly due to high inflation and unfriendly regulations. On the other hand, Singapore boasts of a talented workforce, friendly regulations and well-developed infrastructure. Therefore, many crypto and fintech companies are opening businesses in the country.
