As the United States languished in the middle of the pack of large economies, with relatively better growth and liberalization providing ballast to economies in Asia, the world’s largest economy just isn’t what it used to be, suggests a new economic ranking.

Hong Kong topped the list of the world’s most free economies, with Singapore, New Zealand, Switzerland and Canada rounding out the top five in the list that was released this week by the Fraser Institute—a free market think tank—in its annual Economic Freedom of the World report. The institute noted that America mired in the 16th spot for the second consecutive year.

Even as concerns swirl about the health of China, Hong Kong has maintained its economic vitality more than 20 years after cutting ties with the U.K. The sluggishness of the world’s second largest economy has the potential to tip its autonomous region into recession, economists have noted.

“Economic freedom leads to prosperity and a higher quality of life, while the lowestranked countries are usually burdened by oppressive regimes that limit the freedom and opportunity of their citizens,” said the report’s authors, Fred McMahon and Michael Walker, in a statement.

Few of the economies cited by Fraser are actually outperforming with multiple risks encroaching upon the global economy. Barely edging the 1.2 percent growth rate seen by the U.S. during the comparable time frame, Hong Kong’s economy grew by 1.7 percent in the 2nd quarter. Singapore, meanwhile, is not expected to grow by more than 2 percent this year.

A series of criteria, including personal freedom, access to markets, respect for private property and the rule of law formed the basis of Fraser’s data ranking countries, assigning an economy a numerical value based on a composite of how they score in each category, although the concept of economic freedom can be highly subjective. It is based on statistics from, the most recent available and the ranking comes with a 2 year lag.

A high level of regulation is all but suffocating growth is what was underscored in the report as it noted what’s become a frequent refrain among critics of the U.S. economy. The US economy looses $2 trillion due to its labyrinth of environmental, tax and compliance laws, claimed a 2014 survey by the National Association of Manufacturers. NAM’s data found that the cost of regulatory compliance was nearly $10,000 per worker annually.

The Fraser Institute found that countries like Libya, Venezuela—in the throes of wrenching downward spiral that’s destabilized its society—and Zimbabwe were among the several of the least free economies that were perennially troubled. The more free the economy, the more wealthy citizens tend to be, the organization found suggesting that economic liberalization has a trickle-down effect to per-capita growth.

“Countries in the top quartile of economic freedom (such as Singapore, Canada and Chile) had an average per-capita GDP of US$41,228 in 2014, compared to US$5,471 for bottom quartile countries (such as Venezuela, Iran and Zimbabwe),” the report’s authors noted.

“In fact, 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),” it said. “And life expectancy is 80.4 years in the top quartile of countries compared to 64 years in the bottom quartile.”

(Adapted from Bloomberg)

Categories: Economy & Finance