Economic Freedom Index: An African Perspective

The Eastern Africa Policy Centre (EAPC) is a new regional think-tank that seeks to promote and disseminate Free Market ideas and the philosophy of Liberty within the Eastern African region. The immediate goal of the Centre is to educate, promote and spark debate on and around the importance of individual liberty and Free Market ideas, especially with regard to how these affect sustainable socio-economic development within the region. The EAPC seeks to become an important repository of information, especially in the areas of policy research and education and in linking public policy with policy outcomes

Global Economic Freedom Report 2014

Economic freedom has been shown to promote prosperity and other positive outcomes in developed and developed societies. This vindicates calls for unshackling markets from the tight clutches of government control. It is a necessary condition for inclusive development. It liberates people from dependence in government in a planned economy, and allows them to make their own economic and political choices.

 Kenya improved slightly in the global economic freedom report of 2014, published by the Fraser institute in collaboration with the Eastern Africa Policy Centre. Although Kenya improved from position 87 in the year 2013 to position 77 in the year 2014 out of 152 countries sampled, it still ranks in the 3rd quartile in the Economic Freedom Index 2014 (EFW 2014). Kenya had a composite score of 6.98 compared to the 6.81 one year ago. The index published in Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately owned property.

The Economic Freedom Index is a summary that measures the degree of economic freedom in five broad areas: Size of Government: Expenditures, Taxes, and Enterprises;  Legal Structure and Security of Property Rights;  Access to Sound Money; Freedom to Trade Internationally; Regulation of Credit, Labor, and Business.

Rwanda topped in the region once again, it was ranked 29th, an improvement from its 36th rank in the year 2013.  Uganda improved from 64th to 57th, Tanzania dropped from 93rd to 94th, and Burundi maintained its 145th, in 2014 from the previous year. Africa’s biggest economy; Nigeria, dropped from 124th to 125th. The continent’s best ranked country was Mauritius, which was ranked 5th globally.  South Africa ironically ranked 93rd a drop from its previous rank of 87th.

7 of 10 least economically free are from Africa: Central African Republic, the Democratic Republic of Congo, Burundi, Chad, Algeria, Zimbabwe, and Congo Republic. The United States, once considered a bastion of economic freedom, now ranks 12th in the world, tied with the United Kingdom. Due to a weakening rule of law, increasing regulation, and the ramifications of wars on terrorism and drugs, the United States has seen its economic freedom score plummet in recent years, compared to 2000 when it ranked second globally.

Once again, Venezuela has the lowest level of economic freedom worldwide, with the Republic of Congo, Zimbabwe, Argentina and Algeria rounding out the bottom five countries. Some despotic countries such as North Korea and Cuba could not be ranked due to lack of data.

According to fact-based research in top peer-reviewed journals, people living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer life spans. The cornerstones of economic freedom include personal choice, voluntary exchange, freedom to compete, and security of private property.

Countries in the top quartile of economic freedom had an average per capita GDP of US$39,899 in 2012, compared to US$6,253 for bottom quartile nations.

Moreover, the average income of the poorest 10 per cent in the most economically free countries in 2012, US$11,610, was almost double the overall average income in the least free countries. And life expectancy is 79.9 years in the top quartile compared to 63.2 years in the bottom quartile.

Written by Alex Njeru. Programs Director,Eastern Africa Policy Centre

Photo: Press Rwanda