The Heritage Foundation and The Wall Street Journal today released their annual survey of economic freedom, the 2002 Index of Economic Freedom, which analyzes countries according to various factors involved in economic freedom, comes up with an overall rating for each and ranks them accordingly, grouping them in four categories–“Free,” “Most Free,” “Mostly Unfree” and “Repressed.” In this latest index, as in last year’s, Russia was ranked near the bottom of the list–in the bottom half of the “Mostly Unfree” group–coming in 131st out of 155 countries, just below Venezuela, tying with Bangladesh and Romania and just ahead of the Congo Republic and Yemen. Russia was rated freer than Turkmenistan (150th), Belarus and Uzbekistan (tied for 148th), which were ranked among the “Repressed,” and Tajikistan and Ukraine (tied for 137th), which were ranked among the “Mostly Unfree.” It was rated less free than Kazakhstan and Kyrgyzstan, (which tied Chad and Nigeria for 125th), Azerbaijan (which tied Malawi and Niger for 118th) and Moldova (which tied Indonesia and Turkey for 105th), which were, like Russia, among the “Mostly Unfree.” Armenia was ranked among the “Mostly Free” (tying with a number of countries, including Jordan, Panama and France for 45th place), along with Latvia (38th, tied with Argentina and South Korea) and Lithuania (29th, tied with Italy and Taiwan). The only former Soviet republic in the “Free” category was Estonia, which tied with Ireland, Luxembourg, the Netherlands and the United States for 4th place. Hong Kong, Singapore and New Zealand, respectively, were deemed to have be the freest countries in the world economically.
The Index of Economic Freedom assesses each country according to ten categories–trade policy, fiscal burden, government intervention, monetary policy, foreign investment, banking/finance, wages/prices, property rights, regulation and black market–and assigns a numerical rating in each category ranging from 1 to 5, “1” signifying “an institutional or consistent set of policies that are most conducive to economic freedom,” and “5” signifying “a set of policies that are least conducive.” Russia received a 4.0 in each of the following categories: trade, banking/finance, property rights, regulation, black market. It received a 3.5 for fiscal burden, a 3.0 for foreign investment and wages/prices, and a 2.5 for government intervention. It received the worst possible score–5.0–for monetary policy. Overall, Russia was assigned a grade of 3.70, the same grade it received in last year’s Index of Economic Freedom, when it came in 127th out of the 155 countries ranked, tied with the Republic of Congo and Mauritania, and in the index the year before that. Russia’s score was higher in the 1990s–3.40 in 1995, 3.50 for 1996, 3.55 for 1997, 3.35 for 1998 and 3.50 for 1999 (see the Monitor, November 3, 2000).
Russia’s rating in the 2002 Index of Economic Freedom might come as a surprise to some observers, given the introduction of a 13-percent flat income tax and the State Duma’s passage of legislation this past summer instituting various reforms, including measures to remove bureaucratic obstacles to business activity and to overhaul the country’s Soviet-era judicial system. Aside from the flat tax, however, most of these reforms have yet to be implemented, and law in Russia has traditionally been honored more in the breach than the practice.
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