UK must turn around the ship of state towards economic freedom

Dr Rainer Zitelmann is a historian and sociologist. In this guest essay, he argues the UK is slipping down the list of free countries in a new global index

Last year, the UK received its worst rating in the Index of Economic Freedom since 1995, when the index was first calculated. This year’s rating is even worse. 

The Index, which is published by the Heritage Foundation, ranks a total of 176 countries based on how economically free or unfree they are. The comprehensive rating is based on twelve categories of freedoms. 

The Index divides countries into five groups, the best of which is “free” (and includes Singapore, Switzerland, Ireland and Taiwan); the worst is “repressed” (with countries like Venezuela, Cuba, and North Korea). The index can also be regarded as a “capitalism ranking.” With a score of just 69.9 points, the UK is no longer one of the “mostly free” countries and has been relegated to the group of “moderately free” countries. 

There are now 16 countries in Europe alone that are economically freer than the UK. Even Austria and Germany are economically freer than the United Kingdom. In 2006, the UK had a respectable score of 80.4 points, putting it 10 points ahead of Germany. Today, the UK is four points behind Germany and 14 points behind Switzerland.

The Heritage Foundation explains the UK’s deteriorating rating: “The size and scope of the state have expanded dramatically since 2020, and significant reforms are needed to place the economy on a solid path of recovery. Restoring the soundness of public finances remains the most critical issue and will require a sustained commitment to downsizing government spending.”

The UK has positive ratings in the areas of “Property Rights,” “Government Integrity” and “Judicial Effectiveness,” but only receives moderate scores for “Labor Freedom” and “Tax Burden.” However, I expect that the UK’s “Tax Burden” rating will deteriorate further next year, which is likely to lead to the UK dropping even further down the Index. The UK has poor or very poor ratings in the fields of “Government Spending” and “Fiscal Health.”

The UK is not the only country to lose ground in this year’s ranking: The U.S. only just scrapes into the second-best of the five categories (“mostly free”, rank 25). If the United States were to lose just one more point in next year’s ranking, it would find itself in the “moderately free” category, along with the UK. The U.S. has progressively dropped down the rankings in recent years. 

Another country that has lost a lot of ground in the Index over the past few years is China, which now only ranks 154th out of 176. The story is very different in Vietnam: although the country calls itself “socialist,” it has registered more economic freedom gains since 1995 than almost any other country in the world. Despite ranking just 72nd, its score of 61.8 is 20 points higher than in 1995. 

In so many countries around the world today capitalism is increasingly under threat – even in countries like the U.S. and UK, which were widely regarded as model capitalist countries in the days of Reagan and Thatcher. It is time to defend capitalism – not only, but perhaps especially in the UK!

Rainer Zitelmann is the author of the book In Defense of Capitalism, which is available in the U.S. from March 7, 2023: https://in-defence-of-capitalism.com/