BizNews Briefing: Neil Emerick – South Africa rises in freedom index: Economic freedom and growth amid global challenges

In an insightful interview, Neil Emerick from the Free Market Foundation discusses South Africa’s rise in the Freedom Index, moving from 85th to 81st place. He emphasizes the importance of economic freedom for growth and quality of life, comparing South Africa’s ranking with its BRICS counterparts. Emerick also addresses the complexities of international trade, climate change, and the challenges Africa faces in achieving economic development amid global pressures.

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Extended transcript from the interview ___STEADY_PAYWALL___

(00:00) Alec Hogg: Just going to have to ask you because it is we’re getting feedback coming through on to from when I speak. So I’m actually going to ask you just to give us in a nutshell exactly what the freedom index is about and how South Africa’s rating.

(00:21) Neil Emerick: Yeah, well, good morning. And it’s nice to be able to deliver some good news for a change. We come out with a report annually. And this year, we’re able to report that South Africa has gone up in the rankings instead of down. We’ve moved from 85th last year to 81, which for the first time in a while has put us in the top half of the country. So we measure 165 countries around the world. And this is now, I think, the first time in about five, six years that we’ve got back into the top half.

(00:49) Alec Hogg: So who’s around us just to give some context?

(00:54) Neil Emerick: The BRICS countries, funnily enough. I mean, maybe just a little background. The index itself is tempting to measure economic freedom and how’s that defined? So in a broad context, we’re looking at whether the individual has choices, economic choices over the state of government. If you’re taxed 100%, then you’re a slave. If you’re not taxed zero, that’s obviously extremely free. So somewhere in the middle is where we’re measuring. Different countries score differently in different areas.

South Africa now, as I say, smack bang in the middle. We’re a very average country doing average things, but we do have some quirks, which is areas that we feel we could do better in. To your question, India is 84th. We’re 81st. Brazil is 85th. So we’re very much surrounded there by our BRICS fellows. On the African side, Mauritius is 17th. So that’s the most free country in Africa.

The next African country is Kenya at 74th, so it’s slightly better than us. Uganda at 76th, and then Botswana is at 80th. That kind of gives you a feel for where we sit. In terms of overall countries, the top 10 is Hong Kong, Singapore, Switzerland, the US, as you’d expect. In the bottom, we’ve got countries like the Sudan, and Japan is 11th, Germany 16th, France is 36th, it’s immediately 51st. So that’s sort of a smell test.

(02:22)

So why is this important? What’s the impact of being higher up on the economic freedom index on things like economic growth, job creation, etc.? Well, you know, as an example of the free market foundation, we’re obviously coming at these things from a certain perspective, but the motivation behind the report, which is now 30 years old, is that economic freedom counts and that the individual’s right to choose is an important contribution to freedom more generally.

The important part then is, well, okay, so what follows from there? That’s where this particular report is important because it forms part of an econometric body of work that says, okay, well, given economic freedom, what comes out of it? There are a couple of interesting stats they got in this year’s report, which is that if you take the 165 countries, split them up into quartiles, what are the average income levels and so on at the bottom and the top? Now if economic freedom didn’t matter, those numbers would be all over the place, but they’re not. They’re highly correlated with very good outcomes. The freer you are, the more of everything you tend to have.

So the top 40 countries in that list earn $53,000 a year, where at the bottom, the average is $7,000. A very important statistic is the poor in the top 40 countries earn $7,600 a year, whereas the poor in the unfree countries earn $900 a year. So it really matters where you’re going to be poor. The life expectancy is 16 years longer in free countries. Your environmental health is 50% better. In fact, there are two and a half times less corruption.

These are the sort of studies that people have done where economic freedom is the variable on the left side and then plot whether these good outcomes fall on the right. And over a thousand papers now have shown that the freer an economy is, the more likely you are to have better outcomes.

(04:41) Alec Hogg: I’d just like to play devil’s advocate here, Neil. We’ve just had a report from the Financial Times, our partners in London, about Africa wanting to exploit its oil and gas reserves, but being prevented from doing so because of funding reasons as the international banks are following a different agenda, an agenda which appears very hypocritical given that most of the climate change problems come from the West. And so now as a consequence of them trying to reduce carbon emissions, they’re not allowing African countries or not giving African countries the support that they need to improve climate change.

Isn’t there something here as well when you have a look at economic freedom given that the countries who have had the advantages and the benefits in the past and have been able to pollute the atmosphere and perhaps do other things that looking back don’t look so good in history? They’ve now got a big advantage; they can afford to have economic freedom, whereas other countries that are still trying to pull themselves up might find a different method of government to support them. And I’m talking here obviously about China, but India is similar. It’s very hard to get a foreign-owned business going in India, for instance. So, and as you said earlier, they’re a little lower than us on the economic freedom index, how do you address a question like that?

(06:09) Neil Emerick: Well, it’s a tough one, isn’t it? I mean, this index is looking at law. So where are there laws in place that restrict individual freedom? And some of what is going on in Europe, especially in terms of climate change, is not so much in law, but as well as just political pressure from the markets. And so in some sense, it’s voluntary behavior.

Legal in the form of the tariffs that they’re now putting on carbon-produced goods from Africa. Tariffs are never good. I mean, borders are political fences, and the index does show that free trade promotes wealth everywhere. So to the degree Europe is now restricting its imports, it’s going to hurt us, obviously; we won’t be able to trade with them to the same degree. But it’s a choice.

Things like climate change, people will find this statement controversial, but it’s almost a luxury good. Once you’ve achieved a decent level of income and decent levels of education, well, then some of these environmental issues then come to the fore. But Africa has some bigger problems to solve. We have some real poverty issues that we wish to solve. So I’m going to be the free trader. And so we want to be able to trade. We have excellent resources, including gas and oil off our shores. So the opportunity to exploit those would seem low-hanging fruit.

(08:07) Alec Hogg: I presume then from that philosophical perspective that you would be hoping that Donald Trump, Mr. Tariffs, does not win the US presidential election.

(08:38) Neil Emerick: It’s a complicated race, but if tariffs were to be introduced, that would surely have an impact on something like the freedom index.

It would affect America’s freedom score. Obviously, this is something that countries can deal with unilaterally. I mean, nothing stops South Africa from moving all of its tariffs tomorrow. And we can import and export freely, which is what we would advocate for. But certainly, Trump makes the case that he’s going to get the Chinese to pay for all these imports. It’s not. It’s American consumers that are going to pay. And once that dawns on them, then they’ll realize that all their goods they’re paying for are more expensive.

(08:38) Alec Hogg: Fascinating insights there on the Freedom Index. And nice good news to hear that South Africa has moved a little up.

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