In this article, we will look into the 20 most liberal countries in the world. If you want to skip our detailed analysis, you can go directly to the 5 Most Liberal Countries in the World.
Economic Liberalism vs Economic Conservatism
The concepts of liberalism and conservatism both advocate for economic freedom. Economic liberalism is a political and economic ideology that supports personal liberty, economic freedom, private property, and less government interference while promoting economic development. Economic conservatism also stems from the concept of economic liberalism and advocates for a free market with restrictive government intervention. Conservatives strongly oppose the intervention of government and believe that free markets are more capable of ensuring better resource allocation. Liberals, on the other hand, believe that high government spending on the social welfare of individuals can improve their quality of life and can also contribute to economic development. Some of the most conservative countries report very low social spending which ultimately affects the well-being and quality of life of its residents.
Relationship Between Economic Freedom and Growth
Economic liberalism is built on the very idea of economic freedom, which in turn fosters innovation, entrepreneurship, and efficient resource allocation. A freedom-induced economic environment leads to economic growth. Countries with a liberal economic outlook tend to have improved democratic and protective civil liberties which also leads to political freedom.
Europe has some of the freest countries in the world in terms of both personal and business freedom. The region is also dominant with around 15 countries ranking among the most business-friendly countries in the world. According to a research study “The Relationship Between Economic Freedom and Economic Growth in EU Countries” by Ivana Brkić, there is a positive relationship between economic freedom and economic growth in a country. The study explores this interrelationship for European Union Countries, by analyzing the impact of economic freedom elements on the GDP growth of the member countries. The study concluded that the change in economic freedom is a significant factor in measuring a country’s economic growth.
Another study “Economic Freedom Influences Economic Growth and Unemployment: An Analysis of the Eurozone” by Roberto Cervelló-Royo et al., analyzes the correlation between economic freedom and economic growth. The study explores various economic freedom indicators such as business freedom, government integrity, labor freedom, and tax burden levels and interrelates them with the economic growth of the eurozone and concludes that lower tax rates and high labor and business freedom enhance a country’s economic growth.
Europe’s Economy and its Market
According to the IMF, Europe reports a GDP of $25.44 trillion and a GDP growth of 1% as of 2023. The GDP per capita in the region is $34,710. The economic growth in Europe is expected to grow at a higher pace in 2024. The economic freedom in the region drives economic growth and fosters a vibrant market. Some of the major players in the market include Accenture plc (NYSE:ACN), Novo Nordisk A/S (NYSE:NVO), and ASML Holding N.V. (NASDAQ:ASML)
Accenture plc (NYSE:ACN) is a leading European multinational company. On November 16, the company announced the acquisition of the New Zealand-based IT services provider, Solnet. The takeover will strengthen Accenture plc’s (NYSE:ACN) cloud and infrastructure engineering offerings in the New Zealand market. More than 100 technologists from Solnet will join Accenture plc (NYSE:ACN) to further expand its offerings.
On November 15, Accenture plc (NYSE:ACN) announced that it had invested in a virtual production and filmmaking company, Vū Technologies. This transaction will help the company provide virtual production capabilities to its clients. Vū Technologies specializes in advanced technologies such as real-time rendering, motion capture, and virtual reality to blend live-action footage and computer-generated content. This investment will help Accenture plc (NYSE:ACN) reach a wider audience by providing them the virtual production facilities in collaboration with Vū Technologies.
Novo Nordisk A/S (NYSE:NVO) is dominating the European market with a market cap of $349.7 billion as of November 23. On November 10, the company announced an investment of 42 billion Danish kroner for the expansion of its manufacturing facilities in Kalundborg, Denmark. The investment will provide additional capacity across the entire global value chain from manufacturing to packaging. The new facility will serve as a multi-product facility. This expansion will help Novo Nordisk A/S (NYSE:NVO) meet future market demands.
ASML Holding N.V. (NASDAQ:ASML) is a top multinational company in Europe, boasting a market cap of $270.22 billion as of November 23. On October 18, ASML Holding N.V. (NASDAQ:ASML) reported earnings for the fiscal third quarter of 2023. The company reported an EPS of $5.07 and surpassed estimates by $0.20. ASML Holding N.V. (NASDAQ:ASML) reported a revenue of $7.03 billion for the quarter. The company’s revenue grew by 24.53% on a year-over-year basis.
Now that we have discussed the concept of economic liberalism and business updates in Europe, which fosters some of the most liberal countries in the world, let’s take a look at the 20 most liberal countries in the world.
20 Most Liberal Countries in the World
Methodology
To rank the 20 most liberal countries in the world, we utilized three metrics: Financial Development Index, Economic Freedom Index, and Ease of Doing Business Ranking.
The Financial Development Index provides an analysis of the depth, access, efficiency, and stability of financial institutions and markets. The FDI database, obtained from the IMF, captures the financial development of 190 economies. The level of financial development in a country is indicative of its economic liberalism and growth. Countries with higher FDI are likely to be more economically liberal.
Our second metric, the Economic Freedom Index is an annual index published by the joint effort of The Heritage Foundation and The Wall Street Journal. The index is a detailed assessment of a country’s economic freedom that utilizes 12 distinct indicators including tax burdens, property rights, financial freedom, trade freedom, rule of law, and government integrity among others.
Our third metric is the ease of doing business obtained from the World Bank. It ranks 190 countries on the basis of business freedom.
Firstly, we filtered the top countries based on the Financial Development Index to compile our list of the most liberal countries in the world and formed a list of the top 60 countries. Then, we employed both the Economic Freedom Index and Ease of Doing Business Ranking to calculate our score. We shortlisted the top 100 countries from both rankings and then calculated the score as follows:
Score for Countries ranked from 1-10: 10
Score for Countries ranked from 11-20: 9
Score for Countries ranked from 21-30: 8
After assigning scores to both our rankings, we finally calculated a weighted average by assigning a 25% weight to ease of doing business and a 75% weight to the Economic Freedom Index. Finally, we ranked the countries based on the calculated score in ascending order.
20 Most Liberal Countries in the World
20. Austria
Financial Development Index (2021): 0.658
Economic Freedom Index Ranking (2023): 23
Ease of Doing Business Ranking (2019): 8
Insider Monkey Rating: 8.00 out of 10
Austria is ranked among the most liberal countries in the world. According to the IMF, it reported a financial development index of 0.658. Austria is ranked 23 on the Economic Freedom Index.
Accenture plc (NYSE:ACN), Novo Nordisk A/S (NYSE:NVO), and ASML Holding N.V. (NASDAQ:ASML) are some of the most prominent stocks in the European market.
19. United Arab Emirates
Financial Development Index (2021): 0.486
Economic Freedom Index Ranking (2023): 24
Ease of Doing Business Ranking (2019): 16
Insider Monkey Rating: 8.25 out of 10
Ranked 19th on our list, the United Arab Emirates reported a financial development index of 0.486 as of 2021. According to the Heritage Foundation, the United Arab Emirates is ranked 24 on the Economic Freedom Index as of 2023
18. Mauritius
Financial Development Index (2021): 0.493
Economic Freedom Index Ranking (2023): 26
Ease of Doing Business Ranking (2019): 13
Insider Monkey Rating: 8.25 out of 10
Mauritius is ranked among the most liberal countries in the world. According to the IMF, it reported a financial development index of 0.493. Mauritius is ranked 26 on the Economic Freedom Index as of 2023.
17. Luxembourg
Financial Development Index (2021): 0.707
Economic Freedom Index Ranking (2023): 7
Ease of Doing Business Ranking (2019): 72
Insider Monkey Rating: 8.25 out of 10
Luxembourg ranks 17th on our list, reporting a financial development index of 0.707 as of 2021. According to the Heritage Foundation, Luxembourg is ranked 7 on the Economic Freedom Index of 2023.
16. United Kingdom
Financial Development Index (2021): 0.836
Economic Freedom Index Ranking (2023): 28
Ease of Doing Business Ranking (2019): 8
Insider Monkey Rating: 8.50 out of 10
The United Kingdom is ranked among the most liberal countries in the world. According to the IMF, it reported a financial development index of 0.836. The United Kingdom is ranked 28 on the Economic Freedom Index as of 2023.
15. United States
Financial Development Index (2021): 0.917
Economic Freedom Index Ranking (2023): 25
Ease of Doing Business Ranking (2019): 6
Insider Monkey Rating: 8.50 out of 10
Ranked 15th on our list, The US reported a financial development index of 0.917 as of 2021. According to the Heritage Foundation, the US is ranked 25 on the Economic Freedom Index as of 2023.
14. Iceland
Financial Development Index (2021): 0.496
Economic Freedom Index Ranking (2023): 19
Ease of Doing Business Ranking (2019): 26
Insider Monkey Rating: 8.75 out of 10
Iceland is ranked among the most liberal countries in the world. According to the IMF, it reported a financial development index of 0.496. Iceland is ranked 19 on the Economic Freedom Index as of 2023.
13. Germany
Financial Development Index (2021): 0.702
Economic Freedom Index Ranking (2023): 14
Ease of Doing Business Ranking (2019): 22
Insider Monkey Rating: 8.75 out of 10
Ranked 13th on our list, Germany reported a financial development index of 0.702 as of 2021. According to the Heritage Foundation, Germany is ranked 14 on the Economic Freedom Index as of 2023.
12. Canada
Financial Development Index (2021): 0.873
Economic Freedom Index Ranking (2023): 16
Ease of Doing Business Ranking (2019): 23
Insider Monkey Rating: 8.75 out of 10
Canada ranks 12th on our list, reporting a financial development index of 0.873 as of 2021. According to the Heritage Foundation, Canada is ranked 16 on the Economic Freedom Index as of 2023.
11. Finland
Financial Development Index (2021): 0.645
Economic Freedom Index Ranking (2023): 11
Ease of Doing Business Ranking (2019): 20
Insider Monkey Rating: 9.00 out of 10
Ranked 11th on our list, Finland reported a financial development index of 0.645 as of 2021. According to the Heritage Foundation, Finland is ranked 11 on the Economic Freedom Index as of 2023
10. Netherlands
Financial Development Index (2021): 0.708
Economic Freedom Index Ranking (2023): 8
Ease of Doing Business Ranking (2019): 42
Insider Monkey Rating: 9.00 out of 10
The Netherlands is ranked among the most liberal countries in the world. According to the IMF, it reported a financial development index of 0.708. The Netherlands is ranked 8 on the Economic Freedom Index.
9. Australia
Financial Development Index (2021): 0.908
Economic Freedom Index Ranking (2023): 13
Ease of Doing Business Ranking (2019): 14
Insider Monkey Rating: 9.00 out of 10
Australia is ranked 9th on our list. According to the IMF, it reported a financial development index of 0.908. Australia is ranked 13 on the Economic Freedom Index.
8. Norway
Financial Development Index (2021): 0.636
Economic Freedom Index Ranking (2023): 12
Ease of Doing Business Ranking (2019): 9
Insider Monkey Rating: 9.25 out of 10
Ranked 8th on our list, Norway reported a financial development index of 0.636 as of 2021. According to the Heritage Foundation, Norway is ranked 12 on the Economic Freedom Index as of 2023
7. South Korea
Financial Development Index (2021): 0.818
Economic Freedom Index Ranking (2023): 15
Ease of Doing Business Ranking (2019): 5
Insider Monkey Rating: 9.25 out of 10
South Korea ranks 7th on our list, reporting a financial development index of 0.818 as of 2021. According to the Heritage Foundation, South Korea is ranked 15 on the Economic Freedom Index of 2023.
6. Switzerland
Financial Development Index (2021): 0.939
Economic Freedom Index Ranking (2023): 2
Ease of Doing Business Ranking (2019): 36
Insider Monkey Rating: 9.25 out of 10
Switzerland is ranked among the most liberal countries in the world. According to the IMF, it reported a financial development index of 0.939. Switzerland is ranked 2 on the Economic Freedom Index.
Investors looking to increase their exposure to the European market can research stocks including Accenture plc (NYSE:ACN), Novo Nordisk A/S (NYSE:NVO), and ASML Holding N.V. (NASDAQ:ASML).
Click to continue reading and see the 5 Most Liberal Countries in the World.
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Disclosure: None. 20 Most Liberal Countries in the World is originally published on Insider Monkey.