Hong Kong is world's freest economy; US slips on freedom score

The most free economy in the world
The most free economy in the world

Hong Kong has retained its title as the world's freest economy for the 22nd year in a row, according to the latest Index of Economic Freedom, even as rising political strife and civil discontent grip the financial hub.

The index—published annually by the Wall Street Journal and think tank the Heritage Foundation—judges economic freedom on four key pillars: rule of law, limited government, regulatory efficiency and open markets.

People in economically free societies earn incomes that more than twice the average levels in all other countries and they live longer too, according to the report released on Tuesday.

"Hong Kong is free because it has a better right to higher wages, longer lives, a better environment—all of that comes with economic freedoms," Ed Feulner, the think tank's founder, told CNBC, noting the city's transformation from a manufacturing-driven economy to one that's now 97 percent service-oriented.

Some of the 'freest' countries on the index were Asian Pacific (APAC) economies: Singapore came in second, with New Zealand at third and with Australia fifth. In fourth place, Switzerland was the sole non-APAC economy in the top five.

The index's global average economic freedom score was 60.7—the highest recorded in the index's 22-year history—as more developing nations, including India, Myanmar and the Philippines, climbed up the rankings.

Declining economic freedom was reported 19 advanced economies, such as the United States, Japan and Sweden.

"With scores in labor freedom, business freedom and fiscal freedom notably declining, the economic freedom of the United States plunged 0.8 point to 75.4, matching its lowest score ever," the Heritage Foundation said.

Economic vs political freedoms

While Hong Kong is known for strong private property rights, openness to global trade and financial flows, its track record in other areas is becoming spotty.

Unsuccessful attempts to set up a standard working hours regime and implement a universal pension scheme remain hot-button issues as residents complain of long working hours, unaffordable housing and costly retirement.

Does HK really want to keep its dollar peg?
Does HK really want to keep its dollar peg?

The city enjoys a high degree of autonomy from mainland China under the 'One Country, Two Systems' principle, but citizens have long protested against rising Chinese interference, culminating in a near three-month long street demonstration in 2014 over the right to nominate candidates for the post of chief executive in 2017. The protests failed to sway Beijing, who will only allow pre-screened, pro-China candidates to stand in next year's election.

Moreover, the recent disappearance of five booksellers ignited worries that China was clamping down on Hong Kong's freedom of expression. Five men connected to a Hong Kong publisher that specialized in books critical of China's ruling Communist Party were reported missing last year, triggering speculation that mainland officials had spirited them across the border as a silencing mechanism.

And data released last week by the International Federation of Journalists' (IFJ) revealed that Hong Kong's press freedom declined last year, citing heightened control by Beijing.

"As Hong Kong goes to elections next year the party is also using its considerable wealth to consolidate its influence over the region," the IFJ said.

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