AEI Animated chart of the day: Economic freedom in Venezuela vs. China, Cuba, USA and the world average, 1995 to 2019 The animated “bar chart race” visualization above shows the trends over time from 1995 to 2019 in the annual Heritage Foundation’s Index of Economic Freedom for the US, China, Venezuela, and Cuba along with the world average score. According to the Heritage Foundation, its Index of Economic Freedom is: Based on 12 quantitative and qualitative factors, grouped into four broad categories, or pillars, of economic freedom: Rule of Law (property rights, government integrity, judicial effectiveness) Government Size (government spending, tax burden, fiscal health) Regulatory Efficiency (business freedom, labor freedom, monetary freedom) Open Markets (trade freedom, investment
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The animated “bar chart race” visualization above shows the trends over time from 1995 to 2019 in the annual Heritage Foundation’s Index of Economic Freedom for the US, China, Venezuela, and Cuba along with the world average score. According to the Heritage Foundation, its Index of Economic Freedom is:
Based on 12 quantitative and qualitative factors, grouped into four broad categories, or pillars, of economic freedom:
- Rule of Law (property rights, government integrity, judicial effectiveness)
- Government Size (government spending, tax burden, fiscal health)
- Regulatory Efficiency (business freedom, labor freedom, monetary freedom)
- Open Markets (trade freedom, investment freedom, financial freedom)
Each of the twelve economic freedoms within these categories is graded on a scale of 0 to 100. A country’s overall score is derived by averaging these twelve economic freedoms, with equal weight being given to each.
The main goal of the visualization is to understand and chart the decline of economic freedom in Venezuela following the failed Bolivarian Revolution that was ushered in by socialist Hugo Chavez after his landslide victory to the presidency in December 1998. Here are some observations:
1. In 1995 when the Index of Economic Freedom for the world’s nearly 200 countries was first calculated by the Heritage Foundation, Venezuela’s overall score of 59.8 was slightly higher than the world average that year of 57.6. But in all subsequent years, Venezuela’s score was below the world average.
2. Venezuela’s economic freedom score remained above communist China’s until 2004, when it fell below China and remained there through the end of the series in 2019.
3. By 2017 as Venezuela’s economy continued to collapse under the burden of failed economic policies that socialist dictator President Nicolas Maduro continued when he assumed office in 2013 following Chavez’s death as Chavez’s hand-picked successor, Venezuela’s economic freedom score fell below Cuba’s for the first time. In 2018, Venezuela’s economic freedom fell to a 24-year low of 25.2, and its score was nearly 7 points below Cuba’s score of 31.9. This year, Venezuela’s score improved slightly to 25.9 with a small improvement in labor freedom outpacing a decline in business freedom, but the failing socialist country ranked No. 179 out of 180 countries and below all other countries except for North Korea!
4. Over the entire 25-year period, Venezuela’s economic freedom score fell by nearly 34 points from 59.8 in 1995 to 25.9 this year, at a rate of more than a one point decline every year. I think it’s safe to say that no other country in the world experienced such a large decline in its economic freedom over the last quarter century as Venezuela, which is another way of saying that no other country in the world experienced such a significant increase in failed democratic socialism in recent decades. And no other country has experienced the increase in human misery that can be blamed on Venezuela’s socialism.
According to Heritage’s country report on Venezuela:
Venezuela’s economic freedom score is 25.9, making its economy the 179th freest in the 2019 Index. Venezuela is ranked last among 32 countries in the Americas region, and its overall score is well below the regional and world averages. Venezuela’s once-modern economy has collapsed into a sort of 21st century feudalism. Monetization of large public deficits, coupled with mismanagement of the state-dominated oil industry, has led to hyperinflation and shortages of foreign currency, basic goods, and industrial inputs. An economic plan launched in August 2018 included the removal of five zeroes from the currency, a massive devaluation, and another large increase in the minimum wage amid persistent ad hoc policy interventionism, heavy state control of the economy, and blatant disregard for the rule of law.
MP: Venezuela is experiencing an unprecedented and man-made humanitarian crisis that has resulted from the gradual erosion of economic freedom over the last 20 years that is clearly shown in the animated chart above. In what’s been described as the largest exodus in Latin America in a hundred years, more than three million people—about 10% of the population—have fled socialist Venezuela as a result of the political instability, chronic shortages food and medical supplies, hunger, hyper-inflation, life-threatening diseases like malaria, poverty, and soaring crime rates. Ironically, Venezuela’s economic downfall is a tragic story of human misery that resulted directly from numerous failed socialist policies that are somehow now gaining popularity in the United States: socialized health care replacing private health care, free college, strict gun control laws, minimum wage legislation, and various attempts to address income inequality.