RESULTS BY SUB-INDICES
The tables may be interpreted both from top to down and from bottom to up. In the first approach economies are ranked from right to left, in the second – from left to right. Higher place of a country in the table means that its economy contains more rightness (self-regulation) and less leftness (governmental regulation). The countries with GDP per capita over 35 thousand international dollars are in colored boxes.
= = =
Public Finance Sub-Index
Table 1. Public Finance Sub-Indices – 2017
Scale 1. Leftness-Rightness of Economies by Public Finance Sub-Index (2017)
By Public Finance Sub-Index Singapore’s economy (0.190) is the rightest one, and economy of Argentina (0.737) is the leftest one among all considered. The three most liberal economies also include Cambodia (0.216) and Macedonia (0.219). Of the developed countries, France (0,596) and Belgium (0.552) most intervene in the economy through government spending and taxes.
The relative center is at point 0.365. 51 countries are located to the right of this point, 44 countries - to the left. The countries with GDP per capita more than 35 thousand international dollars, are located in almost equally to the right and left of the relative center (16 and 17 countries, respectively). Just over half of the developing countries (35 countries out of 62) gravitate to the right pole.
Almost equal distribution of both economically developed and developing countries to the right and left from the relative center leads to the conclusion that there is no strict interdependence between the Public Finance Sub-Index and economic development. In other words, the degree of government intervention in the economy on this parameter is not conditioned by the level of national economic development and is not a condition for it.
In ranking of economies from liberal to dirigist Azerbaijan (0.376) takes 55th position. The sixth ten also includes both countries with high GDP per capita, such as Oman (0.372), Iceland (0.374) and Denmark (0.387), and developing countries such as Latvia (0.363), Lithuania (0.380) and Turkey (0.380).
= = =
Price Regulation Sub-Index
Table 2. Price Regulation Sub-Indices – 2017
Scale 2. Leftness-Rightness of Economies by Price Regulation Sub-Index (2017)
By Price Regulation Sub-Index Azerbaijan’s economy (0.440) is the closest to the extreme left point. Switzerland’s economy (0.066) is the rightest one among the analyzed countries. The countries are almost equally distributed to the right (48 countries) and left (46 countries) from the relative center (0.206). Taiwan's (China) indicator coincides with the relative center.
The price regulation models preferred by developed and developing countries vary considerably. In economically developed countries, prices tend to be more liberal, i.e. governments intervene in the pricing in a lesser extent. 22 countries out of 23 in which the governments interfere least with the pricing processes are in the high-income group.
In general, 27 economically developed countries out of 33 analyzed in this study, are located to the right of the relative center and only 5 to the left. All wealthy countries located on the left side (except the UK) are oil rich Arab countries (Qatar, Kuwait, Saudi Arabia and Oman). Along with them, a number of resource economies considered to be developing (including Russia, Kazakhstan, Iran) are also located close to the left pole.
= = =
Foreign Trade Sub-Index
Table 3. Foreign Trade Sub-Indeces – 2017
Scale 3. Leftness-Rightness of Economies by Foreign Trade Sub-Index (2017)
As in the previous Report, regarding regulation of foreign trade, Singapore’s is the most liberal economy (0.057), and Iranian economy (0.551) is the leftest. The value of the relative center remained practically unchanged (0.243).
Most of the analyzed countries (61 countries out of 95), including the absolute majority of countries with high per capita GDP (30 out of 33 countries) are located to the right from the relative center. Only 3 rich countries, namely South Korea (0.259), Kuwait (0.262) and Saudi Arabia (0.309) are on the left wing. In other words, in the foreign trade regulation, just as in the case of pricing, economically developed countries prefer the liberal economic model. This is quite understandable: the majority of goods and services produced in developed countries are rather competitive in world markets, and therefore their leaders and business communities are more interested in the liberalization of international trade. As for developing countries, they strive to protect their domestic markets harder, although the domestic market protection measures can stimulate economic development only under certain additional conditions.
Among 95 countries, Azerbaijan (0.307) is the 22nd country on severity of the government regulation of foreign trade operations. Some other resource economies, including Russia (0.336), Kazakhstan (0.335), Nigeria (0.419), Venezuela (0.507) and Iran (0.551), are also characterized by rigid government regulation of foreign trade.
= = =
Licensing Sub-Index
Table 4. Licensing Sub-Indeces – 2017
Scale 4. Leftness-Rightness of Economies by Licesing Sub-Index (2017)
By Licensing Sub-Index Georgia's economy (0.034) is the rightest one, and Cambodia occupies the leftest point (0.354) among 95 economies under view. 8 out of 10 countries concentrated on the right pole are rich countries; while from ten countries on the left pole only in Cyprus (0.259) GDP per capita exceeds 35 thousand international dollars. It leads to the conclusion that in rich countries, governments regulate licensing “softer” than in developing countries.
However, by the Licensing sub-Index the distribution of wealthy countries to the right and left from the relative center (0.103) differs significantly from their distribution by price regulation and foreign trade sub-indices. In this case, 9 wealthy countries are located on the left wing, including France (0.107), Belgium (0.111), Austria (0.118), Canada (0.131) and Italy (0.132), along with oil-rich Bahrain (0.109) and Kuwait (0.125).
In the ranking of economies from right to left Azerbaijan (0.133) takes 77th line and it’s 19th country with most rigid regulation of licensing.
= = =
Employment Regulation Sub-Index
Table 5. Employment Regulation Sub-Indices – 2017
Scale 5. Leftness-Rightness of Economies by Employment Regulation Sub-Index (2017)
Regarding regulation of labor relations between employer and employee Singapore (0.146) is the most liberal country, and the leftest economy belongs to Venezuela (0.804)*. It is followed by Sri Lanka (0.593), Ecuador (0.574) and Argentina (0.568), which more than others limit the freedom of companies to hire and dismiss. None of the top ten countries on the left pole is a wealthy state. Nevertheless, a number of economically developed countries, including France (0.470), South Korea (0.469), Italy (0.419) and Sweden (0.414) attach higher importance to the protection of employees’ direct social rights and "in return" rather severely limit the freedom of companies. Some other wealthy countries, in particular, Singapore, Switzerland (0.157), the United States (0,181) and the United Kingdom (0.221), in contrary, provide in this area extensive rights to businesses in cost of limiting the rights of workers. It should be noted that almost all the top ten countries on the right wing have high per capita GDP. The only developing country among them is Georgia (0.265).
On this sub-index, Azerbaijan (0.331) is number 30 among the liberal countries and its economy is to the right from the relative center (0.376).
The obvious concentration of developed countries on the right pole and developing countries - on the left looks somewhat “blurry”, given their numerical distribution on the right and left sides of the relative center. Finland should be ignored, since its Subindex coincides with the relative center. As for the other wealthy countries, 20 of them are on the right wing and 12 on the left. Stochastic ranking of developed and developing economies suggests that “softness or stiffness” (within certain limits) of the state regulation of hiring and firing rules is not a condition for economic development and is not conditioned by it.
* The latest statistics for Venezuela is unreachable; data for the previous year was used.
= = =
Minimum Wage Sub-Index
Table 6. Minimum Wage Sub-Indices – 2017
Scale 6. Leftness-Rightness of Economies by Minimum Wage Sub-Index (2017)
In the United Arab Emirates and Egypt the minimum wage level is regulated neither by law nor collective agreements. The Emir of Qatar has the authority to set a minimum wage, but currently it is not applied. In terms of minimum wage regulation these three states are absolutely liberal and are located at zero point. In January 2014, Singapore has officially established minimum wage for cleaner jobs in the amount of USD 1,000 per month. Since this group of workers is relatively small, Singapore, again as in the previous Report, is conventionally placed at the point "0.010".
In some countries the minimum wage is set only for those employed in the public sector (for instance, in Bahrain only for citizens of the country that work for the government), and in some others (South Africa, Cambodia, Cyprus) – just for a limited categories of employees. These countries are, also conditionally, located at the point “0.050” or “0.080” – depending on the share of public sector employees in total employment. Eight economies (Austria, Denmark, Finland, Iceland, Italy, Norway, Sweden and Switzerland) are placed at the 0.050 point. In these countries a minimum wage is not defined legislatively, but still governed by collective agreements.
All these countries plus Georgia (0.026) and Uganda (0.033), form a group of most liberal states in terms of MW.
Indonesia (0.776) "heads" the left pole. In the top ten of left-wing economies only in Oman (0.635) per capita GDP exceeds 35 thousand international dollars. Among rich countries New Zealand (0.532) and France (0.524) are the leftess ones by this sub-index, in the ranking from left to right they are number 12 and 13, respectively.
As the right pole allowed to certain conventions, the analysis of the deviation of economies from the relative center is of less importance. But these conventions do not affect the leftness-rightness of economies in relation to each other. However, it should be noted that rich countries are almost equally distributed to the left (16 countries) and to the right (17 countries) from the relative center.
Azerbaijan (0.200) is located to the right from the relative center and takes 31st place in the ranking of economies from liberal to dirigiste.
