For the 31st year in a row, the Heritage Foundation has published the Index of Economic Freedom, otherwise known as the “Capitalism Ranking.” https://www.heritage.org/index/
Nepal’s economic freedom score is 52.5, making its economy the 131st freest in the 2025 Index of Economic Freedom. Last year, Nepal ranked 130th. In the Asia-Pacific region, Nepal ranks 28th out of 39 countries. The country’s economic freedom score is lower than the world and regional averages. Nepal’s economy is considered “mostly unfree” according to the 2025 Index.
The Index states: “The government’s statist approach to the economy seriously weakens economic freedom and development in Nepal. Corruption, a lack of transparency, and a burdensome business approval process impede much-needed expansion of private investment and production. Property rights are poorly protected by the inefficient judicial system, which is subject to substantial political influence. Despite some progress in streamlining the process for launching a business, other time-consuming and costly requirements reduce regulatory efficiency. Labor laws are restrictive. There is a talent drain, especially among educated youth.”
Contrary to the assertions of anti-capitalists, this study on the state of economic freedom in 184 countries proves that more economic freedom, not more state regulation or development aid, is the only effective means to alleviate environmental destruction and poverty.
This conclusion is supported by a comparison of the Index of Economic Freedom with other economic indices, such as Yale University’s Environmental Performance Index. Countries classified as “Free and Mostly Free” in the Index of Economic Freedom have an average Environmental Performance Index score of 61.1, significantly higher than the score for countries classified as “Repressed” (40.6).
Above all, poverty is a problem in economically unfree countries, as a comparison of the United Nations Multidimensional Poverty Index (which includes 104 developing countries) with the Index of Economic Freedom shows. In developing countries classified as mostly or moderately free, the poverty rate stands at 1.8 percent. In contrast, countries categorized as mostly unfree or repressed have a poverty rate of 15.7 percent, nearly nine times higher.
Rarely has a country gained so many places in the Index from one year to the next as Argentina. Ranked 124th out of 184, Argentina is still among the group of countries considered “Mostly Unfree.” In last year’s Index, however, Argentina only ranked 145th, which means it has gained 19 places year-over-year. I suspect this improvement would have been even bigger if data collection for the Index had not ended in June 2024. Argentina’s rapid rise can be attributed to Javier Milei’s economic reforms, which initially led to a temporary increase but have since resulted in a substantial reduction in poverty.
Argentina’s leap up the index surpasses even that of the previous year’s biggest winner, Vietnam, which climbed 13 places in the 2024 index compared to 2023.
In a long-term comparison since 1995, Vietnam has gained 23.5 points, more than any other country of comparable size in the world (the United States has lost more than 6 points over the same period). Although Vietnam was able to gain another 2.4 points this year compared to the previous year, in relative terms it only ranked 61st out of 184 countries. Vietnam is ranked 11th out of 39 countries in the Asia-Pacific region. The country’s economic freedom score is higher than the world and regional averages. Vietnam’s economy is considered “moderately free” according to the 2025 Index. “Capitalizing on its gradual integration into the global trade and investment system, Vietnam’s economy is becoming more market-oriented. However, despite partial privatization of state-owned enterprises, liberalization of the trade regime, and increasing recognition of private property rights, institutional shortcomings still discourage more sustained development.”
Vietnam once again demonstrates the link between economic freedom and poverty. In the early 1990s, nearly 80 percent of the Vietnamese population was living in poverty according to World Bank data, whereas today that number has decreased to less than 4 percent https://www.worldbank.org/en/country/vietnam/overview. It will be interesting to see what impact the radical streamlining of the state apparatus recently announced by Vietnam will have on its ranking in next year’s Index.
Looking at the Index as a whole, little has changed in the top and bottom groups. As in the previous year, the most economically free countries are Singapore, Switzerland, Ireland, Taiwan, and Luxembourg, while Venezuela, Cuba, and North Korea again bring up the rear of the list.
In conjunction with the Index, it is also interesting to analyze the migration patterns
of refugees: for the most part, refugees flee from countries with less economic freedom to countries with greater economic freedom. According to UNHCR data, eight million people have fled socialist Venezuela in recent years https://www.unrefugees.org/news/venezuela-crisis-explained/#:~:text=People%20are%20fleeing%20Venezuela%20in,homes%20in%20search%20of%20safety. Only countries in the grip of war have seen a larger exodus of people. And 90 percent of the people who have stayed in Venezuela are living in poverty https://www.wilsoncenter.org/blog-post/venezuela-more-mere-numbers#:~:text=Inflation%20cooled%20since%20then%2C%20but,was%20living%20in%20extreme%20poverty.
It will be interesting to see next year’s index. This year, the United States ranks as low as 26th. This means that there are 16 European countries that surpass the USA in terms of economic freedom. But that should not be seen as an endorsement of the European countries, where economic freedom is also increasingly under threat. The USA’s lower ranking is primarily due to its extremely high national debt, which is one of 12 criteria used by the Index’s authors to rank countries. Without a reversal of its national debt trend, the United States will struggle to significantly improve its position.
Rainer Zitelmann is the author of the books How Nations Escape Poverty https://nations-escape-poverty.com/ and The Origins of Poverty and Wealth https://origins-poverty-wealth.com/
