What the UK and Russia Share

In these days of bitter conflicts between the United Kingdom and Russia, it seems that many have forgotten about all the qualities these two great nations share – such as disappointing scores on the 2008 Heritage Index of Economic Freedom. Thanks to high taxes and a ballooning state, Britain has dropped in the rankings from the elite “fully free” countries (such as Canada, the United States, and Australia) to “partly free” (sharing company with Chile, Denmark, and Estonia). Russia, on its behalf, scored lower than countries such as Bolivia, China, and Niger for its enduring problems with corruption and lack of rule of law. The report reads “The judicial system is unpredictable, corrupt, and unable to handle technically sophisticated cases. Contracts are difficult to enforce, and an ancient antipathy to them continues to impede Russian integration into the West.” See excerpts from the new report after the jump.

From the Russia country page of the 2008 Index of Economic Freedom:

Russia’s economy is 49.9 percent free, according to our 2008 assessment, which makes it the world’s 134th freest economy. Its overall score is 2.5 percentage points lower than last year, one of the largest annual declines, caused by sharply lower scores in trade freedom and business freedom. Russia is ranked 40th out of 41 countries in the European region, and its overall score is much lower than the regional average.Russia has weak or almost average scores in every area. The top individual income and corporate tax rates are relatively low at 13 percent and 24 percent, respectively, but overall tax revenue is relatively high as a percentage of GDP. The labor system is only partially flexible.Russia’s significant weaknesses lie in trade freedom, investment freedom, financial freedom, property rights, and freedom from corruption. Foreign investment in virtually all sectors faces official and unofficial hurdles, including bureaucratic inconsistency, corruption, and outright restrictions in lucrative sectors like energy. Corruption engenders a weak rule of law, which in turn reinforces the transience of property rights and arbitrary law enforcement.

From the United Kingdom country page:

The economy of the United Kingdom (U.K.) is 79.5 percent free, according to our 2008 assessment, which makes it the world’s 10th freest economy. Its overall score is 0.5 percentage point lower than last year, reflecting worsened scores in four of the 10 economic freedoms. The U.K. is ranked 3rd out of 41 countries in the European region, and its overall score is much higher than the regional average.The U.K. scores extraordinarily well in investment freedom, trade freedom, financial freedom, property rights, business freedom, and freedom from corruption. The average tariff rate is low, despite distortionary EU agricultural tariffs, and business regulation is efficient. Almost all commercial operations are simple and transparent, and support for private enterprise is a world model. Inflation is fairly low, and the business climate attracts foreign investment. The financial sector is a world hub. The judiciary is independent and highly trained. Corruption is almost nonexistent, and the labor market is notably flexible.The U.K. scores far below the world average in government size and fiscal freedom. Total government spending equals more than two-fifths of GDP, and tax revenue and rates are very high.