For the 31st year in a row, the Heritage Foundation has published the Index of Economic Freedom, otherwise known as the “capitalism ranking.” 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).

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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%. In contrast, countries categorized as mostly unfree or repressed have a poverty rate of 15.7%, nearly nine times higher.

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. Argentina’s rapid rise can be attributed to President 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, 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,” the report states. “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 alleviation. In the early 1990s, nearly 80% of the Vietnamese population was living in poverty, according to World Bank data, whereas today that number has decreased to less than 4%. 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.

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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 United Nations High Commissioner for Refugees data, 8 million people have fled socialist Venezuela in recent years. Only countries in the grip of war have seen a larger exodus of people. And 90% of the people who have stayed in Venezuela are living in poverty.

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 U.S. 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 U.S.’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 U.S. will struggle to improve its position.

Rainer Zitelmann is the author of How Nations Escape Poverty, nominated for the Hayek Book Prize 2025.