Every year, the Heritage Foundation ranks countries around the world on their economic freedom. It’s a kind of capitalism index.
But analysis shows that the most economically “free” countries also register the highest scores on Yale University’s EPI environmental index, averaging 76.1, while “mostly free” countries averaged 70.2. These two groups have a significant lead over the “moderately free” countries, which received much lower ratings (59.6 points) for their environmental performance.
The countries rated by the Heritage Foundation as either “mostly unfree” or “repressed” received by far the worst Environmental Performance Index scores (46.7 and 50.3, respectively). Researchers at Yale University found that there is not only a correlation between the Heritage Foundation’s index and their own EPI but also between the EPI and the “Ease of Doing Business Index.” That latter index is published each year as part of the World Bank’s “Doing Business Report” and is generally regarded as the world’s most comprehensive and reliable gauge of the ease of doing business.
In 2016, researchers published a study in the journal Sustainability that included an evaluation of the correlation between the EPI and the “Open Market Index” compiled by the International Chamber of Commerce. The OMI measures a country’s openness to free trade and is thus an important indicator of economic freedom. The researchers found a high degree of overlap between the OMI index and the EPI:19 of the OMI’s 27 highest-scoring countries also appear in the top 27 of the EPI. The survey covered a total of 75 countries, including all G20 and European Union members. Together, these countries account for more than 90% of international trade and investment. The researchers found evidence for their “hypothesis that countries with an open economy score higher in environmental performance.”
There are two real-world observations that also disprove the argument that stronger economic growth automatically leads to greater environmental pollution. First, in noncapitalist countries, environmental degradation has been a far more serious problem than in capitalist countries. Second, the correlation between economic growth and increasing resource consumption is becoming ever weaker in the age of dematerialization.
Put simply, these studies point in the same direction: Capitalism is not the problem. It is the solution — both economically and environmentally.
Rainer Zitelmann is a historian, sociologist, and author of the book The Power of Capitalism.
