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New Zealand, Switzerland, Denmark and Finland are Still the World Champions in Institutional Quality; Chile is Still Ahead in Latin America

May 23, 2017 6:06 pm A+ / A-

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 The results of the 2017’s Index of Institutional Quality, carried out by Martín Krause, confirm once again that the world champions for institutional quality are still the same: New Zealand, Switzerland, Denmark and Finland. Within the Americas, the winners are The US, Canada and Chile.

 Academic Martín Krause elaborates the Index of Institutional Quality for 191 countries since 2007. The results were later extended to 1996, meaning his measurements span 22 years of comparative analysis. This index averages 8 internationally prestigious measurements for Rule of Law, Voice and Accountability, Perception of Corruption (taken from Transparency International), Economic Freedom (taken from both Heritage and Fraser), Freedom of the Press, Competitiveness and Doing Business (taken from the World Bank’s Doing Business index).

  It should be noted that this edition of the Index reflects the perceptions and measurements captured in 2016, which means it shows a certain delay.

 “The world is in turmoil, but this hasn’t yet filtered through to its institutions. Nevertheless, there is tension in the air and institutions in many countries are confronted with a challenging situation. They must prove that they are capable of fulfilling their role and preserving the fundamental elements that have enabled social progress on an unprecedented scale. Populism is on the rise and some populist leaders like Donald Trump are even in government, while in Europe others are waiting for their chance. Interestingly, however, in Latin America their position has grown weaker. Consequently, the time has come for republican institutions to show that they can curb this trend” Klause explains. “There is no denying this very real and present danger. Nevertheless, at least for the time being, none of the leading countries in the index have suffered a significant decline in institutional quality. With the exception of Lithuania, which climbed seven places, none of the top 25 countries in the IQI has gone up or down by more than two places. The four countries that have topped the institutional quality table for the past twenty years continue to do so, the only difference being that this year Switzerland is replaced by New Zealand in the first position.” According to Krauze populism remains a threat, but the republican institutions in the countries with the highest institutional quality still resist.

  After New Zealand, Switzerland, Denmark and Finland the best students are the Netherlands, Norway, Canada, the UK, Ireland, Australia, Germany, the US, Luxemburg, Estonia, Austria, Hong Kong, Belgium, Iceland and Taiwan. The American Cup, meanwhile, goes to Chile, that occupies the 24th position. If the continent is taken as a whole, the podium is completed with the US and Canada.

  The worst students don’t show much variation either. The club of the 20 worst countries in terms of institutional quality is formed by Cuba, Myanmar, Iraq, both Congos, Zimbabwe, Angola, Yemen, Afghanistan, Sudan, Chad, the republic of Central Africa , Syria, Venezuela, South Sudan, Equatorial Guinea, Libya, Turkmenistan, Eritrea, Somalia and North Korea. North Korea has the unfortunate privilege of occupying the last position ever since the index was established.

Overview of the Americas and Argentina

 When we consider the setbacks of the past we can see distinct falls, but it’s more impressive to observe what has happened since 1996 or since 2007. In the first group we find countries that share a “Bolivarian spirit”. They all fell, 105 positions in the case of Bolivia, 94 for Argentina, 78 for Ecuador and 75 for Venezuela. As dramatic as this is, like we can see in daily news from Venezuela, there are worst cases like Haiti, that lost 42 positions, or Cuba, 29.  With a few small changes they were always last.

 After the populist government ended in 2015, Argentina seems to be reversing a 14-year trend. This is not a circumstantial improvement but a first step in what could be a long-term tendency. In fact, this year’s improvement still does not fully show the changes our country went through during 2016, which will be more visible from 2018 onwards since basic statistics take time to produce. Furthermore, what happened in the country, taking into account its size and relative political weight, may signal a trend that could turn the scales between the two socioeconomic models that have been in conflict this last few decades, between countries that want to strengthen their institutions and  participate in international trade and those that are closer to XXIst Century Socialism.

For a little more detail, if we analyse Argentina’s performance in each indicator we can see most of them have gotten at least slightly better. Those that measure economic freedom are the exception, but its data that takes longer to collect and, in the case of Fraser’s, shows a fall because it refers back to 2014.

Argentina 2016 2017 Change
Rule of Law 171 163 +8
Voice and Accountability 85 84 +1
Freedom of the Press 107 104 +3
Corruption 107 95 +12
Competitiveness 106 103 +3
Economic Freedom -Heritage 169 169 0
Economic Freedom- Fraser 149 156 -7
Doing Business 121 116 +5

 Corruption is the measure that improved the most. On one hand, it improved because of the advancements that took place in 2016 and, on the other, because it is the most recent measurement. Respect for the Rule of Law also improved significantly, as did Doing  Business.

Comparison of the Performance of American Countries

2017 1996/2017 2007/2017 1 año
Canada 8 -1 3 -3
Estados Unidos 13 -4 0 0
Chile 24 -2 -2 -2
Costa Rica 35 -10 19 -3
Santa Lucía 36 -11 -5
Bahamas 39 -22 -16 -1
Uruguay 41 0 9 -2
Dominica 45 -1 0
Barbados 47 -19 -15 -4
Jamaica 55 -19 3 1
Panamá 56 -22 12 5
Perú 67 16 13 -5
Antigua and Barbuda 73 -22 6
San Kitts and  Nevis 75 -28 -9
Colombia 82 15 18 -5
Trinidad and Tobago 83 -51 -20 -16
El Salvador 89 -32 -24 -9
Grenada 92 -33 2
México 93 -11 -18 -7
Dominican Republic 97 -25 17 1
Belice 100 -58 -44 -7
Suriname 102 -8 -5 5
Brasil 104 -3 -14 -5
Guatemala 108 -33 1 -2
Guyana 117 -37 -6 10
Paraguay 120 -57 8 -1
Nicaragua 124 -39 -29 -10
Honduras 127 -51 -14 -5
Argentina 138 -94 -45 4
Bolivia 145 -105 -27 -6
Ecuador 148 -78 -15 -8
Haití 161 -42 4 4
Cuba 171 -29 -7 0
Venezuela, RB 184 -75 -23 0

 In the Western Hemisphere, Canada occupies the first place in 5 of the measurements that make the index (Rule of Law, Corruption, Voice and Accountability and both measurements of Freedom of Economics). The US leads in term of Competitiveness and Doing Business. It also shares the first place in terms of Freedom of the Press with Costa Rica, and St. Vicent and the Grenadines. It is remarkable that Canada holds good positions for Rule of Law, functioning as a well-functioning democracy and Free Trade. Venezuela holds the last place for 5 of these measurements (Rule of Law, Corruption, Competitiveness and Economic Freedom according to Fraser). Cuba holds the last position for the other three (Voice and Accountability, Freedom of the Press and Economic Freedom according to Heritage), although in this case we have to take into account the fact that not every index used includes Cuba. If we take into account only Latin American countries, Chile holds the first position in four measurements (Rule of Law, Competitiveness and both Economic Freedom measurements). Costa Rica leads in both Freedom of the Press and Voice and Accountability. Uruguay is first in terms of Perception of Corruption and Mexico in Business Friendliness. It is also noticeable that the region is not particularly good for businesses, since those who lead in international competitiveness and friendliness to business have relatively low scores when compared to those who lead in other regions.

 The region as a whole has its worst average in Competitiveness, followed by Doing Business and Rule of Law. It does best at Freedom of the Press and Voice and Accountability.

 The following table shows the performance of different Latin American countries regarding free markets and republican institutions:

Country Political Country Market
9 Canadá 0,9398 6 United States 0,9495
18 United States 0,8708 8 Canadá 0,9274
19 Barbados 0,8607 23 Chile 0,8392
23 Saint Lucia 0,8326 42 Costa Rica 0,7109
24 St. Vicent and the Grenadines 0,8265 48 Panamá 0,6852
26 Uruguay 0,8158 49 Saint Lucía 0,6724
28 Bahamas 0,8102 50 Perú 0,6597
29 Costa Rica 0,8021 59 Bahamas 0,6285
30 Chile 0,8003 62 México 0,6194
38 Dominica 0,7813 64 Jamaica 0,6093
40 Saint Kitts and Nevis 0,7687 66 Colombia 0,5953
50 Grenada 0,6971 67 Dominican Republic 0,5908
56 Antigua and Barbuda 0,6669 71 Uruguay 0,5815
61 Jamaica 0,6390 72 Guatemala 0,5804
66 Suriname 0,6154 74 Saint Vicent and the Grenadines 0,5641
69 Belize 0,5938 83 El Salvador 0,5332
71 Trinidad and Tobago 0,5815 88 Barbados 0,4950
76 Panamá 0,5588 89 Dominican Republic 0,4923
78 Brazil 0,5482 96 Trinidad y Tobago 0,4560
88 Guyana 0,4868 98 Honduras 0,4474
94 El Salvador 0,4735 106 Nicaragua 0,4202
98 Perú 0,4595 108 Antigua y Barbuda 0,4105
100 Dominican Republic 0,4490 112 Paraguay 0,3982
102 Colombia 0,4465 117 Brazil 0,3312
104 Argentina 0,4358 118 Belize 0,3304
121 Bolivia 0,3587 125 Saint Kitts and Nevis 0,3000
126 México 0,3437 132 Grenada 0,2789
127 Paraguay 0,3396 134 Suriname 0,2721
135 Nicaragua 0,3026 137 Guyana 0,2652
143 Ecuador 0,2769 141 Ecuador 0,2447
148 Guatemala 0,2670 145 Haití 0,2333
149 Cuba 0,2644 159 Argentina 0,1806
151 Honduras 0,2517 160 Bolivia 0,1727
157 Haití 0,2227 185 Venezuela, RB 0,0274
180 Venezuela, RB 0,0942 189 Cuba 0,0112

  Canada and the Unites States exchange leadership in one measurement or another and the Caribbean Island have better political results than economic ones. Others, like Chile, Guatemala or Mexico have a better economic performance. A detailed analysis of each case, along with the performance at the different areas studied, would highlight which areas require attention and which have to be reformed in each country.

Conclusion:

  The institutional panorama in Latin America and those countries which have the strongest institutions shows a somewhat opposite situation. Latin America seems to be on the verge of improving after populist models have exhausted. On the other hand, the institutional frame in more developed countries seems threatened by the advancement of the same populism Latin America seems to be leaving behind. Curiously, Chile, the Latin American country with the best institutional quality, shows signals similar to those in countries with similarly developed institutions. Populist pressures are strong and after years of stability it has began to fall, even if at the moment they are not particularly harsh.  However, we don’t expect a movement of confluence by which countries which are now performing poorly will go up and those who are up will go down, converging somewhere around the middle since they all benefit from a general improvement.

 * The whole study is available here.

1 To be included in the index a country has to be ranked in at least 4 of the indices considered, and at least once in each sub-index (politics and market).

 

New Zealand, Switzerland, Denmark and Finland are Still the World Champions in Institutional Quality; Chile is Still Ahead in Latin America Reviewed by on .  The results of the 2017’s Index of Institutional Quality, carried out by Martín Krause, confirm once again that the world champions for institutional quality a  The results of the 2017’s Index of Institutional Quality, carried out by Martín Krause, confirm once again that the world champions for institutional quality a Rating: 0

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