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Life, Liberty and the Pursuit of… Investment Returns
EMsights Capital Group believes that economic and political freedoms and rule of law are important precursors for the economic development, growth, education and sustainability of sovereign countries. Through our on-the-ground country visits, we follow a country’s pursuit and execution of fair and free elections, civil liberties, functioning of government, and the importance it places on economic freedom.
To supplement our research, we also monitor sources such as Freedom House’s Freedom in the World report and the Heritage Foundation’s Index of Economic Freedom. This helps us understand the world from as many different perspectives as we can and reman abreast of available information.
While both reports provide measures of freedom, they arrive at the results using distinct methodologies that assign varying importance to different facets of freedom.
At a high level, Freedom House and the Index of Economic Freedom often convey similar stories. For instance, both reports indicate a contraction in global freedom in the past year. Freedom House reports a decline in global freedom for the 18th consecutive year, with 2023 seeing a total of 52 countries suffering a decline in freedom and only 21 seeing improvements. The Index of Economic Freedom reports that freedom has fallen to its lowest level since 2001, and there remains a clear link between economic freedom and economic growth.
Occasionally, the nuances of the reports can lead to conflicting outlooks. In the 2024 Freedom in the World report, Thailand experienced the second largest gain in aggregate score, following Fiji. This gain, attributed to competitive parliamentary elections and the formation of a new governing coalition, led to an improved status for Thailand from “Not Free” to “Partly Free” notwithstanding ongoing efforts to dissolve the party that garnered the highest number of votes. On the other hand, the Index of Economic Freedom reported a decline in Thailand’s overall score, citing political instability and the country’s investment climate and economic potential as the primary concerns.
Longer-term trends reveal additional differences in views. For instance, Tanzania has seen one of the largest aggregate declines in the past 10-years according to Freedom in the World, yet its overall rating in the Index of Economic Freedom remains steady to slightly positive over the period. Thailand and Tanzania aren’t merely isolated examples, rather, they represent the idea that freedoms are enjoyed (or not) across a variety of dimensions, both political and economic, and understanding the nuances is important.
Both the Freedom in the World report and Index of Economic Freedom are pieces to the puzzle that shape our perspective on a country. They provide valuable insights that supplement our investment process and broaden our perspective, even when they have conflicting views.
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