Wealth, Economic Freedom And Environmental Sustainability

September 24, 2002

The environmental sustainability index (ESI) is based on 20 indicators and 68 related variables that allow cross-national comparisons of rates of nonrenewable resource use and other environmental policies in countries worldwide. The index scores range from 0 to 100 with 100 being optimal sustainability.

Researchers have determined the ESI scores of 142 countries. Comparing ESI scores with per capita gross national income (GNI), we find that wealthier developed countries tend to score higher than poor undeveloped countries. Furthermore, ESI scores can be compared with the Heritage Foundation/Wall Street Journal Index of Economic Freedom (IEF), which scores each country on a scale of 1 to 5, with 1 representing the freest countries. (IEF scores are determined by looking at, among other factors, each countries fiscal burden, trade practices, government intervention and regulation.)

Comparing the indices, we find:

  • Countries such as Finland, Sweden and Switzerland with high environmental sustainability index scores (73.9, 72.6 and 66.5, respectively) also rank among the countries with the highest annual per capita GNI ($25,130, $27,140 and $38,140), and are among the economically freest countries (with index scores of 1.95, 2.05 and 1.90).
  • Countries ranking in the middle range of ESI scores (around 50), such as Algeria, Russia and Egypt, are poorer (GNI of $1,580, 1,690 and $1,490) and less economic freedom (3.10, 3.70 and 3.55).
  • The lower end of the ESI scale includes impoverished countries such as Haiti, Ukraine and Turkmenistan (GNI, $510, $690 and $750) and little economic freedom (3.80, 3.85 and 4.40).

This comparison shows there is a connection between a country's wealth, economic freedom and environmental sustainability. This suggests that the best strategy for sustainable development is free markets and liberal democracy.

Source: Steven F. Hayward, "Sustainable Development in the Balance," Environmental Policy Outlook, August 2002, American Enterprise Institute, 1150 Seventeenth Street, N.W., Washington, DC 20036, (202)862-5800.


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