An annual survey of economic freedom shows despite the constant threat of Islamist terrorism, overall the world is moving toward greater liberty.

The 2004 Index of Economic Freedom, released yesterday by the Heritage Foundation and The Wall Street Journal, shows the continuation of an encouraging trend in Europe, with seven more countries indicating an increase in freedom than a decline.

Reflecting on the 10 years of the index’s existence, the publishers note “former Eastern bloc countries are now among the most economically free, and former leaders of the industrialized world have slipped in the standings.”

Seven of the world’s 10 most liberal economies are in North America and Europe, but the top three are in the Asia-Pacific region – Hong Kong, Singapore and New Zealand.

They are followed, in order, by Luxembourg, Ireland, Estonia, the United Kingdom, Denmark, Switzerland, the United States, Australia, Sweden, Chile, Finland, Cyprus and Canada.

The index shows worldwide, economic freedom has improved in 75 countries, declined in 69 countries and remained the same in 11.

Among the 155 countries ranked, the survey classifies 16 as “free,” 55 “mostly free,” 72 “mostly unfree,” while 12 remain “repressed.”

The index is based on 10 categories, from fiscal burdens and government regulation to monetary and trade policy.

It indicates that despite an overall trend toward more economic freedom, property-rights protection has declined overall in the past three years.

“Secure property rights help explain why Hong Kong and Singapore enjoy annual per capita incomes of better than $24,000 while Zimbabwe, where property rights have been trampled, has an annual per capita income of $559,” writes Index co-editor Mary Anastasia O’Grady in the Wall Street Journal. “Indeed, this correlation is but a subset of the wider conclusions shown in the Index. To wit, that the best path to economic development and rising living standards is the one paved with economic freedom.”

The Journal points out tax competition has put pressure on Western Europe’s welfare states, driving down corporate tax rates. A number of the former Soviet bloc countries also have enacted flat taxes.

Ireland, the region’s second-freest economy, and a major draw for U.S. investment, has a 12.5 percent corporate rate, which contrasts sharply with the European Union average of 30 percent.

The index shows Europe’s most impressive performer, however, is the Slovak Republic for its “reduced taxes, liberalized prices, accelerated pace of privatization and restructured banking sector.”

The country, formerly the eastern part of Czechoslovakia, consequently has seen an increase in foreign investment and a banking sector dominated by foreign capital.

While the Asia-Pacific region is home to the world’s three freest economies, the majority of countries in the region remain “mostly unfree.”

Sub-Saharan Africa also is “mostly unfree,” with 30 out of 42 countries in that category.

Zimbabwe is the worst African performer, ranking 153rd.

Nevertheless, 21 African countries improved their scores this year.

North Africa and the Middle East, however, showed no net gain or loss.

In Latin America, 11 countries improved their rankings but 13 declined.

Argentina and Venezuela, where President Hugo Chavez has formed close ties with Fidel Castro’s Cuba, showed the regions greatest decline in economic freedom. Venezuela now is in the bottom category, “repressed.”

The “repressed” economies, in descending order of rank, are Cuba, Belarus, Tajikistan, Venezuela, Iran, Uzbekistan, Turkmenistan, Laos, Burma, Zimbabwe, Libya and North Korea.

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