New Estimates of the Economic Independence Index: Is Economic Independence Necessary for Sustaining Economic Growth?

Abstract

Is economic independence necessary for sustaining economic growth? In the past, political—and therefore economic—independence was a prelude to economic growth. With most countries gaining their political independence in the twentieth century, countries’ economic independence was understated assuming its existence with the end of colonialism. Yet economic independence began to be increasingly circumscribed by measures and pressures imposed by the more powerful countries, multinational corporations and international organizations on the less powerful countries. Due to the rising importance of economic independence, the first composite index to quantify it, with its two versions EII-1 and EII-2, was published in 2017 and estimated values for economic independence for some selected countries for the period 2010–2013. This study aims to measure the levels of economic independence for 104 of these selected countries for the period 2014–2019 using the 2017 index, and compare the countries’ scores in the two periods. The Russian Federation topped the two indexes making it without dispute the strongest economically independent country. As economic growth proved to be contingent on real economic independence, countries may need to assess their vulnerability or resilience to external economic shocks through their new scores in the EII in order to sustain economic growth.

Keywords:

• economic growth
• economic independence
• composite indices
• cross-country studies
• tariffs
• sanctions

JEL Classification Codes:

• C43
• C82
• F01
• F43
• H10
• O57

Notes

1 The original intention of this study was to estimate new scores of economic independence for all 112 countries that appeared in Helmy’s study. However, some data for some countries was unavailable for the new period to be estimated. Accordingly, this study assesses estimates of the economic independence indexes for only 104 countries out of the original 112 countries of the previous study.

2 For a detailed description of the sources of the data for each indicator see Helmy (2017, appendix tables A1, A2, and A3).

3 The equation is: where I_q,c is the sub-index for indicator (q) of country (c). For some indexes the formula was inverted to make higher values better.

4 As there are originally six indicators used to the build both versions of EII, taking the geometric mean of all six seems more plausible. However, since the sixth indicator (having the veto power in UN Security Council) had zero values for all selected countries with the exception of the five permanent members of the UN Security Council, taking the geometric mean by multiplying the six indexes and taking their sixth root would have resulted in zero values for all selected countries less five. Accordingly, the veto power index was excluded from EII-2 following Helmy, and the geometric mean of the remaining five indexes was calculated. There was another logical reason for excluding the veto power index in that its effect is not only confined to the big five, but to their allies who may benefit from their alliance with them to secure greater economic independence (See Helmy 2017).

5 As mentioned earlier, the figures here relate to the latest year possible in each of the two periods 2010–2013 and 2014–2019.

Additional information

Notes on contributors

Heba E. Helmy

Heba E. Helmy is Professor of Economics, Economics Program Leader, and Head of the Finance and Investment Management Department at the Faculty of Management Sciences, October University for Modern Sciences and Arts (MSA), 6th of October City, Egypt.