World’s best economy 2018: Iceland by an Arctic fox’s whisker

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IAREM top 20 economies (with 2017 IAREM score comparison line)

A new global economic leader has emerged this year, while Australia has fallen even further from the top position it once held. IA’s econometrics specialist Alan Austin reveals the winners and losers for 2018.

ICELAND IS FINALLY benefiting from its draconian responses to the 2007 global financial crash of allowing mass bankruptcies and jailing corrupt executives. It has just generated the world’s best-performed economy.

Iceland skiied ahead of the pack this year with low unemployment – just 1.7% – exceptional economic growth, high economic freedom and the world’s highest median wealth at US$203,847 per adult. (Median wealth reflects fair distribution of the prosperity as well the quantum.)

Most impressively, Iceland has reduced its debt dramatically from 94.7% of gross domestic product (GDP) in 2011 to 42.3% last year. It is on track to have this below 24% by year end.

Singapore came a close second this year, after ranking first last year and second the year before. Hong Kong remained in third place for the second year in a row. These three led the world by a fair margin.

The IAREM score

The Independent Australia ranking on economic management (IAREM) is a composite index which measures the performance of all national economies on eight key indicators.

These are national income per person, GDP growth, median wealth per adult, jobs, inflation, tax levels, government debt and economic freedom. This simple formula can easily be replicated by anyone who has the internet, spreadsheet software and is excited by econometrics:

IAREM = ip + gr + mw + j – in – t – gd + ef

The raw data comes from tables published by the World BankCredit Suisse, Heritage Foundation, the CIA Factbook, the International Monetary Fund (IMF) and This is the world’s only multi-variable index of overall economic performance.

2018 World leaders

Top economies for 2018 (with 2017 scores in brackets) are:

1. Iceland 39.32 (25.37)

2. Singapore 38.72 (36.89)

3. Hong Kong 37.62 (34.15)

4. Brunei 34.86

5. Switzerland 31.42 (34.64)

6. Ireland 28.73 (20.00)

7. Luxembourg 28.57 (31.58)

8. Norway 27.47 (29.14)

9. United Arab Emirates 25.63 (27.95)

10. South Korea 24.53 (23.98)

In the top ten this year are Iceland, Brunei, Ireland and South Korea. Out are Taiwan, Kuwait, Japan and the Netherlands.

The next ten are:

11. Netherlands 23.70 (26.58)

12. Panama 23.36 (19.20)

13. Taiwan 23.21 (28.63)

14. Kuwait 22.80 (27.80)

15. Malta 22.72 (25.15)

16. New Zealand 22.37 (19.52)

17. Germany 22.19 (25.74)

18. Canada 21.93 (24.42)

19. China 21.36 (21.98)

20. Thailand 21.29 (20.40)

The third ten are:

21. Australia 20.97 (22.01)

22. Vietnam 20.40 (19.27)

23. Sweden 20.39 (19.52)

24. Estonia 19.73 (19.06)

25. Czech Republic 19.51 (19.14)

26. India 19.15 (14.86)

27. Bahrain 18.52 (18.03)

28. Lithuania 17.76 (14.26)

29. United States 16.68 (20.49)

30. Israel 16.49 (21.68)

Arriving in the top 30 this year for the first time, or after an absence, are Brunei, India, Bahrain and Lithuania. Out are Japan, Belgium, Denmark and Finland.

Top 30 economies in the world ranked in order by IAREM score: 2018

Top advances in 2018 rankings

Economies which rose most impressively through the ranks this year, besides Iceland, include New Zealand, Ireland, Panama, Vietnam and India.

New Zealand advanced on most variables with the jobless down to 4.5%, economic freedom the highest in the Western world and government debt steadily reducing.

Ireland’s GDP growth soared, its jobless rate fell and its debt position improved markedly. India’s GDP also grew impressively, its income per person increased and the government repaid more debt.

Iceland’s economic history

Iceland has emerged only recently as a successful economy after centuries of relative poverty. Its economy modernised after World War II and boomed in the 1990s and early 2000s as local banks, newly privatised, offered international financial services at absurd rates and rapidly expanded their assets.

The crash of late 2007 then impacted Iceland disastrously. The government could not rescue the banks so let them collapse. This led to a period of extreme hardship for most Íslendingars, with widespread job losses, a seriously devalued currency, rampant inflation, large-scale emigration and tough decisions to be taken by subsequent left-right coalition governments.

Responses included seeking a bail-out from the IMF, selling government bonds to raise funds, prosecuting and jailing bank bosses, controlling capital flows, encouraging tourism and building new government-owned banks from the wreckage. Those decisions now appear vindicated.

Dismal declines in 2018

Economies to have fallen furthest on the IAREM this year include Israel, the USA, the United Kingdom, Belgium and Japan. None of these managed to take advantage of the continuing boom in global trade, investment, jobs and corporate profits.

Australia’s poor performance since the 2013 change of government continues. The decline has been relentless. From top spot in the world from 2011 to 2013, Australia fell to third in 2014, to ninth in 2015, down to 13th in 2016, then 18th in 2017 and now 21st. This is almost certainly the lowest ranking in Australia’s history.

Australia’s debt continues to surge – alone in the OECD with Mexico and the USA – and median wealth fell from US$197,532 per adult last year to $191,453. Inflation and economic freedom both slipped marginally.

Reasons for Australia’s demise as a leading economy have been well-canvassed in the alternative media. The pro-Coalition mainstream media, however, has been silent on the inexorable fall down virtually all global measures.

IAREM recent history

This is the sixth year Independent Australia has published the IAREM, and 2018 is the twelfth year for which rankings have now been compiled. The top economies over that period have been:

2007: Norway

2008: Luxembourg

2009: Australia

2010: Luxembourg

2011: Australia

2012: Australia

2013: Australia

2014: Singapore

2015: United Arab Emirates

2016: Switzerland

2017: Singapore

2018: Iceland

Just one final fun fact from Iceland. The prime minister’s office is an old stone building in Reykjavík known as Stjórnarráðshúsið. This was originally built in the 1700s as a prison. Perhaps this concentrates the mind of legislators today.


1. IAREM calculations are detailed in the 2013 edition. The same caveats apply. See also analyses for 200720142015, 2016 and 2017.

2. Government debt is now drawn from the World Bank’s data ‘Net lending/net borrowing (% of GDP)’. Discontinuation of the previous database necessitated this change.

3. A small number of tiny kingdoms previously excluded were included this year. Hence Brunei’s first appearance.

4. The author and publisher welcome interaction. Readers are urged to join the chat below and at the IAREM Facebook page. Further data will be readily supplied.

You can follow Alan Austin on Twitter @AlanAustin001.

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