Best Countries for Business

Looking for a land of opportunity? The Old World beckons. Despite a sluggish economy, Europe dominates the top of FORBES’ annual ranking of the finest countries for capitalism—with Scandinavia as a particular stand-out. European countries represent two-thirds of the top 25 with Denmark repeating in the lead position of the Best Countries for Business.

The picture isn’t as bright for the U.S., which slides four spots to No. 22. It continues a six-year descent since 2009 when the U.S. ranked second overall. The U.S. is the financial capital of the world and its largest economy at $17.4 trillion (China is second at $10.4 trillion), but it scores poorly on monetary freedom and bureaucracy/red tape. More than 150 new major regulations have been added since 2009 at a cost of $70 billion, according to the Heritage Foundation.

The drop this year by the U.S. can be blamed on a couple of factors. Its rating fell relative to other countries on the World Bank’s measure of investor protection, which is part of the international financial institution’s annual “Doing Business” study. Blame poor scores on the “extent of shareholder governance.” The U.S. also got dinged on the World Banks’ tax component, as well as technological readiness per the World Economic Forum’s “Global Competiveness Report.”

Denmark has ranked first in six of the 10 annual editions of FORBES’ Best Countries list. The country has been in the news in the U.S. lately thanks to Democratic presidential candidate Bernie Sanders, who holds up the nation of 5.6 million people as a model socialist utopia. The country does have one of the highest individual tax burdens in the world in exchange for its wide-ranging services, but it is very much a market-based economy.

Denmark ranked in the top 20 in all but one of the 11 metrics we used to gauge the Best Countries for Business (it ranked 28th for red tape). It scored particularly well for freedom (personal and monetary) and low corruption. The regulatory climate is one of the world’s “most transparent and efficient,” according to the Heritage Foundation.

The $341 billion Danish economy has been listless of late, growing only 1.1% last year and likely not much better in 2015 when the books are closed. A drop in export revenue has been the main culprit, but the foundation is in place for strong economic activity ahead. The Danish stock market is enthusiastic about the country’s prospects. It is up 34% over the past 12 months.

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We gauged the Best Countries for Business by grading 144 nations on 11 different factors: property rights, innovation, taxes, technology, corruption, freedom (personal, trade and monetary), red tape, investor protection and stock market performance. Each category was equally weighted. The data came from published reports from the following organizations: Freedom House, Heritage Foundation, Property Rights Alliance, Transparency International, World Bank Group and World Economic Forum (click here for more details on the methodology).

New Zealand moves up one spot to No. 2 (it ranked first in 2012). The $201 billion economy is the smallest of our top 10 countries, but it has performed well, up 3.3% last year. The country offers a transparent and stable business climate that encourages entrepreneurship. The economy is closely tied to Australia’s. New Zealand gets high marks property rights, monetary freedom, investor protection and low corruption.

Rounding out the top five are Norway, Ireland and Sweden.

While the U.S. fell in our ranking, the world’s next four biggest economies all improved their overall standing. The United Kingdom and Japan both moved up three spots to No. 10 and No. 23 respectively. Germany improved two places to No. 18. China rose from No. 97 to No. 94. The communist nation’s poor ranking can be attributed to low scores on personal and monetary freedom, as well as investor protection and red tape.

The very bottom of the list features a number of emerging markets restrained by high levels of corruption and little freedom. Chad replaces Guinea in last place, a spot Guinea held for three straight years. Chad scored in the bottom five in five of our 11 criteria. The landlocked nation in Central Africa relies on oil for more than half of its exports. Falling energy prices have further hindered Chad, which faces extreme levels of poverty. The rest of the bottom five includes Guinea, Libya, Haiti and Myanmar (click here for more on the worst countries for business).

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