Status of Democracy and Market Economy
The Status Index explores the state of development achieved by 128 countries on their way to democracy under the rule of law and a market economy flanked by sociopolitical safeguards. In contrast to minimalist definitions of electoral democracy, the BTI's understanding of democracy includes the rule of law and representativeness.
Development in our understanding entails not only economic growth, but also overcoming poverty while extending freedoms of action and choice to the largest possible share of the population. The underlying BTI concept of a socially responsible market economy implies not only free markets and property rights, but also principles of social justice, equal opportunities and sustainability.
We consider democracy and a market economy interdependent and mutually reinforcing and therefore aggregate the respective ratings into a single Status Index. Neither does this imply that there is only one path of transformation nor that economic transformation has to precede democratic transformation or vice versa. But sustained economic growth and effective poverty reduction require a government that is transparent, non-corrupt, and responsive to the needs of its people. Only a democracy based on the rule of law can ensure the equal playing field for all citizens that is essential to sustained development. On the other hand, only a market economy flanked with sociopolitical safeguards can provide all citizens with opportunities to realize their potential in the open marketplace of goods and ideas that is essential to a prosperous democracy.
Political Management of Transformation
The BTI's key innovation is its focus on the steering and management of development and transformation processes. The Index reviews and evaluates the reform activities of political decision makers, thus providing valuable information on the key factors of success and failure for states on their way to democracy and a market economy. Governments must be determined in pursuing their goals, they must be prudent and effective in using their resources, and they must combine the capacity to govern with consensus-building while cooperating reliably with neighboring states and external support organizations. The BTI is the only ranking worldwide to focus so thoroughly on political leaders' management performance with self-collected data.
The level of difficulty evaluation accounts for the fact that the quality of transformation management is shaped by each state's unique structural conditions. The more adverse a country's structural conditions and the more limited its available resources, the higher good governance is scored in the Management Index.»