Every year, I look forward to the annual releases of both Economic Freedom of the World and the Index of Economic Freedom. With their comprehensive rankings, these two publications enable interested parties to compare nations and see which countries are moving in the right direction.
As an American, I’m ashamed to say that these publications also show which nations are moving in the wrong direction. And the United States ranks poorly by this metric, having dropped from 3rd place to 10th place since 2000 according to Economic Freedom of the World.
The United States also has dropped to 10th place in the Index of Economic Freedom, and is now ranked only as a “mostly free” nation.
Some people dismiss these pieces of data because the two rankings are considered to reflect a pro-free market bias.
The United States took the top spot in the WEF’s Global Competitiveness Index as recently as 2007 and 2008, but then dropped to 2nd place in 2009.
I think Bush bears the full blame for that unfortunate development. But the decline has continued in recent years, and Obama deserves a good part of the blame for the drop to 4th place in 2010.
The United States then fell to 5th place last year, in part because of horrible scores for “Wastefulness of Government Spending” (68th place) and “Burden of Government Regulation” (49th place).
Given this dismal trend, I opened the just-released 2012 Report with considerable trepidation. And my fears were justified. The United States has now dropped to 7th place.
Here is some of what was said about America.
The United States continues the decline that began a few years ago, falling two more positions to take 7th place this year. Although many structural features continue to make its economy extremely productive, a number of escalating and unaddressed weaknesses have lowered the US ranking in recent years. …some weaknesses in particular areas have deepened since past assessments. The business community continues to be critical toward public and private institutions (41st). In particular, its trust in politicians is not strong (54th), perhaps not surprising in light of recent political disputes that threaten to push the country back into recession through automatic spending cuts. Business leaders also remain concerned about the government’s ability to maintain arms-length relationships with the private sector (59th), and consider that the government spends its resources relatively wastefully (76th). A lack of macroeconomic stability continues to be the country’s greatest area of weakness (111th, down from 90th last year).
For people who like to look at the glass as being 1/10th full, the United States does beat Portugal (116ht place) in the score for macroeconomic stability.
Here are a few additional highlights. Or lowlights might be a better word.
- The United States scores 42nd in property rights, behind Namibia and Uruguay.
- The United States ranks 59th in government favoritism, behind Guinea and Bolivia.
- The United States scores 76th in wastefulness in government spending, behind Mali and Nicaragua.
- The United States also is 76th in the burden of government regulation, behind Kenya and Thailand.
- The United States scores 69th in extent of taxation, behind Gambia and Ethiopia.
- The United States ranks 103rd for total tax rate, behind Greece (!) and Philippines.
Now time for some caveats. The WEF report is based on survey results, for better or worse, and it also probably is best characterized as a measure of the attitudes of the business community rather than an estimate of economic freedom.
Regardless of limitations, though, it is a good publication. As such, it is downright embarrassing to see the United States fare so poorly in key indices—particularly when third-world nations score better.
We know that small government and free markets are the keys to prosperity. Bush took us in the wrong direction, however, and Obama is repeating his mistakes.
So don’t be surprised to see the American score decline further as additional reports are issued.