The U.S. has slipped markedly in economic freedom since the year 2000

WASHINGTON — Economic freedom around the world remains on the rise but it has declined notably in the U.S. since the year 2000, according to an authoritative study released today by the Cato Institute and Canada’s Fraser Institute.

In 2000 the U.S. was the second-freest economy listed in Economic Freedom of the World, an annual report written by James Gwartney from Florida State University and Robert Lawson from Auburn University. This year the U.S. has fallen to 8th place, behind Hong Kong (ranked in first place), Singapore, New Zealand, Switzerland, the United Kingdom, Chile, and Canada.

More significant than the U.S.’s drop in the rankings is its fall in the freedom ratings: on a scale of 0-10, the U.S. fell from 8.55 in 2000 to 8.04, according to the Economic Freedom of the World Report: 2008 Annual Report.  Only five countries have experienced a greater decline over the same time period: Zimbabwe, Argentina, Niger, Venezuela, and Guyana.

“The rule of law, government spending, and regulation are the areas where the United States saw the most troubling declines in its ratings this decade,” observes Ian Vasquez, director of Cato’s Center for Global Liberty and Prosperity.

Economic Freedom of the World ranks 141 countries on a range of factors in five broad areas: 1) size of government; 2) legal structure and security of property rights; 3) access to sound money; 4) freedom to trade internationally; and 5) regulation of credit, labor and business.

As the eradication of global poverty is a major concern in the world today, this year’s report includes a chapter investigating the connection between economic freedom and poverty. Using various measures of poverty, the chapter’s authors, Dr. Gwartney and Seth Norton from Wheaton College, found a strong positive relationship between economic freedom and poverty reduction.

Based on their findings, Gwartney and Norton conclude: “Good intentions alone will not reduce poverty. As they reflect on their actions, the planners working towards meeting the Millennium Development Goals must focus on economic freedom and growth. If they fail to do so, the results, tragically, of the project are virtually certain to be disappointing.”