Politics & Policy

In Comparative Economic Freedom, the U.S. Is in 16th Place

(Dreamstime image: Roman Lipovskiy)
America’s commitment to free-market principles has been slipping in the last decade.

Hooray, we’re number . . . 16!?

The latest Index of the Economic Freedom of the World was released last week, and the United States held its ranking as the 16th freest economy (see page 8 of the report), the same ranking as last year. I suppose it could have been worse.

The Economic Freedom of the World report is put together every year by a consortium of more than 70 think tanks from around the world. It rates countries on a variety of policies from the size of government and the tax and regulatory burden to the soundness of the money supply and property rights. And, given the link between economic freedom and growth, it tells us a great deal about our ability to prosper.

In 2000, the United States ranked second in the world when it came to how free we were to buy and sell, to hire and fire, to run our businesses and conduct other economic activities free of government interference. As recently as 2009, we were still in the top ten. Now we are tucked between Lithuania and Malta. The top four positions are held by traditional free-market economies Hong Kong, Singapore, New Zealand, and Switzerland. But Americans may be shocked to know that Canada finishes at number five. We may love to make fun of our neighbor to the north. But they are increasingly moving in the right direction, while we are becoming less free. Other countries that beat us now, include Ireland, Australia, the United Kingdom, and Chile.

The U.S. has tumbled in a number of specific measures as well as in the overall ranking. On size of government, we now rank 78th. For all the talk about European socialism, we now have a bigger government than much of Europe. On regulation, we do better, but we’ve still fallen from second in the 2003 report to eighth today. And for all the political chest-beating about how we are losing trade wars, the U.S. is hardly a bastion of free trade. We now rank 60th in the world, not all that far away from Donald Trump’s bête noire, Mexico, which comes in at 67th place. Even the soundness of the dollar has declined. In the 2005 report, we ranked first in terms of monetary soundness. Today, following years of rising debt and quantitative easing, we are 40th.

Perhaps most frightening of all, when the report was first issued in 1980, our legal system and respect for property rights were the best in the world. We stayed in the top ten through 2000. But today, we’ve fallen to 27th, putting us in the company of countries such as Rwanda and Portugal.

The U.S. has tumbled in a number of specific measures as well as in the overall ranking.

It is important to note that this report measures only economic freedom. The U.S. still does better on measures of political freedom and civil liberties. Some of the countries that outrank us on economic measures have serious issues when it comes to human rights. Still, even on these measures, the U.S. is slipping. According to last year’s Human Freedom Index, which includes both personal and economic liberties, the United States ranks 20th.

Unfortunately, neither of the two leading presidential candidates is likely to make things better.

Donald Trump gives rhetorical support to cutting regulation, but he has been far more specific about the new regulations he plans to impose, such as paid sick and parental leave or, depending on the day of the week, a higher minimum wage. He would cut taxes, but he would also increase spending and grow the size of government. His refusal to tackle entitlement reform would balloon the national debt and further threaten the soundness of the money supply. After all, he has said that he wants to borrow more while interest rates are low and that we can always repay the debt by printing more money. He has demonstrated little belief in our legal system or property rights. And, of course, one of the key planks of his campaign is a vow to restrict our freedom to trade with whom we want. As the Donald himself might say, “Not good.”

Meanwhile Hillary doesn’t even give lip service to reducing the size, cost, and intrusiveness of government. She would massively increase government spending, and the only reason that she wouldn’t borrow as much as Trump is that she would raise taxes. She has never met a regulation that she doesn’t like, and her anti-trade stance betters Trump’s only because it’s less believable. Bad or worse? Flip a coin.

We should not get too excited over small year-to-year fluctuations in these rankings. But there is no doubt that we are seeing a broad long-term trend that is leaving us both less free and poorer as a nation. Worse, neither Donald Trump nor Hillary Clinton is likely to reverse that trend. That’s a pretty sad legacy to leave to our children.

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