The United States economy is being downgraded again, according to a report released Monday by the Fraser Institute and the Economic Freedom Network. The U.S. has dropped to 16th in the world for economic freedom. As recently as 2000, the United States was the second-freest economy in the world.
“Economic freedom breeds prosperity, and the most economically free countries offer the highest quality of life while the lowest-ranked countries are usually burdened by oppressive regimes that limit the freedom and opportunity of their citizens,” said Fred McMahon of the Fraser Institute.
Countless studies have shown that countries with greater levels of economic freedom also have greater levels of prosperity. According to the report, “countries in the top quartile of economic freedom had an average per-capita GDP of US$38,601 in 2013, compared to US$6,986 for bottom quartile nations.”
The positive effects of economic freedom can even be seen among the poorest in a country. The poorest 10 percent in economically free countries have average income of $9,881. The poorest 10 percent in economically repressive countries have average income of just $1,629.
All income levels benefit from economic freedom. The U.S., however, is moving in the wrong direction, largely due to erosion in the rule of law and overly burdensome regulation.
“A weakened rule of law, the so-called wars on terrorism and drugs, and a confused regulatory environment have helped erode economic freedom in the United States, which has now fallen behind more economically free countries such as Qatar, Jordan and the U.A.E.,” McMahon said
The index, which was first published almost 20 years ago, looks at five components of economic freedom:
1. size of government
2. security of property rights
3. access to sound money
4. freedom to trade internationally
5. regulation of credit, labor, and business.
The top-10 most economically free jurisdictions are Hong Kong, Singapore, New Zealand, Switzerland, United Arab Emirates, Mauritius, Jordan, Ireland and Canada, with the United Kingdom and Chile tied for tenth.
Australia is just outside the top 10 at number 11. As a result, the new report finds that the US, at sixteenth now, is the least free economy among the major English-speaking nations.
It is vital to note that the American drop has occurred in just the last 15 years. At the start of the new century, and for much of its history, the United States was a bastion of economic freedom in the world. That is no longer the case.
The loss of economic freedom in the U.S. is not the result of exogenous events or developments elsewhere in the world. It is the direct consequence of policy choices made by lawmakers and bureaucrats.
The good news is that policy choices can be reversed. The bad news is they need to be quickly if the U.S. is to reclaim the beacon of economic freedom.