18 Countries Now Have More Economic Freedom Than U.S. – Here are the Details (+3K Views)

This year’s Economic Freedom of the World Index, which lists countries by most to least free using every available objective criterion, contains a real shocker when it comes to the United States. We aren’t just slipping on the index, we’re falling off a cliff. In many parts of the world, life is freer than in the “land of the free.” What this reports says about the United States should be front-page news. Instead, it has received barely any attention at all. [The U.S. has fallen from a high of 2nd to its current 19th. Here’s why.] Words: 1040

So says Jeffery Tucker of Laissez Faire Today (www.lftoday@lfb.org) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Tucker goes on to say, in part:

The Economic Freedom of the World Index lists countries by most to least free, using every available objective criterion. Are people free to make contracts, keep what they earn, use a sound currency, rely on some degree of legal stability, trade internationally, associate as they please toward their mutual well-being? The more people can do this, the higher their countries rank on the scale. The more that government interferes with their lives, the lower on the scale they rank...

Here is the executive summary from this year’s report:

“Nations in the top quartile of economic freedom had an average per capita GDP of $37,691 in 2010, compared to $5,188 for bottom quartile nations in 2010 current international dollars In the top quartile, the average income of the poorest 10% was $11,382, compared to $1,209 in the bottom in 2010 current international dollars Interestingly, the average income of the poorest 10% in the most economically free nations is more than twice the overall average income in the least free nations. Life expectancy is 79.5 years in the top quartile compared to 61.6 years in the bottom quartile Political and civil liberties are considerably higher in economically free nations than in unfree nations.”

What is the relationship between freedom and prosperity? They are directly related. If this index doesn’t prove it to a person’s satisfaction, nothing on this Earth will prove the point…

The long and short of it:

“The United States, long considered the standard-bearer for economic freedom among large industrial nations, has experienced a substantial decline in economic freedom during the past decade. From 1980-2000, the United States was generally rated the third-freest economy in the world, ranking behind only Hong Kong and Singapore. After increasing steadily during the period from 1980-2000, the chain-linked EFW rating of the United States fell from 8.65 in 2000 to 8.21 in 2005 and 7.70 in 2010. The chain-linked ranking of the United States has fallen precipitously from second in 2000 to eighth in 2005 and 19th in 2010 (unadjusted ranking of 18th).”

[The list of 18 countries that rank higher than the U.S. are:

1. Hong Kong,
2. Singapore,
3. New Zealand,
4. Australia,
5. Canada,
6. Switzerland,
7. Oman,
8. Ireland,
9. Mauritius,
10. Bahrain,
11. Finland,
12. United Kingdom,
13. Chile,
14. Zambia,
15. Taiwan,
16. Denmark,
17. Estonia and
18. Kuwait

(Incidentally, Japan ranks 23rd, Germany 29th, China 100th and Argentina 110th out of the total of 144 countries surveyed.)]

…The question is why. The U.S. fell in every area. Regulation is more intense. There are more trade barriers. Property rights are less secure. Government is much larger. Money is not sound either, but the report gives a good grade here only because of the method of quantification. They look only at official rates of inflation so that there are accurate data across many countries. If you look under the hood at U.S. monetary policy, you can see that we are headed for a devastating fall in this area too.

What is the main reason for the fall of the U.S.? Property rights are less secure. As the authors say, “While it is difficult to pinpoint the precise reason for this decline, the increased use of eminent domain to transfer property to powerful political interests, the ramifications of the wars on terrorism and drugs, and the violation of the property rights of bondholders in the bailout of automobile companies have all weakened the United States’ tradition of the rule of law and, we believe, contributed to the sharp decline…”

We’ve all sensed this. We see evidence all around us but, even so, it can be difficult to process intellectually. We are born to believe that we live in the land of the free. As much as we regret many of the things we see, we don’t want to make any fundamental adjustments in our outlook for the future. We want to believe that our freedom is somehow divinely protected and, despite all political trends, essentially unalterable.

This report puts us on notice. We have to come to terms with the realities. It is going to get worse before it gets better. We live in a digital age, surrounded by miracles. But those miracles are coming to us not because of anything our government is doing. We are dependent so much on the freedom that exists and grows outside our borders.

A major advantage that formerly poor countries have is that they don’t have to deal with the rotting industrial-age infrastructure that plagues the U.S. and Europe. They don’t have an antique grid and their economies are not saddled with endless and entrenched public-private partnerships and central plans like the federal code. They can leapfrog the industrial age and move right to the digital age. It’s a beautiful thing to behold.

Someone who looked at this report asked me a question. Is it time to start thinking of sending my kids abroad? The answer, I believe, is yes. Going abroad provides an important cultural education. But nowadays, we are really talking about the future itself. They may have to emigrate for economic opportunity. We all might have to.

But where? Looking at the index, Canada is looking better all the time. So is New Zealand. China ranks low overall, but sectors of China like Shanghai are extremely free by any international comparison. There is also Latin America. Nicaragua, for example, ranks very high and is rising year after year. It’s the trend line that matters.

It was my privilege to interview the main number cruncher behind the report, Robert Lawson. Below he provides more detail and some extremely interesting observations about how not being a “developed industrialized nation” can be a gigantic advantage in the digital age.

You can watch this interview here.

Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

*www.lftoday@lfb.org