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 U.S. 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.
But the folks at the World Economic Forum surely can’t be pigeonholed as a bunch of small-government libertarians, and the WEF’s Global Competitiveness Report shows the same trend.
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 U.S. 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 U.S. 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 U.S. scores 42nd in property rights, behind Namibia and Uruguay.
- The U.S. ranks 59th in government favoritism, behind Guinea and Bolivia.
- The U.S. scores 76th in wastefulness in government spending, behind Mali and Nicaragua.
- The U.S. also is 76th in the burden of government regulation, behind Kenya and Thailand.
- The U.S. scores 69th in extent of taxation, behind Gambia and Ethiopia.
- The U.S. 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 U.S. 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.
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Welcome Instapundit readers. Thanks, Glenn. Since the declining score in the U.S. is partly due to poor fiscal policy, you may want to peruse this video primer on the size of government.
International Liberty 
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But wait! America’s standing in the world must be improving on other indexes: eg. “fairness”, i.e. the institutionalized expectation and mandate that someone smarter, someone more competent, or someone simply harder working will work to insulate me from the consequences of mediocrity and sluggish lifetime choices. And that the total effect of this flattening of incentives, will be more productivity which will allow this country to maintain a sixfold prosperity advantage over the world average. Indeed,… dream on…
These rankings are especially revealing in pointing out trend, rather than absolute ranking. And the trend for the US is clear: Decline.
In a nutshell, there is just no way on earth for American mentality to become more like the rest of the world without American prosperity also converging to the world average. That is the central theme of the HopNChange journey — and Americans would recognize it as such, we’re it not perhaps for their renowned international naïveté.
So, unfortunately, these evil capitalist rankings relate to another ranking which is the A-Z of mid and long term prosperity: GROWTH RATE.
And that directly relates to another more ominous predictor of what’s to come: People’s attitudes. For example, I deal a lot with the Swiss and I have noticed that they are both cognizant of their politico-economic and institutional differences to the rest of the world AND actively and proudly continue to revere and uphold such differences. They are thus on a good track, for the time being. Proud of Swiss decentralization (the major portion of public spending determined by cantons) and especially proud of being different than the rest of Europe where the dream of more centralization is the norm, i.e. more bureaucratization, redistribution and cronyism.
But in contrast to, say, Switzerland, the leading trend in America is towards ideological convergence to the rest of the world, and particularly Europe. In America, and especially amongst the left, the chief complaint is that we are losing our standing on the world because …ahemm “We are not like Europe”. It’s pathetic to see the excuses and logical contortions the human mind goes through to justify and enable redistribution. Redistribution from the top 1% in global wealth standing to the top 20% in global wealth standing that is (i.e. what redistribution in America essentially amounts to, by default). It definitely seems like Americans are finally ripe to listen to the standard sirens of prosperity shortcuts. Sirens that have brought down, many one civilizations: Reject American differences from the rest of the world and join the world average, culturally — and thus inevitably, economically too.
So in contrast to the, say, Swiss, the prevailing American attitude and aspiration is “We want to become like Europe”. Of course not like southern Europe (even liberals have mostly given up on that) where growth trendlines are stagnant (and lately even negative, but that is a temporary correction, the slow growth decline trendlines will be restored sooner or later). But American liberals want to become like Northern Europe, you know, Scandinavia, France, Germany, i.e. places that are riding an ahem .. astounding! growth trendline of 1-2% — in a world that is growing by 5% on average — and are thus on a permanent trendline of losing 3-4% of their relative world prosperity standing per year.
In other words, the prevailing mid-long term aspirations of Americans can be summarized as: “Our best scenario, the completion of the HopNChange journey, is to copy Europe which is merging into average worldwide prosperity levels — at an average rate of 3-4% per year!”. So when the Transformation of HopNChange is complete we will be lucky dogs, just like France and Germany who, every year on average, are losing 3-4% of their relative world prosperity standing. And I’m not even comparing to Eurozone averages, just the better performers amongst the Europeans. As they say in Europe: “In the world of the blind, the one eyed is king”. Thus in Europe, a 2% growth trendline – in a world that grows at 5% average — makes you a tiger economy! an economy to be emulated!
But I could be wrong. Don’t take my word for it. Just be foolish enough to wait twenty years before recognizing it. As I have repeatedly said, decline can be almost fun… in the beginning! For 4,5,6 years, sub-par growth rates will only amount to a 15% or so convergence towards the world average. Unfortunately, the negative effects of slow growth tend to compound. But we’ll deal with that when we get there. Once we have more than 50% of the population deadlocked into government dependency then we’ll realize we made a mistake and reverse course. People will support it, people will vote for it. Ok, austerity, you go first…[ha ha]. The movie of decline is playing according to script…
“Redistribute Wealth and fast.”
You realize this was exactly what candidate Obama was promising in 2008?
[…] […]
SWINNEY BIG THREE
Get Money out of politics
SWINNEY BIG THREE
A—Fed fund election—6 months-= 3 primary 3 general—No personal money—
Outside very very limited—VERY
B. since no need for campaign funds BAN all government employees accepting anything with a financial value. Present or future promises. This closes K Street Bribery
100.. Progressive Flat Tax by group—14,00 income and we should be
paying our way and paying down the debt. We can do it with higher tax rate for top.
We did it 1945-1980 by Taxing wealth.
Sad but true today top 50% get 87% + of
individual income and pay 13.5% tax Rate.
It took a Tax Rate of 32% on Top 50% to balance our budget. It would require a change from (Top 1% paying 23%); (Top 10% paying 19%); and (top 25% paying 15%). The top 2% own 50% of wealth and took 30% of income.
Redistribute Wealth and fast.
HOW— by Flat Tax by group—tax income to pay our way—we have done it before.
Why is it that Heritage Index and this are so different?