This century has not been good news for economic liberty in the United States.
According to Economic Freedom of the World, America has dropped from being the 3rd-freest economy of the world in 2001 to the 12th-freest economy in the most recent rankings.
Perhaps more important, our aggregate score has fallen from 8.20 to 7.81 over the same period.
So why has the U.S. score dropped? Was it Bush’s spending binge? Obama’s stimulus boondoggle? All the spending and taxes in Obamacare? The fiscal cliff tax hike?
I certainly think all those policies were mistaken, but if you dig into the annual data, America’s score on “size of government” only fell from 7.1 to 7.0 between 2001 and 2012.
Which means economic freedom in the United States mostly declined for reasons other than fiscal policy. In other words, our score dropped because of what happened to our scores for trade policy, monetary policy, regulatory policy, and property rights and rule of law.
That triggered my curiosity. If America is #12 in the overall rankings, how would we rank if fiscal policy was removed from the equation?
Here are the results, showing the top 25 jurisdictions based on the four non-fiscal policy factors. As you can see, the United States drops from #12 to #24, which means we trail 14 European nations in these important measures of economic freedom.
If you look in the second column, you’ll notice how many of those European nations have double-digit increases when you look at their non-fiscal rankings compared to their overall rankings.
This is for two reasons.
First, their fiscal scores are terrible because of high tax rates and a stifling burden of government spending.
Second, these same nations are hyper-free market on issues such as trade, regulation, money, rule of law and property rights.
In other words, the data back up points I’ve made about policy in nations such as Denmark and Sweden.
In an ideal world, countries should have free markets and small government. In Northern Europe, they manage to get the first part right. Which is important since non-fiscal factors account for 80 percent of a nation’s overall grade.
Now let’s return to the issue of America’s decline.
Here are the non-fiscal rankings from 2001. As you can see, the United States was #5 at the time, scoring higher than even Singapore and Hong Kong. And the U.S. was behind only three European nations back in 2001.
For what it’s worth, America’s score has fallen primarily because of a significant drop in the trade category (from 8.7 to 7.7) and a huge drop for rule of law and property rights (from 8.7 to 7.0).
In other words, it’s not good for prosperity when a nation begins to have problems such as protectionism and politicized courts.
P.S. The erosion of America’s score for non-fiscal factors is particularly disappointing since improvements in those factors have played a big role in protecting the world from the negative economic consequences of more spending and taxes.
P.P.S. I think this is an example of correlation rather than causation, but the above rankings for non-fiscal economic liberty seem somewhat similar to the rankings I shared last week looking at overall societal freedom.
[…] menos mala) puntuación en política fiscal, pero también reiteré que las naciones nórdicas están más orientadas al mercado que los Estados Unidos cuando se consideran otras variables (especialmente el estado de […]
[…] measuring non-fiscal factors, it is in the top-10 percent for economic […]
[…] Yes, the burden of government spending is enormous and the tax system is stifling, but the nation gets extremely high scores for rule of law and human liberty. Moreover, it is one of the world’s most laissez-faire economies when looking at areas other than fiscal policy. […]
[…] core argument is that Denmark is very bad on fiscal policy, but very laissez-faire on other issues such as regulation. The net effect is that Danes have about the same amount of […]
[…] pesado por um enorme estado de bem-estar social e impostos excessivos. Curiosamente, se você examinar as variáveis de políticas não-fiscais do relatório Economic Freedom of the World, a Suécia está classificada muito acima dos EUA […]
[…] fato, nesses últimos pontos, vale notar que as nações nórdicas são mais economicamente livres que os Estados Unidos, de acordo com especialistas do Fraser Institute que preparam o Economic Freedom of the […]
[…] I did a version of the Laissez-Faire Index in […]
[…] as Scandinavian countries, have big welfare states. But the damage of those policies is offset by a very laissez-faire approach to businesses. So the big companies that help put together the GCR understandably give those places […]
[…] First, these numbers help to explain why Europe is a relatively rich continent. European nations traditionally have dominated the top-10 rankings. It’s not a good continent for fiscal policy, but those countries dominate the scores in other policy areas. […]
[…] a better (or at least less bad) score on fiscal policy but also reiterated that Nordic nations are more market-oriented than America when looking at other variables (especially rule of […]
[…] gets a better (less worse) score on fiscal policy, but also reiterated that Nordic nations are more market oriented than America when looking at other variables (especially rule of […]
[…] is a point I made last year, but EFW‘s chart is much better than my homemade […]
[…] generally get crummy scores for fiscal policy, but misguided policies on taxes and spending are more than offset by superior scores for trade, monetary policy, regulatory policy, and quality of […]
[…] in the United States (though I do want to copy Danish policies in other areas, which generally are more pro-economic liberty than what we have in […]
[…] Unidos (apesar de que quero, sim, copiar a Dinamarca em outras áreas, em que são geralmente mais pró-liberdade econômica do que temos nos […]
[…] the Nordic nations are highly ranked. Indeed, they hold three of the top five slots. No wonder they score highly in that part of Economic Freedom of the World. Moreover, they also get very good scores for monetary policy, […]
[…] If you don’t believe Worstall and Iacono, check out this table of data I prepared back in 2015. […]
[…] answer is that they are nice places. Yes, they get terrible scores on fiscal policy, but they tend to be very pro-market in areas like trade, monetary policy, regulation, and rule of law. So they almost always rank in […]
[…] Yes, the burden of government spending is enormous and the tax system is stifling, but the nation gets extremely high scores for rule of law and human liberty. Moreover, it is one of the world’s most laissez-faire economies when looking at areas other than fiscal policy. […]
[…] it is ranked #20 for economic liberty, only four spots behind the United States (and the country is more pro-market than America when looking at non-fiscal policy […]
[…] measuring non-fiscal factors, it is in the top-10 percent for economic […]
[…] policy, regulatory policy, monetary policy, and rule of law and property rights. Indeed, it has more economic freedom than the United States when looking an non-fiscal policies. The same is true for […]
[…] the data from Economic Freedom of the World, I’m not sure I believe […]
[…] in the United States (though I do want to copy Danish policies in other areas, which generally are more pro-economic liberty than what we have in […]
[…] kudos to our friends from across the ocean. Most of them have big welfare states, but at least they compensate with free market policy in other areas, along with lots of personal […]
[…] kudos to our friends from across the ocean. Most of them have big welfare states, but at least they compensate with free market policy in other areas, along with lots of personal […]
[…] policy, regulatory policy, monetary policy, and rule of law and property rights. Indeed, it has more economic freedom than the United States when looking an non-fiscal policies. The same is true for […]
[…] Perhaps that’s a partial explanation, but I think there’s a much simpler way of making sense of the data. The Nordic nations, as I’ve repeatedly written, have strongly pro-market policies once fiscal policy is taken out of the equation. […]
[…] are all good answers, but if you look at the data from Economic Freedom of the World, a major reason for the decline in America’s score is that the rule of law has […]
[…] while the rule of law has been eroding in the United States, the good news is that we still rank in the top 20 in a new ranking from the […]
[…] is a point I made last year, but EFW‘s chart is much better than my homemade […]
[…] are all good answers, but if you look at the data from Economic Freedom of the World, a major reason for the decline in America’s score is that the rule of law has […]
[…] are all good answers, but if you look at the data from Economic Freedom of the World, a major reason for the decline in America’s score is that the rule of law has […]
[…] are all good answers, but if you look at the data from Economic Freedom of the World, a major reason for the decline in America’s score is that the rule of law has […]
[…] net result of these reforms is that the Nordic nations are a strange combination of many policies that are very good (very little regulation, very strong property rights, very open trade, and stable money) and a […]
[…] net result of these reforms is that the Nordic nations are a strange combination of many policies that are very good (very little regulation, very strong property rights, very open trade, and stable money) and a […]
[…] further to the left), but with much more redistribution (i.e., closer to the bottom). Which is exactly what you see when you look at the underlying data from Economic Freedom of the […]
[…] We can enjoy some dark humor while the rule of law is further eroded. […]
[…] other nations, while they have higher than optimal taxation and spending, they make up for it in other areas. These nations generally have open trade, a strong rule of law, and private property protection, […]
[…] is merely decent. Almost all European nations have excessive taxes and spending, for instance, but they compensate with very pro-market policies in other […]
[…] [1] Daniel J. Mitchell, “Economic Freedom in America Is Declining Mostly Because of Creeping Protectionism and the Loss of Rule of Law and Property Rights,”August 24, 2015, https://danieljmitchell.wordpress.com/2015/08/24/economic-freedom-in-america-is-declining-mostly-bec…. […]
[…] that the Nordic nations, much beloved by Bernie Sanders and other leftists, generally are more free market than the United States on non-fiscal […]
[…] that the Nordic nations, much beloved by Bernie Sanders and other leftists, generally are more free market than the United States on non-fiscal […]
[…] that the Nordic nations, much beloved by Bernie Sanders and other leftists, generally are more free market than the United States on non-fiscal […]
[…] that the Nordic nations, much beloved by Bernie Sanders and other leftists, generally are more free market than the United States on non-fiscal […]
[…] one that is weighed down by a large welfare state and excessive taxation. Interestingly, if you look at the non-fiscal policy variables from Economic Freedom of the World, Sweden actually ranks much higher than the United States (along […]
[…] in the United States (though I do want to copy Danish policies in other areas, which generally are more pro-economic liberty than what we have in […]
[…] in the United States (though I do want to copy Danish policies in other areas, which generally are more pro-economic liberty than what we have in […]
[…] Like Bernie Sanders, they generally point to nations such as Denmark and Sweden, though they never have a good response when you point out that: a) these nations became rich when government was very small, and b) they compensate for today’s bad fiscal policy with ultra-free market policies in other areas. […]
[…] that America now ranks below Estonia for rule of law, and given that rule of law is gradually eroding in the United States, the obvious lesson is that the public sector in America needs to […]
[…] in the United States (though I do want to copy Danish policies in other areas, which generally are more pro-economic liberty than what we have in […]
[…] don’t forget that New Zealand has the world’s freest economy for non-fiscal factors, ranking even above Hong Kong and […]
[…] I then had a follow-up piece that expanded the discussion, responding to critics but also noting that advocates of lower rates and supporters of targeted credits at least agree on the importance of reducing double taxation and also want to address non-fiscal impediments to growth. […]
[…] I then had a follow-up piece that expanded the discussion, responding to critics but also noting that advocates of lower rates and supporters of targeted credits at least agree on the importance of reducing double taxation and also want to address non-fiscal impediments to growth. […]
[…] Or, to be more accurate, there almost surely is too much regulation in those nations, but since we’re discussing the relative economic performance of the United States and Europe, the relevant point is that there’s less government intervention in certain European countries (particularly Nordic nation…. […]
[…] on those latter issues, it’s worth noting that Nordic nations are more free market-oriented than the United States according to the experts at the Fraser Institute who put together Economic Freedom of the […]
[…] Hardly. Indeed, if you take the data from Economic Freedom of the World and remove the fiscal policy variable (and thus measure the degree to which markets are allowed to operate), then Denmark and Sweden are both among the world’s top-10 nations for free markets. […]
[…] Hardly. Indeed, if you take the data from Economic Freedom of the World and remove the fiscal policy variable (and thus measure the degree to which markets are allowed to operate), then Denmark and Sweden are both among the world’s top-10 nations for free markets. […]
[…] month, I cited data from Economic Freedom of the World to explain that the United States was becoming less competitive because of creeping protectionism and reductions in the rule of law and property rights. writes […]
[…] month, I cited data from Economic Freedom of the World to explain that the United States was becoming less competitive because of creeping protectionism and reductions in the rule of law and property […]