Terry Miller: Economic freedom in decline in the United States


Global economic freedom has reached record highs, according to the 2014 Index of Economic Freedom, released Tuesday by the Heritage Foundation and the Wall Street Journal. But after seven straight years of decline, the United States has dropped out of the top 10 most economically free countries.

For 20 years, the index has measured a nation’s commitment to free enterprise on a scale of 0 to 100 by assessing 10 categories, including fiscal strength, size of government and property rights. These commitments have powerful effects: countries that achieve higher levels of economic freedom consistently and measurably outperform others in terms of economic growth, long-term prosperity, and social progress. Botswana, for example, has made gains through low tax rates and political stability.

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Those who lose their freedom, on the other hand, risk economic stagnation, high unemployment and deteriorating social conditions. For example, brutal government intervention in the Brazilian economy continues to limit mobility and fuel a sense of injustice.

It is not difficult to understand why the United States is losing ground. Even marginal tax rates above 43% cannot fund runaway public spending, which has driven the national debt soaring. The Obama administration continues to shackle entire sectors of the economy with regulations, including health care, finance and energy. Intervention hampers both personal freedom and national prosperity.

But as the U.S. economy languishes, many countries are surging forward, thanks to policies that bolster economic freedom — the same ones that have made the U.S. economy the strongest in the world. Governments in 114 countries have taken action in the past year to increase the economic freedom of their citizens. Forty-three countries, from all regions of the world, have now achieved their highest ranking of economic freedom in the index’s history.

Hong Kong continues to dominate the list, followed by Singapore, Australia, Switzerland, New Zealand and Canada. They are the only countries to earn the index’s “economically free” designation. Mauritius has won the highest honors among African countries and Chile has excelled in Latin America. Despite unrest in the Middle East, several Gulf states, led by Bahrain, have been designated as “mostly free”.

A realignment is underway in Europe, according to the findings of the index. Eighteen European nations, including Germany, Sweden, Georgia and Poland, have reached new heights of economic freedom. By contrast, five others – Greece, Italy, France, Cyprus and the UK – recorded lower scores than they had when the index started two decades ago.

The players who have improved the most are in Eastern Europe, especially in Estonia, Lithuania and the Czech Republic. These countries have gained the most economic freedom over the past two decades. And it’s no surprise: Those who lived under communism have no trouble recognizing the benefits of a free market system. But countries that have experimented with milder forms of socialism, such as Sweden, Denmark and Canada, have also made impressive strides toward greater economic freedom, with gains of almost 10 points or more on the scale. of the index. Sweden, for example, is now ranked 20th out of 178 countries, up from 34th out of 140 countries in 1996.

The United States and the United Kingdom, historical champions of free enterprise, suffered the most pronounced declines. Both countries now fall into the “mostly free” category. Some of the worst performing countries are in Latin America, particularly Venezuela, Argentina, Ecuador and Bolivia. All are ruled by crony populist regimes pushing policies that have made property rights less secure, spending unsustainable and inflation ever more threatening.

Despite financial crises and recessions, the global economy has grown nearly 70% in 20 years, from $32 trillion in 1993 to $54 trillion in 2012. Hundreds of millions of people have left the squalor as their economies became freer. But it is an appalling and avoidable human tragedy that many peoples of the world remain unfree and poor.

The record of growing economic freedom elsewhere makes it inexcusable for a country like the United States to continue to pursue policies contrary to its own growth, while wielding its influence to encourage other countries to follow the same disastrous course. The 2014 Index of Economic Freedom documents a global race to improve economic opportunity through greater freedom — and this year’s Index demonstrates that the United States needs a sea change in direction.

Mr. Miller is Director of the Center for International Trade and Economics at the Heritage Foundation.

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