Dan Mitchell – Center for Freedom and Prosperity Sept 19, 2012
Wow. I wasn’t surprised to learn that the United States dropped in the new rankings unveiled today in Economic Freedom of the World.
Last year, the U.S. fell from 7th to 10th, and I though dropping three spots was bad. But falling by eight spots this past year is a stunning decline.
Who would have thought that Scandinavian welfare states such as Denmark and Finland would rank higher than the United States? Or that Ireland, with all its problems, would be above America?
But since I’m not a misery-loves-company guy, I’m happy to see some nations doing well. I’ve previously highlighted the good policies in Hong Kong and Singapore. And I’ve trumpeted the good policies in Switzerland and Australia, as well as Canada, Chile, and Estonia.
So kudos to the leaders in those nations.
As you can see, it’s an understatement to say that the United States is heading in the wrong direction. We’re still considerably ahead of interventionist welfare states such as France and Italy, though I’m afraid to think about what the U.S. score will be five years from now.
Here’s what the authors of the report had to say about America’s decline.
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 to 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 to 2000, the chainlinked 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).
For those interested in why the United States has dropped, the “size of government” score has fallen from 8.65 in 2000 to 7.70 in the latest report. That’s not a surprise since the burden of government spending has exploded during the Bush-Obama years.
But the trade score also dropped significantly over the same period, from 8.78 to 7.65.
So the protectionists should be happy, even though the rest of us have less prosperity.
The most dramatic decline, though, was the in the “legal system and property rights” category, where the U.S. plummeted from 9.23 in 2000 down to 7.12 in the new report. We’re not quite Argentina (3.76!), to be sure, but the trend is very troubling.