The United States is becoming less free economically, according to Canada’s Fraser Institute for Economic Freedom. The information was released in the organization’s 2015 Annual Report, which measures the degree to which the policies and institutions of countries are supportive of economic freedom.
According to the recently released study,
“Throughout the period from 1970 to 2000, the United States ranked as the world’s freest OECD [Organization for Economic Cooperation & Development] nation (generally the third freest economy overall behind only Hong Kong and Singapore). The chain-linked summary rating of the United States in 2000 was 8.65. By 2005, the US rating had slipped to 8.22. The slide has continued. The 7.73 chain-linked rating of the United States in 2013 was more than 0.9 of a unit lower than the 2000 rating. While other nations have also declined since 2000, the decline in economic freedom in the United States has been more than three times greater than the average.”
The problems presented by America’s economic freedom decline are more than just temporary.
According to the report, “…a one-point decline in the… rating is associated with a reduction in the long-term growth of GDP of between 1.0 and 1.5 percentage points …This implies that, unless policies undermining economic freedom are reversed, the future annual growth of the US economy will be only about half its historic average of 3%.”
The Fraser report notes that the most significant reversals in U.S. economic freedom have been in the areas of legal system and protection of property rights, freedom to trade internationally, and regulation. The increased use of eminent domain was particularly cited. “…it is clear that 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 auto-bailout case have weakened the US tradition of rule of law. These factors surely contributed to the sharp decline in the legal system area.”
While the United States’ reversal is particularly glaring, the rest of the world has not progressed as hoped. “While economic freedom has generally risen globally since 1980, there has been a modest reversal of the trend since 2000. …the average rating for the original OECD nations has fallen by 0.26 of a point since 2000.”
Fraser notes that the cornerstones of economic freedom are personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately owned property. The report used 42 “data points” to construct a summary index and to measure the degree of economic freedom in five broad areas:
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Hong Kong and Singapore were found to have the most open economies. New Zealand, Switzerland, United Arab Emirates, Mauritius, Jordan, Ireland, Canada, and the United Kingdom round out the top 10. The United States came in 16th, Japan 26, Germany 29, South Korea 39, Italy 68, France 70, Mexico 93, Russia 99, China 111, India 114, and Brazil 118. The 10 lowest-rated countries are countries are: Angola, Central African Republic, Zimbabwe, Algeria, Argentina, Syria, Chad, Libya, the Republic of Congo, and, in last place, Venezuela.
Fraser’s research indicates that Economic freedom plays a large role both in the prosperity of a nation’s population and in other areas of “well-being.”
“Nations in the top quartile of economic freedom had an average per-capita GDP of $38,601 in 2013, compared to $6,986 for bottom quartile nations. In the top quartile, the average income of the poorest 10% was $9,881, compared to $1,629 in the bottom quartile in 2013. Interestingly, the average income of the poorest 10% in the most economically free nations is about 50% greater than the overall average income in the least free nations. Life expectancy is 80.1 years in the top quartile compared to 63.1 years in the bottom quartile. Political and civil liberties are considerably higher in economically free nations than in unfree nations.”