If you were to rank the countries of the world in terms of economic
freedom, where would the United States fall? First, or at least in the
top three? The top five, surely.
Because there is, in fact, a resource that ranks every country by
this measure -- the 2012 Index of Economic Freedom, and the United
States comes in at No. 10. That's right: the nation that is supposed to
lead the world in liberty finishes behind nine others, including
Ireland, Chile, Switzerland and Canada. Even the small African nation of
Mauritius beats us.
And while this ranking represents a new low for the U.S., which was
ninth last year, it's part of a recent trend. As recently as 2008, the
U.S. ranked seventh worldwide, had a score of 81 (on a 0-100 scale, with
100 being the freest), and was listed as a "free" economy. Today, the
U.S. has a score of 76.3 and is "mostly free," the Index's
Now before we explain why, let's back up and briefly touch on how the
editors of the Index -- published annually since 1995 by The Heritage
Foundation and The Wall Street Journal -- figure out the scores. Each
country is evaluated in four broad areas of economic freedom:
1) Rule of Law. Are property rights protected through an effective
and honest judicial system? How widespread is corruption -- bribery,
extortion, graft, and the like?
2) Regulatory Efficiency. Are businesses able to operate without
burdensome and redundant regulations? Are individuals able to work where
and how much they want? Is inflation in check? Are prices stable?
3) Limited Government. Are taxes high or low? Is government spending
kept under control, or is it growing unchecked?4) Open Markets: Can
goods be traded freely? Are there tariffs, quota or other restrictions?
Can individuals invest their money where and how they see fit? Is there
an open banking environment that encourages competition?
For the most part, of course, the United States does very well on
these measures. Finishing 10th out of 179 countries, after all, is
impossible if you don't have a large degree of economic freedom, and the
U.S. is very free. Property rights are strong. Our court system is
independent. Business start-up procedures are efficient. The labor
market is flexible.
But in certain key areas, the United States is lagging badly. A big
one is government spending. The U.S. now ranks 127th in the world in
this category. Spending by government consumes 42.2 percent of gross
domestic product. Total public debt is now larger than the entire
Taxes are another problem. The U.S. score isn't helped by the fact
that the U.S. tax structure relies so much on taxes on capital and
investment, which restrict growth. Regulations continue to grow in
number, making it harder than necessary for our economy to recover. How
bad is it? More than 70 major rules have been imposed since 2009, and
they cost Americans nearly $40 billion last year.
The deterioration of the U.S. score on freedom from corruption is
especially troubling. Blame the government (read: taxpayer) bailouts of
troubled industries such as automakers. These create the perception of
corruption. As far as many Americans are considered , it's politically
well-connected companies and special-interest groups who get the breaks.
They see the more than 1,100 companies that have won exceptions to
Obamacare, and they can't help but wonder if some form of cronyism is
involved.We can't hope to create the number of jobs we need under these
That's why we have to get serious about cutting government down to
size, overhauling our tax system, and transforming costly entitlement
programs. Otherwise, the United States has just completed its last year
as a top-10 finalist in the Index.
Ed Feulner is president of The Heritage Foundation (www.heritage.org).