The U.S. Loses Ground on Economic Freedom

Riots in Greece and France! An IMF bailout for Ireland! The Euro under threat! Tea parties in America! Is it the end of capitalism? Many were predicting just that last year. The Heritage Foundation's 2011 Index of Economic Freedom tells a different story, says Terry Miller, the director of the Center for International Trade and Economics at the Heritage Foundation.

The Index records countries' commitment to the free enterprise/capitalist system by measuring 10 categories of economic freedom: fiscal soundness and openness to trade and investment, government size, business and labour regulation, property rights, corruption, monetary stability and financial competition.

The good news this year? One hundred and seventeen countries, mainly developing and emerging market economies, improved their scores, and the average level of economic freedom around the world improved by about a third of a point on the Index's 0 to 100 scale.

Economies that stuck to the principles of economic freedom are recovering more quickly from the recession and financial crisis, and growing faster than countries whose governments tried to spend their way out of trouble.

There's an amazing 4.5 percentage point difference in average growth rates between the big spenders and those governments that kept their budgets under control.

For the United States and the United Kingdom, the Index of Economic Freedom confirms what those countries' voters already knew, that there is an urgent need for real change, says Miller.

The United States dropped to 9th place in the 2011 Index, with its lowest economic freedom score in a decade, and the United Kingdom fell all the way to 16th place.

Hong Kong, Singapore, Australia and New Zealand dominate the top of the economic freedom rankings – economic growth rates in those countries averaged 6.8 per cent in 2010.

Source: Terry Miller, The U.S. Loses Ground on Economic Freedom, Wall Street Journal, January 12, 2011.

For text: http://online.wsj.com/article/SB10001424052748703779704576074193214999486.html

For Index: http://www.heritage.org/index/

For more on Economic Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=17

First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 18 January 2011