U.S. is Losing Economic Freedom

The Fraser Institute, a Canadian think tank, released its annual index of economic freedom for the year 2013, using data from the year 2011. The results are not encouraging for Americans.

The U.S., which ranked third in economic freedom behind Hong Kong and Singapore from 1980 to 2000, has fallen to 17^thout of the 152 countries the Fraser Institute surveyed. What are the contributing factors to this decline? The authors suggested that the U.S. legal system, protection of property rights, international trade freedom, and increasing regulations are stifling economic freedom in the U.S. Moreover, the U.S. has tied Venezuela (which is dead-last in economic freedom in the world) for the largest reduction in economic freedom ratings. The study said, “Unless policies undermining economic freedom are reversed, the future annual growth of the US economy will be half its historic average of 3%.”

Among European and Western countries, Australia, Canada and Finland remain in the top ten. Belgium, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Portugal, Spain and the U.S. have tumbled down in the rankings over the past thirty years.  Switzerland fell to 4^th from 2^nd, but the U.S.’s decline from 3^rd to 17^th was the one of the largest of the group, aside from Greece falling to 78^th from 33^rd, Italy to 70^th from 49^th, and Luxembourg to 25^th from 6^th. Denmark, Finland, Iceland, New Zealand (which now stands third in the world), Poland, Sweden and the United Kingdom (from 17^th to 9^th) were among those which made positive gains.

The top ten economically free countries are:

1. Hong Kong
2. Singapore
3. New Zealand
4. Switzerland
5. United Arab Emirates
6. Mauritius
7. Finland
8. Bahrain
9. Canada
10. Australia

The bottom ten in the world are:

1. Algeria
2. Democratic Republic of the Congo
3. Burundi
4. Central African Republic
5. Angola
6. Chad
7. Zimbabwe
8. Republic of Congo
9. Myanmar
10. Venezuela

Contra most college and university courses, the study found that countries formerly colonized by the United Kingdom have done better than countries colonized by other European colonial powers. On average, former English colonies’ institutions performed one point higher, on average, than their counterparts, which the authors attributed to the English common law system left behind by the colonial administrators. The authors said:

“Moreover, the English common law system provides for greater stability and protection under the law than French civil law. Under English common law, legal changes occur as the result of precedents derived from judicial decisions rendered by judges. This system leads to more gradual changes and greater constrainton the ability of political decision-makers to alter the law. No such check is present under civil law, the foundation of which is that the law is what the political decision-makers say it is.”

Adding to that, the former English colonies had a higher mean per-capita income of $4,415 compared to non-English colonies’ $3,725.

Happiness and life satisfaction were also discussed in the study. Basing their findings on the World Values Survey, a global survey of life satisfaction, the study found that GDP and income per-capita  cannot completely explain why people are happy and satisfied with their lives. For example, there is a “positive life satisfaction effect of Latin America” where residents are happier even if they are significantly less well off than others in the West. Chileans and Mexicans are much happier than Germans, even thoughthe Germans havea higher income per-capita and other economic measures. Levels of trust among strangers and unemployment rates had some effect on happiness and life satisfaction results as well.

The study also covered the trends of all of the 152 countries over the past thirty years and, based on their charts and data, we at Accuracy in Academia found the following:

• China, despite all the publicity about a rising economy, has regressed in economic freedom from being ranked 92^nd in 1980 to 101^st in 2011
• India has fallen to 85^th in the world in economic freedom from 50^th in 1980
• Surprisingly, Taiwan made the biggest jump between 1980 and 2011, climbing from 16^th in the world to 12^th, while Japan fell to 32^nd from being ranked 12^th in 1980 and South Korea climbed to 44^th since 1980.
• Israel is now ranked 46^th in economic freedom, when in 1980 they were ranked 95^th.

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