Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

22 September 2012

17 Countries Now Have More Economic Freedom than the USA

The Economic Freedom of the World: 2012 Annual Report published by the Fraser Institute measured the economic freedom of countries using the data of 2010.  The principal authors of the report are James Gwartney of  Florida State University, Robert Lawson of Southern Methodist University, and Joshua Hall of Beloit College with contributions from eight other academics.

The economic freedom evaluation of the USA continued its nearly monotonic decline since the year 2000.  In 2000 we had a rating of 8.65 on a scale of 10.00, but we have sunk to a rating of 7.70 now.  Since the year 2000, the rest of the world has seen a small increase in rating from 6.71 to 6.83.  In 2010, our 8.65 rating of the year 2000 would have made the USA a close third to Singapore, with Hong Kong number one.  But in our state of degradation as of 2010, the USA is now disgracefully 18th in the world in economic freedom.  When the evaluation is made for 2012, we will find that we have slid much further down the list.

Here is what the world looks like color coded by quartile in economic freedom:


You can see why Mexicans have been coming across the border illegally to work in the USA from this map.  I was not surprised to see Venezuela and maybe even Argentina in the least free quartile, but I was surprised to see India there.

Here are the ratings and the rankings of the upper two quartiles:


These economic freedom ratings are made based on the following criteria with the individual USA ratings and rankings following each:

1) Size of government (6.43, 73rd, our worst major category ranking)

2) Legal system and property rights (7.14, 28th)

3) Sound money (9.68, 7th)

4) Freedom to trade internationally (7.46, 57th)

5) Regulation (7.76, 31st)

Regulation is further broken down into the following subcategories:

a) Credit market regulations (6.95, 121st, our worst regulatory ranking)

b) Labor market regulations (9.06, 3rd)

c) Business regulations (7.26, 30th)

If we evaluate which areas of economic freedom are most pulling our ranking down in order, they are:

Size of government, 73rd
Freedom to trade internationally, 57th
Regulation, 31st
Legal system and property rights, 28th

in which areas our ranking was worse than our overall ranking. Note that our size of government ranking of 73rd puts us at the top of the list of nations in the third quartile.  That is in the lower half of the 144 nations evaluated.  Does that hurt your pride?  It should.  It should be excruciating pain.  Personally, I find each of these rankings to be disgraceful and a source of great anger.

Our economic freedoms are as basic as any other freedoms.  To sustain our lives, we need to be free to earn a living.  We also need to be free to enjoy earning our living without having burdens constantly loaded on our backs such as heavy taxes and unnecessary regulations and paperwork requirements.  The American businessman sees his business drained by excessive taxes, is forced to be an unpaid tax collector, is forced to divulge much too much private information, is forced to assume responsibilities and risks that are properly either those of his employees or his customers, is kept from doing things according to his own judgment by laws that are often irrational, and is forced to comply with unintelligible and excessively voluminous rules and regulations.

The American businessman is treated like a slave of the state and generally forced into being a criminal by laws and regulations he cannot even read, cannot understand, and in many cases could not abide by if he understood them.  This is exactly what a great many politicians want.  They want to extort tax money, favors, and campaign contributions at will from businessmen.  They use the overly complex and voluminous law and the threat of still more laws and regulations to make most businessmen cower before them.

There are very practical consequences for our economy.  As our economic freedoms are lost, our ability to grow our real per capita GDP decreases.  See the graph I have prepared from World Bank data for the years from 1980 to 2011:



Note that the post-2000 performance is clearly much worse than that of 2000 and earlier.  A loss of economic freedom is a loss of opportunity and an increase in uncertainty.  With less opportunity and more uncertainty, fewer people will start start-up companies and fewer people will be hired by such companies:

George W. Bush grew government and added many regulations, but Obama has grown government even more and added slightly more regulations and many more very expensive regulations.  With many more regulations awaiting a second term and hopes for many tax increases, Obama intends to further degrade our economic freedoms in the name of redistribution and a wrongheaded claim that catastrophic man-made global warming will result if he does not drastically cut our fossil fuel energy use.  If he is re-elected, he will attempt to greatly further decrease our economic freedoms.


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