January 15 2014

Economic Freedom Index: U.S. Falls out of Top Ten

Charlotte Hays

The Heritage Foundation and the Wall Street Journal have released the 2014 Index of Economic Freedom. The Index finds that, after seven years of decline, the U.S. is no longer among the top ten nations for economic freedom.

Using a scale of from 0 to a hundred, the Index has for two decades measured the economic freedom of nations. Regulation, taxes, and debt have taken the U.S. out of the top ten. The Wall Street Journal reports:

Those losing freedom, on the other hand, risk economic stagnation, high unemployment and deteriorating social conditions. For instance, heavy-handed government intervention in Brazil's economy continues to limit mobility and fuel a sense of injustice.

It's not hard to see why the U.S. is losing ground. Even marginal tax rates exceeding 43% cannot finance runaway government spending, which has caused the national debt to skyrocket. The Obama administration continues to shackle entire sectors of the economy with regulation, including health care, finance and energy. The intervention impedes both personal freedom and national prosperity.

It is within this context of economic decline that President Obama finds himself preoccupied not with setting up economic conditions that can help families stand on their own and create prosperity but with the abstraction of inequality. He is willing to impose more liberty-killing measures to pursue the chimera of equality. Another innovation: if our normal legislative process doesn’t provide what the president wants, he has a pen and phone to circumvent the U.S.’s traditional way of governing.

What countries are replacing the U.S. at the top of the Index?

 The most improved players are in Eastern Europe, including Estonia, Lithuania and the Czech Republic. These countries have gained the most economic freedom over the past two decades. And it's no surprise: Those who have lived under communism have no trouble recognizing the benefits of a free-market system. But countries that have experimented with milder forms of socialism, such as Sweden, Denmark and Canada, also have made impressive moves toward greater economic freedom, with gains near 10 points or higher on the index scale. Sweden, for instance, is now ranked 20th out of 178 countries, up from 34th out of 140 countries in 1996.

The U.S. and the U.K, historically champions of free enterprise, have suffered the most pronounced declines. Both countries now fall in the "mostly free" category. Some of the worst performers are in Latin America, particularly Venezuela, Argentina, Ecuador and Bolivia. All are governed by crony-populist regimes pushing policies that have made property rights less secure, spending unsustainable and inflation evermore threatening.

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