Right Change: U.S. Economy Downgraded Again in Free Market Report

Yet another organization has downgraded the United States’ economic status, confirming the current administration’s policies are rapidly shrinking America’s ability to thrive in a free-market world. The 2012 Economic Freedom of the World report dropped the U.S. to 18th?internationally, compared to 10th?in 2008 and 3rd from 1980 to 2000. The report is based on data gathered through 2010 and featured Hong Kong, Singapore, New Zealand, Switzerland and Australia at the top of its list of 144 countries.

The report is released in the states by the CATO Institute, a public policy research organization based in Washington DC. The think tank says the Economic Freedom of the World report aims to measure a country’s policies against factors of economic freedom and prosperity.

From the CATO website:

The foundations of economic freedom are personal choice, voluntary exchange, and open markets. As Adam Smith, Milton Friedman, and Friedrich Hayek have stressed, freedom of exchange and market coordination provide the fuel for economic progress. Without exchange and entrepreneurial activity coordinated through markets, modern living standards would be impossible.

Potentially advantageous exchanges do not always occur. Their realization is dependent on the presence of sound money, rule of law, and security of property rights, among other factors.?Economic Freedom of the World?seeks to measure the consistency of the institutions and policies of various countries with voluntary exchange and the other dimensions of economic freedom. The report is co-published by…more than 70 think tanks around the world.

With the fall to number 18, the U.S. now ranks behind two “European welfare states - Finland and Denmark” according to the study’s authors. One of those authors, James Gwartney, a professor of Economics at Florida State University, says?a?recent increase in government is one of the factors contributing the country’s fall from the top ten.

“The U.S. is on the wrong track,” said Gwartney, “Countries with the freest economies grew more rapidly and achieved higher income levels for citizens, while the United States' decade-plus course of government expansion, increased debt and regulations and other moves created a system of crony capitalism. The declining economic freedom rating of the U.S. provides confirmation of this trend.”

Truth be told, this decline began in the Bush administration, but it has dramatically increased in the previous four years. President Obama’s first-term attack on small businesses?is?no doubt having an effect on the economic freedom of the country. The Washington Post’s Emi Kolawole points to the conclusion of the CATO report for confirmation of this fact.

Innovation does not factor prominently in the report, but entre­pre­neur­ship does, with the final chapter dedicated entirely to exploring how institutions promote entre­pre­neur­ship and growth. The study’s authors conclude most notably that, while few entrepreneurial ventures noticeably drive overall job creation, self-employment and small firms are a large component of overall job creation.

Earlier this month, the World Economic Forum, in its Global Competitiveness Report, dropped the U.S. to 7th in its rankings, a fall from 1st as recently as 2008. Their report listed weaknesses in dozens of areas compared to just a few years ago. Kolawole says the report?lays the blame squarely at the feet of current governmental policies.

The authors cite a continued lack of trust in government leaders on the part of the business community as well as businesses’ continued criticism of the public and private sectors. As for the lack of trust in government leaders, the authors write that it is “perhaps not surprising in light of recent political disputes that threaten to push the country back into recession through automatic spending cuts.”

The authors also zing U.S. spending priorities, writing, “the government spends its resources relatively wastefully,” a pillar under which the U.S. ranks 76th. Meanwhile, they continue, “a lack of macroeconomic stability continues to be the country’s greatest area of weakness.”

Both reports say their report is designed to measure the degree to which the policies and institutions of countries are supportive of economic freedom. Cornerstones of this support include the size of government, personal choice, the freedom to trade internationally and the security of private property. Does this sound like the America of the last four years?

Many Americans are worried about the country turning into a welfare state, but even welfare state countries?have a stronger economy than ours now. Have we fallen that far, that fast? It appears so. The only remaining question to ask now is how low will this president take us? Do we really want to see the answer to that question?

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