(CCU Student) Economic freedom in the USA is unmatched, right? Wrong, according to a policy briefing given today at The Heritage Foundation, which I attended as part of my CCU Washington semester.
Ambassador Terry Miller, Director of Heritage's Center for International Trade and Economics, spoke on the 2012 Index of Economic Freedom, co-published by Heritage and the Wall Street Journal. The Index scores 179 economies from around the world on ten factors in four major areas: rule of law (property rights and freedom from corruption), limited government (fiscal freedom and government spending), regulatory efficiency (business freedom, labor freedom, and monetary freedom), and open markets (trade freedom, investment freedom, and financial freedom). The Index is in its eighteenth publication this year. The Index in its entirety can be found at www.heritage.org/index.
The Index indicated that the United States actually fell from ninth to tenth in the global rankings. According to the data provided in the back of the index, the U.S has not enjoyed a status of "free" since 2009, when our rating was an 80.7. Since then, the rating has dropped 4.4 points to a 76.3, placing us squarely in the "mostly free" category, along with other countries such as Japan, Qatar, and Austria. This shift downwards comes not only from the recession itself; the economic policy choices made as a result of the recession have hindered economic freedom and growth. If we want our ranking to begin returning to a status of "free", we need to remove burdensome regulations and limit federal spending on failed stimulus packages.
On a global scale, economic freedom has been on the decline. Much of this is due to the recession policies, where governments attempting to spend their way out of the recession generally tend to limit free enterprise practices. There has also been a rise in federal government corruption and a general lack of the rule of law, which also tends to lessen economic freedoms. On the positive side, many countries are now lowering their corporate tax rates or converting to a flat tax system. This tax reform is a great way to entice businesses to start or remain in-country and has created competition between countries of who can have the best business-friendly environment. Inflation is also declining as markets are beginning to slowly recover from the recession.
The biggest gainer was Zimbabwe. Currently, Zimbabwe places next to last in the ratings, ahead of only North Korea, but they improved 4.2 points from last year to a 26.3. Key areas of growth were business, labor, and trade freedom, government spending, and property rights. Obviously, there is still much room for improvement, but it proves that with the right policies in place, everyone can move up in the world.
The biggest loser was Greece. This year, Greece placed 119 with a 55.4, dropping 4.9 points from last year. The two key areas of decline? Government spending and labor freedom. This correlates very well with the current debt crisis that has recently caused Greece to pass an austerity plan with the hopes of receiving more loans from the EU.
Overall, there is hope. As economies become more globally integrated, more opportunities for economic flourishing are created. Competition for markets will increase, driving governments all around the world to create better and freer environments for business. As such, poverty worldwide will decline, and quality of life will increase for everyone.