By Michael D. Tanner
This article appeared on National Review on October 8, 2014.
There was a time, not so long ago, when the United States was considered the world standard for economic freedom. Yes, there were countries out there, like Hong Kong and Singapore, that might have had lower taxes or fewer regulations. But the world could still speak confidently of the American free-enterprise system. No longer.
Bad as this report is, it may actually understate our worsening condition. Most of the report’s data come from 2012. Given the trajectory of governmental growth over the last two years (Obamacare, anyone?), next year’s report is likely to look even worse.
Nor is this report the only indication that our economy is far from free. For example, Transparency International ranks the U.S. 19th on its Corruption Perceptions Index. While this ranking is distorted by the organization’s antipathy to our campaign-finance laws, it also demonstrates increasing corruption and venality among our elected officials. On the World Bank’s Ease of Doing Business Index, we do better, but we still trail Singapore, Hong Kong, and New Zealand.
It has long been pointed out that the United States has the highest business-tax rates among industrialized countries. And a broader look at overall business-tax competitiveness by KPMG ranked the U.S. behind such nations as Canada, the United Kingdom, Mexico, and the Netherlands.
There are very real consequences to the decline in U.S. economic freedom. The report makes very clear that there is a strong correlation between economic freedom and economic growth. For example, the quartile of countries rated most economically free had an average GDP per capita of $39,899. The least free quartile averaged just $6,253. Economic growth among the most free countries averaged 3.43 percent, compared to just 2.55 percent for those ranked least free. Freer countries also perform better on measures ranging from life expectancy to the amount of income earned by the poorest citizens. The authors conclude that “unless policies undermining economic freedom are reversed, the future annual growth of the U.S. economy will be only about half its historic average of 3 percent.”
Moreover, while this report looked only at economic freedom (which is why Hong Kong and Singapore scored so high), the United States’ growing surveillance state, the ongoing wars on drugs and terror, police militarization, and the increasingly intrusive regulatory bureaucracy raise important questions about civil liberties and civil rights as well.
We should not get too excited over the year-to-year fluctuations in these rankings. But the broad long-term trend has become ominous. The U.S. is steadily becoming less free. Like the frog in the proverbial slowly heating pot of water, we might not have noticed. But unless we reverse course soon, the consequences may be inescapable.