US economic freedom ranking improves slightly
The annual Economic Freedom of the World report has been released, and it shows a slight improvement in the rankings for the United States. The report is co-published by the Cato Institute, the Fraser Institute in Canada, and more than 70 think-tanks around the world.
The criteria used to determine which countries enjoy the most economic freedom include sound money, rule of law, and security of property rights, among other factors. The U.S. ranking had been in steady decline for the last few decades, which contrasts with the ranking we enjoyed in the 1980s and early '90s, when we were always seen in the top 4. Currently, the U.S. ranks 11th behind countries like Estonia, Ireland, and Switzerland.
Hong Kong and Singapore retain the top two positions with a score of 8.97 and 8.81 out of 10, respectively. The rest of this year's top scores are New Zealand, 8.48; Switzerland, 8.44; Ireland, 8.19; the United Kingdom, 8.05; Mauritius, 8.04; Georgia, 8.01; Australia, 7.99; and Estonia, 7.95.
The United States, for decades among the top four countries in the index, ranks 11th. The rankings of other large economies in this year's index are Germany (23rd), South Korea (32nd), Japan (39th), France (52nd), Italy (54th), Mexico (76th), India (95th), Russia (100th), China (112th), and Brazil (137th). The 10 lowest-rated countries are: Iran, Chad, Myanmar, Syria, Libya, Argentina, Algeria, Republic of Congo, Central African Republic, and, lastly, Venezuela.
Nations in the top quartile of economic freedom had an average per capita GDP of US$42,463 in 2015, compared to $6,036 for bottom quartile nations. Moreover, the average income of the poorest 10% in the most economically free nations is almost twice the average per capita income in the least free nations. Life expectancy is 80.7 years in the top quartile compared to 64.4 years in the bottom quartile, and political and civil liberties are considerably higher in economically free nations than in unfree nations.
This year's report, for the first time, adjusts the rankings for gender equality. Countries receive lower scores if women there are not legally accorded the same level of economic freedom as men.
One chapter in this year's report finds that support for anti-immigrant, populist parties in OECD countries increases where economic freedom is low and state-provided social welfare protection is high.
The first Economic Freedom of the World Report, published in 1996, was the result of a decade of research by a team which included several Nobel Laureates and over 60 other leading scholars in a broad range of fields, from economics to political science, and from law to philosophy. This is the 21st edition of Economic Freedom of the World and this year's publication ranks 159 countries and territories for 2015, the most recent year for which data are available.
Here's an executive summary (PDF) that includes what kind of data went into determining the rankings.
The change in U.S. rankings from 2014 to 2015 – from a score of 7.75 out of a possible 10 to 7.94 – reflects slight improvements in the size of government, sound money, and regulations.
But these numbers are from the tail end of the Obama administration, which was marked by hundreds of new regulations proposed in 2016. We should expect next year's rankings to dip again.
That many countries have surpassed the U.S. in economic freedom since the 1980s should not surprise us. The erosion of private property rights, the vast expansion of the regulatory and welfare states, and the continued growth of government at every level have severely impacted our economic freedoms. Today, it's harder to start a business, buy a house, and care for your family. We would do well to reverse several of these trends not so much for a higher ranking, but because restoring individual liberty is not only good for our economy, but our personal lives as well.