Economic freedom report: US continues slide, drops to 18th

September 18, 2012 by Jill Elish
Credit: Florida State University

(—The United States, long considered a champion of economic freedom, plunged to No. 18 in new rankings published in the 2012 Economic Freedom of the World, an annual report co-authored by Florida State University economics Professor James Gwartney.

The report is published by Canada's Fraser Institute in cooperation with institutes in 78 other nations and territories. The U.S. publisher is the Cato Institute. The 2012 report, released on Sept. 18, uses 42 different variables derived from sources such as the World Bank and to measure the degree to which the institutions and policies of 144 countries are consistent with economic freedom.

"The report indicates that the U.S. is on the wrong track," Gwartney said. "Freer economies grow more rapidly and achieve higher income levels. Now, for more than a decade, the United States has been expanding the size of government, increasing both debt and regulation, and using subsidies, grants, tax breaks and mandates to centrally plan large sectors of the economy. A system of crony capitalism has emerged. The declining economic freedom rating of the United States provides confirmation of this trend."

The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property, according to Gwartney, who has served as an author of the report since its inception in 1996. Gwartney's co-authors this year are Robert A. Lawson of Southern Methodist University and Joshua Hall of Beloit College.

To determine the rankings, the authors used an index that measures the degree to which countries rely on rule of law and markets rather than -making to allocate resources. The current ratings and rankings are based on data through year-end 2010.

Hong Kong once again topped the rankings of the 144 countries, followed by Singapore, New Zealand and Switzerland. Australia and Canada were tied for fifth.

From 1980 to 2000, the U. S. ranking was third, behind only Hong Kong and Singapore. However, since 2000, the U.S. ranking has slid steadily downward to eighth in 2005, 10th in 2008, and now 18th in 2010. The economic freedom score of the United States now falls below Finland and Denmark, two European welfare states. The United States also trails Mauritius, Chile, Bahrain, the United Arab Emirates, Estonia, Taiwan and Qatar.

The summary ratings of countries range from a low of approximately 3.0 to a high of near 9.0. The U.S. rating has fallen from 8.65 in 2000 to 7.70 in 2010. This approximate 1-point decline may not sound like much, but the report argues that a 1-point change in a country's rating is associated with between a 1- and a 1.5-percentage-point decline in long-term economic growth.

Historically, the per capita income of the United States has grown at an annual rate of a little more than 2 percent. A 1-percentage-point decline would mean future annual growth of per capita income in the 1 percent range, half the historic average, Gwartney said. The growth rate of per capita income in the averaged 2.3 percent in the 1980s and 2.2 percent during the 1990s, but it fell to an annual rate of only 0.7 percent from 2000 to 2010.

"This sluggish growth will be the new norm unless we move away from the policies that are undermining economic freedom," Gwartney said.

The rankings of other large economies include Japan (20th), Germany (31st), Korea (37th), France (47th), Italy (83rd), Mexico (91st), Russia (95th), Brazil (105th), China (107th) and India (111th).

Venezuela has the lowest level of economic freedom among the 144 countries for which data are available. Myanmar, Zimbabwe, Republic of Congo and Angola round out the bottom five nations.

In addition to the country summary rating, the study also measures in five areas: (1) size of government, (2) legal structure and security of property rights, (3) access to sound money, (4) freedom to trade internationally, and (5) regulation of credit, labor and business.

Explore further: U.S. economic freedom continues fall; global average declines: report

More information:

Related Stories

Survey finds US competitive ranking down again

September 5, 2012

(AP)—The United States' ability to compete on the global stage has fallen for the fourth year running as confidence in the country's politicians continues to decline, an annual survey from the World Economic Forum found ...

Water: More Valuable than Diamonds

November 7, 2006

A new study by University of Arkansas economists shows a strong relationship between economic freedom and access to water. David Gay and Charles Britton, economics professors in the Sam M. Walton College of Business, and ...

Recommended for you

Ancient barley took high road to China

November 21, 2017

First domesticated 10,000 years ago in the Fertile Crescent of the Middle East, wheat and barley took vastly different routes to China, with barley switching from a winter to both a winter and summer crop during a thousand-year ...

New paper answers causation conundrum

November 17, 2017

In a new paper published in a special issue of the Philosophical Transactions of the Royal Society A, SFI Professor Jessica Flack offers a practical answer to one of the most significant, and most confused questions in evolutionary ...


Adjust slider to filter visible comments by rank

Display comments: newest first

3.4 / 5 (5) Sep 18, 2012
Just another neoliberal Friedmanian mess. I would not like to live in HongKong or Singapore. These are countries where you have to be rich or die.
2.5 / 5 (8) Sep 18, 2012
This is how Obama wanted to transform the USA.
2.8 / 5 (9) Sep 18, 2012
" The freest quartile of countries had an average per capita income of $37,691, while the least free quartile had a per capita income of just $5,188 in 2010."
"Those people who are more concerned about the poor than economic growth should take note that the poorest 10 percent in the least-free quartile only had a per capita income of $1,209 in 2010, as contrasted with a per capita income of $11,382 for the poorest 10 percent in the freest quartile."
"Greater economic freedom is also associated with more political and civil liberties."
3.2 / 5 (9) Sep 19, 2012
Drivel. Not worthy of an explanation as it's so tainted with a right wing political agenda. Is this some kind of a parody, joke? Just using the words "welfare state" as a trite definition of 2 European countries shows a prejudice view, especially when it's used to draw a sense of belittlement. "Oh how shameful that the US is pressed beneath the undeserving "welfare states". Hogwash. Another paid GOP ad.
3.4 / 5 (5) Sep 19, 2012
The economic growth in countries like Singapore and Hong Kong ends up in the pockets of the 0.01 per cent on top.
There was a reason why Theodore Roosevelt introduced antitrust laws, although his heritage has been swept under the rug by today's Republicans.
1 / 5 (5) Sep 19, 2012
Economic freedom leads to increasing of a stealing ability, at least among some US professors:
3.4 / 5 (5) Sep 19, 2012
The economic freedom score of the United States now falls below Finland and Denmark, two European welfare states.

So economic freedom is fully compatible with a welfare state, and with having a "socialist" health care system like Canada's?
3.7 / 5 (6) Sep 19, 2012
The Frasier institute in Canada was set up by the CATO institute in the U.S. to produce pro-corporate propaganda for the Canadian audience, just as CATO exists to produce pro-Corporate Propaganda for the American Audience.

Not to many years ago the Frasier Institute produced some pro-tobacco industry propaganda claiming that there was no link between smoking and the development of lung cancer.

These Libertarian Stink Tanks - CATO and Frasier, are rotten to the core, and everything they produce is laden with extreme right wing political bias, pro-corporate propaganda and outright lies.

If it comes from CATO or Frasier, you know that you are being lied to.
2.3 / 5 (3) Sep 19, 2012
Leisure is the ultimate Liberty.

"Greater economic freedom is also associated with more political and civil liberties." - RyggTard

Thanks to Libertarian Economic ideology more than ever, Americans are corporate wage slaves.
2.5 / 5 (8) Sep 19, 2012
The economic freedom score of the United States now falls below Finland and Denmark, two European welfare states.

So economic freedom is fully compatible with a welfare state, and with having a "socialist" health care system like Canada's?

Until the welfare state runs out of other people's money and when the makers switch sides to the takers.
1 / 5 (1) Sep 23, 2012
Actually both Republicans and Democrats have contributed to this decline. Neither are without collusion in this matter and both parties are perpetrators of crony capitalism. People in power have been for sale for generations.
3 / 5 (4) Sep 23, 2012
US is ranked the fifty-third freest press in the world, tied with Botswana and Croatia. According to the World Health organization, the United States had the fifty-fourth fairest health care system in the world, with lack of medical coverage leading to an estimated 18,000 unnecessary deaths a year. And according to the Justice Department, one in every thirty-two Americans was in jail, on probation, or on parole.

Rather than having actual freedom, like animals in a habitat in the zoo, Americans have only the illusion of freedom. As long as they don't try to escape the cage, they never know they aren't actually free.

Now, in many countries around the world, including Western countries like Sweden, the US ranks as a bigger threat to peace than Iran or North Korea. In the hated-empire race, the US is now beginning to look like the champion. Nobody likes a loser, especially if the loser is a failed superpower.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.