America loves to boast. The United States has a lot to brag about, as well. We’ve exported many things to the world — Facebook, the automobile — and even the Kardashians, just as a start. But the one thing that Americans really like to harp on is how free our country is. After all, this is the land of opportunity, a place where anyone from anywhere can climb the social ladder and find prosperity.
Thanks to the combination of our social freedoms, along with our capitalistic free-market system, that’s largely held true throughout the decades. But recent research has shown that America is slipping a bit — particularly when it comes to the economic freedoms afforded by our local and federal governments.
New insight from the Fraser Institute, a conservative/libertarian Canadian think tank, shows America has fallen considerably in the group’s rankings of the most ‘economically free’ countries in the world. By looking at several factors, including the size of government, regulation, legal systems, property rights, and restrictions on international trade, the Fraser Institute’s rankings put some rather surprising countries in the top echelon of its list.
As for the U.S.? It’s fallen considerably over the past several years. But more on that in a minute.
Here are the top ten countries (or cities) in the ‘economic freedom’ rankings, as calculated by the Fraser Institute:
1. Hong Kong
3. New Zealand
5. United Arab Emirates
10. United Kingdom/Chile
A quick glance down the list reveals some surprising additions, like Hong Kong at the top, and a couple of Middle Eastern countries. But it makes sense — just think about all the capital that has been flowing to the Gulf states over the past few decades. One thing does stand out about the top ten, which may have some in the U.S. a bit concerned: where is America?
What About America?
So, where does the U.S. come in on the Fraser Institute’s rankings? To end the drama, America is number 16 — sandwiched between Taiwan at 15 and Romania at 17. Now, 16 isn’t bad, especially considering that the entire list encapsulates 157 total countries. And the U.S. is still clearly in the ‘most free’ strata of the rankings, which includes the top 40 nations.
But what is worrisome is that when you take the ranking of 16 into historical context, the U.S. seems headed in the wrong direction. In 2000, America ranked number two, and the biggest drops in America’s scores have occurred during the years since 2010.
“The United States, once considered a bastion of economic freedom, now ranks 16th in the world, a steep fall from second place in the world rankings in 2000,” said Fred McMahon, Dr. Michael A. Walker Research Chair in Economic Freedom with the Fraser Institute, in a press release.
“A weakened rule of law, the so-called wars on terrorism and drugs, and a confused regulatory environment have helped erode economic freedom in the United States, which has now fallen behind more economically free countries such as Qatar, Jordan and the U.A.E..” McMahon said.
There are some caveats to cover, however.
Since 2000 the U.S. has experienced a couple of huge events — 9/11 and the financial crisis — that caused some government clampdown. America’s descending down the list, starting in 2010, definitely had something to do with regulators pushing back after the financial crisis in 2008 and 2009. The risk of individuals and organizations abusing the system which was in part the cause of the global economic meltdown, comes along with the benefits of more economic freedom.
Also, countries like Qatar may be swimming in capital and economic freedom, but have their fair share of issues as well. There are widespread human rights abuses, and even accusations of modern day slavery happening in certain Gulf states, which have helped spur growth in the region.
What Does it Mean For You?
These rankings may not mean an awful lot for the average American. If you are an entrepreneur, however, or someone who is giving serious thought to starting an enterprise, it may shake your confidence a bit.
The truth is, America’s economic power depends on a certain level of economic freedom — and there’s little incentive to take that away. Over the past several years, and particularly in the wake of the Great Recession, government stepped in to stabilize things, which has hurt America’s standing in the rankings. But again, the U.S. is still near the top.
Clearly, though, if government does overstep in certain respects, the economy can suffer. And it may keep would-be entrepreneurs from ever attempting to set up shop. It’ll be interesting to see how things change following the 2016 elections, and whether America can ascend back into the top 10 next year.
Be sure to check out the complete study from the Fraser Institute to get the complete picture.
Follow Sam on Twitter @SliceOfGinger