Economic Freedom Index– U.S. Plummeted from 6th to 17th, Hits Historic Low: Economic Freedom Drives Economic Prosperity…

Bad news for U.S.: According to Index Of Economic Freedom; the U.S. dropped 6 positions in ranking of economic freedom around the world to #17, its lowest level since these studies have been published… While most nations of the world increased their economic freedom, the U.S. saw a significant decline– rated now not ‘free’ but only ‘mostly free’… According to David Davenport; the main contributor is a new category in the study called ‘fiscal health’… This shows that a shocking 38% of U.S. gross domestic product now goes to government and also emphasizes the growing national debt and deficit…

Clearly the U.S. needs– more economic growth, less government spending, less debt– in other words more freedom… According to Milton Friedman; nations that put equality ahead of freedom end-up with neither, but nations that put freedom ahead of equality end-up with great measure of both. The Economic Freedom Index measures the degree of economic freedom in the world’s nations based on the number and intensity of government regulations on wealth-creating activity… It takes approach similar to Adam Smith’s ‘The Wealth of Nations’, i.e.; basic institutions that protect the liberty of individuals to pursue their own economic interests result in greater prosperity for society at large…

But then there are those who think this Index is just bull… According to Justin Katz; this Index is naked punditry masquerading as economic analysis and undermining real efforts towards passing legislation that will help to reform the business climate and contain the ever-growing power of corporations. And, in actual fact, the Index does not measure economic freedoms of families, but economic freedoms of corporations and the 1%-ers…

Index of Economic Freedom Report: Each year since 1995, this Index has ranked the world’s countries in comparative levels of economic freedom, which it defines as the degree to which governments allow labor, capital, and goods to move freely… and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself… In the recent 23rd edition, the Index analyzes economic policy developments in 186 countries, which are graded and ranked on 12 measures of economic freedom…

These measurement are based on 12 quantitative, qualitative factors, grouped into four broad categories, or pillars, of economic freedom. Each of the ten economic freedoms within these categories is graded on a scale of 0 to 100.  A country’s overall score is derived by averaging the ten economic factors with equal weight being given to each. The four categories are:

  • Rule of Law (property rights, government integrity, judicial fairness)…  
  • Government Size (government spending, tax burden, fiscal health)…  
  • Regulatory Balance (business freedom, labor freedom, monetary freedom)…  
  • Open Markets (trade freedom, investment freedom, financial freedom)… 

In the article Debunking Index of Economic Freedom by John Miller writes: Upon examination this Index it turns out to be a very poor barometer of either freedom defined or prosperity… For over a hundred years, the economic world has been engaged in a great intellectual debate:

On one side of this debate are those philosophers and economists who advocate an economic system based on private property and free markets– or what one might call economic freedom… Adam Smith was one of the first to argue economic freedom… According to Robert A. Lawson; key ingredients of economic freedom are; personal choice, voluntary exchange, freedom to compete in markets, protection of person and property…

On the other side of this debate are people who instead argue for an economic system characterized by centralized economic planning and state control of the means of production… These scholars argue that free markets lead to– monopolies, chronic economic crises, income inequality, increasing degradation of the poor… and that centralized political control of people’s economic lives avoids problems of the marketplace…

However the big question is: Do countries that exhibit greater degrees of economic freedom perform better than those that do not?  According to Robert Lawson; much scholarly research has been and continues to be done to see if the Index correlates with various measures of a good society, e.g.; economic growth, income equality, gender equality, equal life expectancy… While there is scholarly debate about exact nature of these relationships the results are uniformly positive…

 In the article U.S. Economy ‘Mostly’ Free by Ben Sasse Jim Demint write: The U.S. is the land of the ‘mostly free’ and home of the brave; but doesn’t the phrase ‘mostly free’ sounds wrong? However, that’s how U.S. economy ranks in the recent Index of Economic Freedom Report… Yes it’s bad news for the U.S. and especially for the poorest, most vulnerable citizens… For decades government has presumed itself competent to manage many aspect of the private sector… Although, the  intentions may be noble but outcomes are mostly– costly, clumsy, very ineffective, and counter productive. Government has saddled many organizations with combination of– byzantine tax code, predatory federal agencies, unnecessary regulations, monetary manipulations.

 Economic freedom is key to greater opportunity and an improved quality of life… It’s the freedom to choose how to produce, sell, use your own resources, while respecting others’ rights to do the same… Economic freedom is the engine that drives prosperity and is the difference between why some societies thrive while others do not. According to Anthony B. Kim; free-market capitalism is built on the principles of economic freedom– not to conserve the status quo, but to overturn and transform it…

Economic freedom means pushing out the old to make way for the new, so that real progress can take place. It means innovation in all realms: better jobs, better goods and services, and better societies… Economic freedom affects every aspect of an individual’s life. Living in a society with high levels of economic freedom leads to– higher income, lower poverty, less unemployment, longer life expectancy, and cleaner environments… More economic freedom improves business and leads to a higher quality of life for all citizens… But since the U.S. is only ‘mostly free’, clearly there is much to be done…

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