By Dr. Harold Pease
For nearly two decades the Heritage Foundation and the Wall Street Journal have teamed-up tracking and rating the 184 nations of the earth on economic freedom. In their 2012 ratings “Hong Kong and Singapore finished first and second in the rankings for the 18th straight year. Australia and New Zealand ranked third and fourth, and Switzerland fifth. Canada finished sixth, … falling out of the group of ‘free’ economies into the ‘mostly free’ category;” a fall made by the United States in 2010. The U.S. also slipped from a three-way tie for ninth place last year to tenth place today. Even Mauritius, taking eighth, a small island off the coast of Africa, was seen as more economically free than we, as were Chile and Ireland taking seventh and ninth.
The 484-page rather complex document, rated countries in ten types of freedom: labor, business, trade, fiscal, government spending, monetary, investment, financial, property, and freedom from corruption. These ten then were evaluated on the basis of “the rule of law, the intrusiveness of government, regulatory efficiency, and the openness of free markets.” A country’s overall score was the average of these categories.
The average economic freedom score for the world dropped two-tenths of a point from 2011, primarily because countries tried to spend their way out of recession and failed. “Rapid expansion of government, more than any market factor, appears to be responsible for flagging economic dynamism. Government spending has not only failed to arrest the economic crisis, but also—in many countries—seems to be prolonging it. The big-government approach has led to bloated public debt, turning an economic slowdown into a fiscal crisis with economic stagnation fueling long-term unemployment,” they concluded.
The United States was no exception with respect to the mounting burden of reckless government spending. The U. S. economic freedom score dropped by 1.5 from last year, a drop attributed to “deteriorating scores for government spending, freedom from corruption, and investment freedom.”
The solutions proposed by Heritage’s Index of Economic Freedom basically amount to undoing much of what has been done since 2008. The authors especially cited the need to unwind government intervention and reduce government involvement in commercial decision-making. They advocated the abolition of the TARP program followed by Freddie Mac and Fannie Mae. Congress should “repeal all U.S. government regulatory measures that interfere with mortgage markets.” This should be followed by the “repeal of the Sarbanes-Oxley Act, which discriminates against small firms and reduces competition.” The overall guideline, as historically it once was; “companies should be allowed to fail, and laws and regulations should create no expectation of a future bailout.”
With respect to reducing government involvement in commercial decision-making, they concluded, “Congress must eliminate the insidious practice of earmarking, which corrupts the legislative process. The government needs to divest itself of all assets acquired in connection with the financial crisis and recession and refrain from interfering in bankruptcy cases. These reforms, like the others, would both complement and reinforce the overall restoration of America’s economic freedom.” Examples might be the return of General Motors to the private sector and the housing market, now largely owned by the federal government, as well.
Why does economic freedom matter, the Heritage Foundation asks and answers? Because it “is a crucial component of liberty. It empowers people to work, produce, consume, own, trade, and invest according to their personal choices.” Indeed, each person controls the fruits of his or her own labor and initiative. Government produces nothing but takes from those who do produce and redistributes it to others. To that extent freedom to keep the rewards of one’s own labor is impaired.
For most of our history we were the freest nation on earth with no significant competition resulting in our people becoming the most abundant ever. Now we are almost out of the top ten and out of the “free” and into the “mostly free” category with the resultant loss of that abundance. Such is inexcusable and indefensible. Our answer is simply less debt, less taxes, and less government. It has always been so.
Dr. Harold Pease is an expert on the United States Constitution. He has dedicated his career to studying the writings of the Founding Fathers and applying that knowledge to current events. He has taught history and political science from this perspective for over 25 years at Taft College. To read more of his weekly articles, please visit www.LibertyUnderFire.org