Wednesday, January 27, 2010

A decline in economic freedom

The most distressing news from the latest index is the fact that the United States fell from its perennial rank as one of the world's freest economies to "Mostly Free." The United States trails Canada, Switzerland, Ireland, New Zealand, Australia, Singapore, and Hong Kong, which topped the rankings for the 16th consecutive year. Although still among the top 10, the United States just barely edged out Denmark (ninth) and Chile (10th) in the 2010 ranking. The U.S. position likely would be even worse, but for the fact that the index ranking is based on data collected for the period between July 2008 and June 2009, thus excluding much of the heavy increases in Washington's bailout spending and regulation in response to the economic meltdown of September 2008 and the recession that followed. Second, the United States was not alone in its flawed approach to the economic crisis. "Regrettably, attacks on the free market, fueled by the economic slowdown and the political appeal of quick interventionist remedies, gained strong momentum in some countries, with far-reaching effects," the index editors said. "Exactly half of the major economies curtailed economic freedom to some degree through various interventionist measures." If this downward trend continues for any length of time, either in the U.S. or elsewhere, the negative results will be widespread around the globe because, as the Index makes clear, "economic freedom has far-reaching positive impacts on various aspects of human development. Economic freedom correlates with poverty reduction, a variety of desirable social indicators, democratic governance, and environmental sustainability." more

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