The United States is the sixth-freest economy in the world, according to yearly rankings released today by the Cato Institute and the Canada-based Fraser Institute.
The Economic Freedom of the World: 2010 Annual Report also shows that economic freedom experienced its first global downturn in a quarter century, with the average score falling to 6.67 in 2008 (the most recent year for which data is available) from 6.74 in 2007. Of the 123 countries with economic freedom rankings dating back to 1980, 88 saw their rankings decrease while only 35 recorded increases.
By responding to the economic decline of 2008 through perverse credit expansion and regulatory policies, countries around the world weakened economic freedom and harmed future growth, said Ian Vasquez, director of Cato’s Center for Global Liberty and Prosperity.
The score for the United States (7.96) reflects a decrease in all areas of economic freedom measured, and results from an increase in government spending and regulations. The fall in U.S. economic freedom is part of a longer trend that saw the United States ranked as the third freest economy in the world in the year 2000, compared to sixth in this years report.
The report ranks Hong Kong number one, followed by Singapore and New Zealand. Zimbabwe once again has the lowest level of economic freedom among the 141 jurisdictions included in the study. Myanmar, Angola, and Venezuela were also listed at the bottom.
The Cato Institute co-publishes the annual peer-reviewed Economic Freedom of the World report in the United States with the Fraser Institute, Canada’s leading public policy think tank.
The Economic Freedom of the World report uses 42 different measures to create an index ranking countries around the world based on policies that encourage economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property.
Economic freedom is measured in five different 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.
Research shows that individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity, greater individual freedoms, and longer life spans. Greater economic freedom is associated with improvements in the whole range of human development indicators. The standard of living in countries that maintain free and open markets is far superior to that of countries with government-managed economies – even in the wake of recession, said Vasquez.
This years report also contains new research showing the impact of economic freedom on rates of unemployment and homicide. Cato.org – Economic freedom report