Economic freedom across the world continues its downward trend and is at it’s second-lowest level in a decade, due in part to the overwhelming burden of “reckless government spending” in developed countries, according to a new report.
The 2012 Index of Economic Freedom, a partnership project of The Heritage Foundation and the Wall Street Journal, shows the U.S. has dropped to 10th on the list, two spots behind Mauritius.
In its 18th edition, the Index conducts an analysis of economic policy developments in 184 countries since the last half of 2010, grading and ranking them on 10 measures of economic freedom which
evaluate the rule of law, the intrusiveness of government, regulatory efficiency, and the openness of markets.The top ten countries, ranked 1-10, are Hong Kong, Singapore, Australia, New Zealand, Switzerland, Canada, Chile, Mauritius, Ireland, and the United States.
Mauritius made its first appearance in the top 10, and is the first time ever for a Sub-Saharan African country to be ranked so high. Chile returned to the top 10, where it last was in 2010.
According to the Index, the scores of 75 countries improved while 90 countries lost economic freedom. Fourteen countries showed no change.
Of the 75 showing improvement, 73 are considered emerging or developing countries, with many situated in the Sub-Saharan Africa, the Asia-Pacific, and South and Central America/Caribbean regions.
Among developed countries, only Australia and Iceland showed score improvements, a reflection of their efforts at reining in government spending.
Increased tensions between government control and a free market is most notable in developed countries where the reckless government behavior has, in many cases, consumed any gains economic freedom may have achieved in different policy areas.
Just a decade ago the Index noted global economic freedom had been advancing for over two decades, and unprecedented global prosperity followed.
The Index notes the rapid pace of government expansion, more than any other factor, appears to be the cause of a flagging economy, with government spending not only failing to stop the economic crisis, but - in many countries - actually prolonging it.
Bloated public debt caused by a system of big government has led an economic downturn into a financial crisis and the associated stagnation is feeding long-term unemployment.
The report continues by noting a disconnect between past promises made by governments - now hindered by rising debt and budget deficits - and their ability to fulfill those promises. The additional disconnect between financial assets and liabilities make both issues hard to avoid.
Almost 75 percent of the world’s population lives in countries labeled “mostly unfree” or repressed, the Index states, with much of that number coming from just two countries, China and India.
Remarkably, Hong Kong defended its position, for the 18th year in a row, as the world’s freest economy. The top five countries on the list of free economies maintained their previous standings, and their “relative strength is no accident.” They have secured their rankings on the list due to limited government, rule of law, open markets and regulatory efficiency.
The Economic Freedom report said economic policies must perform in an environment conducive to sustained economic growth, rising incomes and enhancing overall well-being, and
vibrant and lasting economic growth is achievable only when governments adopt economic policies that increase individual choice and opportunity, empowering and encouraging entrepreneurship.