Index of Economic Standard

With the release of the Heritage Foundation 2010 Index of Economic Freedom world wide, two things pop up. First thing that sticks out is how the United States has lost ground in protecting economic freedom and has even fallen behind Canada, going from the ranks of free to mostly free.

Since the 2008 financial crisis, Government actions by the United States have undermined long term prosperity as well economic freedom through interventionist policy, while creating future economic uncertainty. Stimulus spending, increase regulatory proposals to go with additional health care spending proposals masquerading as reform, and higher taxes are slowing job creation.

Who would have thought that Canada would do better in surviving the present economic crisis than the United States? Despite a history of higher government spending on elaborate welfare programs including health care, Canada under its conservative government has shown fiscal restraint and produced budget surpluses. In 1992, Canada public spending, as part of the national economy, was 15% greater than the United States, but today, the difference is only 2%. The United States has essentially caught up to Canada in public spending and Congress has yet to act on health care proposals. Within this decade, the United States may surpass Canada in public spending, hardly a goal to ascribe to.

The United States spending and taxes policies is increasing the cost of doing businesses in America plus uncertainly of what Congress will actually pass in association with health care “reform” only adds to unpredictability of businesses future costs. (And this doesn’t even count for what Congress has planned to “reduced CO2 levels to save planet Earth.”)

Over the next three years, the issue before American voters will be whether America returns to increase economic freedom or continue moving toward a European Democratic socialistic state. The former will lead to renew economic growth and a return to the prosperity but the latter will lead to slower economic growth as well as slower job creation.

Another lesson from the lists is that eight out of the top eleven economically free countries were descended from Great Britain as former colonies. Hong Kong, Singapore, Ireland, Australia, New Zealand, Canada, the United States and Great Britain are among the economically freest nations in the world. While United States and Great Britain have retreated over the past two years due to the 2008 financial crisis, other nations like Canada and Australia have done a better job of surviving the crisis by not imitating the Obama policies. Despite the past two years decline and regression away from economic freedom, the United States is still one of the wealthiest nations and economically free nations.

The economic index shows the link between prosperity, economic freedom and political freedom. Most of the leading economically free nations are among the wealthiest and politically freest in the world and for those on the bottom of the Index, you will find governments beset by corruption, repression and poverty.

The impact of the Anglo-Saxon vision of free markets have been responsible for increase wealth world-wide and the biggest story not told have been the spread of capitalism world wide and the subsequent wealth created as a result. Even India and China have chosen market reforms to produce new wealth and create new middle class. Since the Reagan era, democratic reforms have gone hand in hand with economic freedom. Countries like South Korea and Taiwan have not just increased wealth for their people but political freedom as well.

The past year has seen retreat from free market ideas including in the United States and Great Britain with the result being slower recovery from our present economic distress. The lesson is that we know how to create wealth and how not to. The Index simply reinforces that message, economic freedom means increased wealth and more freedom.

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