In recently updated rankings, the United States has finally begun to move toward more freedom, according to the 2015 Index of Economic Freedom, prepared by The Heritage Foundation in partnership with Wall Street Journal.
The last several reports have held bad news for the United States, as we were the only country to record a loss in economic freedom for seven straight years. This year, however, things finally started to turn around.
Though the US is still ranked 12th (out of 186 countries), our economic freedom score is 76.2, up 0.7 points from last year’s ranking. That puts us just tenths of a point away from overtaking Denmark, Mauritius, and Ireland – the countries just ahead in the rankings.
The Index of Economic Freedom measures economic freedom for each country based on ten freedoms divided into four main categories: rule of law, limited government, regulatory efficiency, and open markets. Each of the ten freedoms is given a score from 0 to 100, and the average of the scores is the country’s overall economic freedom score.
The only freedom in the US that has deteriorated since last year is business freedom, owing primarily to the billions of dollars in regulations that have been imposed over the last several years of the Obama administration.
Interestingly, Canada is actually the North American leader in economic freedom, a position it has held since overtaking the US in 2010. Canada holds a significant advantage over the US in investment freedom, financial freedom, and property freedom. The United States’ largest advantage over Canada is a flexible labor market, regulated mostly by the states.
Topping the Index of Economic Freedom is Hong Kong. It has led the world in economic freedom since the Index was created in 1995. Conversely, North Korea occupies the “least free” position – with an overall score of only 1.3.
Why is economic freedom important? Well, according to many researchers, it makes us happier. “The high levels of economic growth and economic freedom in the United States are effectively increasing the average American level of happiness while decreasing inequality in life satisfaction between its citizens,” said Will Wilkinson of the Cato Institute in a 2007 paper.
Ambassador Terry Miller, director of the Center for Trade and Economics at The Heritage Foundation, wrote in the Wall Street Journal about other beneficial effects of economic freedom. “Per capita incomes in the freest countries are six to seven times higher than incomes in the least free countries,” he said. “Better-scoring countries in the index enjoy lower rates of poverty, better health care, and do a better job of protecting the environment.”
It’s clear that the United States’ small improvement in economic freedom is worth celebrating. But with increasing regulation, the world’s highest corporate tax rate, and inconsistent protection of property rights, we still have a long way to go if we want to move from the “Mostly Free” to the “Free” category.