When future historians characterize this era, chances are they won’t label it as America’s “golden age.” Indeed, they may well mark 2010 as the year the United States became the home of the “mostly free.”
That’s the finding of the latest “Index of Economic Freedom,” an annual compendium published by The Heritage Foundation and The Wall Street Journal.
The U.S. earned an overall score of 78 out of a possible 100 points in the Index. That was good enough for eighth place, globally. But that score was down 2.7 points from last year’s. It’s the biggest drop recorded among the world’s 20 largest economies. The decline was comparable to Venezuela’s (down 2.8) and Yemen’s (down 2.5), two poster children for bad economic behavior.
The American economy moved from the rarified air of the “free” to the more crowded (and less economically successful) realm of the “mostly free.” That could haunt Americans for years to come.
That’s because, as the Index editors note, less economic freedom means less economic prosperity. And that hurts everyone’s bottom line.
The reason for the drop is obvious: In the face of a global recession, American policymakers intervened repeatedly in the economy. Uncle Sam bailed out banks, insurance companies, Fannie Mae and Freddie Mac. The government bought up two major automakers, then announced a program (Cash for Clunkers) that aimed (unsuccessfully) to create demand for new cars.
Our government pumped out hundreds of billions in new federal spending, but failed to prop up the economy. “The early evidence is that such spending did not work,” the Index editors write. Our nation’s 10 percent unemployment rate backs them up.
Throughout its 16 editions, the Index has repeatedly shown that economic freedom isn’t a dogmatic ideology. It actually represents the rejection of dogma and the embrace of diverse and even competing strategies for economic advancement.
Yet the U.S. is leading a trend, as we so often do. This time, though, the trend line is down. “The average economic freedom score for the 2010 Index is 59.4, down 0.1 point from 2009,” the editors write. “This is only the second time in the history of the Index that average scores for countries measured in successive years have declined.”
That could be a problem. After all, none of the other systems tried throughout human history have come close to economic freedom in terms of providing broad-based prosperity. Experience teaches that even the best efforts of central planners and bureaucrats do not lead to sustainable growth.