Ed Feulner

If you were to rank the countries of the world in terms of economic freedom, where would the United States fall? First, or at least in the top three? The top five, surely.

Guess again.

Because there is, in fact, a resource that ranks every country by this measure -- the 2012 Index of Economic Freedom, and the United States comes in at No. 10. That’s right: the nation that is supposed to lead the world in liberty finishes behind nine others, including Ireland, Chile, Switzerland and Canada. Even the small African nation of Mauritius beats us.

And while this ranking represents a new low for the U.S., which was ninth last year, it’s part of a recent trend. As recently as 2008, the U.S. ranked seventh worldwide, had a score of 81 (on a 0-100 scale, with 100 being the freest), and was listed as a “free” economy. Today, the U.S. has a score of 76.3 and is “mostly free,” the Index’s second-highest category.

Now before we explain why, let’s back up and briefly touch on how the editors of the Index -- published annually since 1995 by The Heritage Foundation and The Wall Street Journal -- figure out the scores. Each country is evaluated in four broad areas of economic freedom:

1) Rule of Law. Are property rights protected through an effective and honest judicial system? How widespread is corruption -- bribery, extortion, graft, and the like?

2) Regulatory Efficiency. Are businesses able to operate without burdensome and redundant regulations? Are individuals able to work where and how much they want? Is inflation in check? Are prices stable?

3) Limited Government. Are taxes high or low? Is government spending kept under control, or is it growing unchecked?

4) Open Markets: Can goods be traded freely? Are there tariffs, quota or other restrictions? Can individuals invest their money where and how they see fit? Is there an open banking environment that encourages competition?

For the most part, of course, the United States does very well on these measures. Finishing 10th out of 179 countries, after all, is impossible if you don’t have a large degree of economic freedom, and the U.S. is very free. Property rights are strong. Our court system is independent. Business start-up procedures are efficient. The labor market is flexible.

But in certain key areas, the United States is lagging badly. A big one is government spending. The U.S. now ranks 127th in the world in this category. Spending by government consumes 42.2 percent of gross domestic product. Total public debt is now larger than the entire economy.

Ed Feulner

Dr. Edwin Feulner is Founder of The Heritage Foundation, a Townhall.com Gold Partner, and co-author of Getting America Right: The True Conservative Values Our Nation Needs Today .
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