Beach adds that the rule of law declined when the Obama administration declared some contracts to be null and void. For example, bondholders in the auto industry were forced to the back of the creditor line during bankruptcy. And there's more regulation of business, such as the Dodd-Frank law for the financial industry and the new credit-card law. But how could the United States place behind Canada? Isn't Canada practically a socialist country?
"Canada might do health care the wrong way," Beach said, "but by and large they do things the right way." Lately, Canada has lowered tax rates and reduced spending.
China is an interesting case. It ranks 140th out of 179, but its economy is on fire. How can this be?
"They have a complex economy," Beach says. "Around the edges of the mainland are rapidly growing city-states, like Hong Kong, which are pockets of enormous prosperity (and) economic freedom. But within the mainland is a very different economy. It's heavily controlled by the state. If you look at the growth rates of these two regions, you'll see one hardly growing."
And look at France. It ranks 64th, behind Mexico, Peru and Latvia! Yet France is a much wealthier country.
"France is doing their best to fall out of the index," Beach explained. "That's a country that says, 'We'd rather not be economically free if we can be economically secure.'"
Which countries should we keep an eye on in the future? Beach says parts of Central and South America are awakening. "Brazil has pretty much broken through after years of doing the right thing and is on the verge of serious sustained economic growth."
And Mexico is improving: "If Mexico could fix its drug war problem, we'd see the good things happening there."
If we want to reverse America's decline, we'd better get to work. There's a lot of government to cut.