The United States’ 2012 economic freedom score of 76.3 drops it from 9th to 10th place in the Heritage Foundation/Wall Street Journal’s 2012 Index. Its score is 1.5 points lower than last year, reflecting deteriorating scores for government spending, freedom from corruption, and investment freedom.
The Index is based on a composite score on a scale of 1 to 100 of ten criteria: Property Rights, Freedom from Corruption Government Spending. Fiscal Freedom. Business Freedom, Labor Freedom, Monetary Freedom, Trade Freedom, Investment Freedom, and Financial Freedom. The score is divided into five relative categories of Free (100-80), Mostly Free (79.9-70), Moderately Free (69.9-60), Mostly Unfree (59.9-50), and Repressed (<50).
Hong Kong, which is a special economic zone of China rather than a fully sovereign nation, remains steady in the No 1 slot. North Korea is last. No. 179. Singapore, Australia, New Zealand, and Switzerland are Nos. 2 – 5 in that order and make up all of the countries in the Free category. Five nations are not ranked. The U.S. in 2012 ranks No. 10; 2nd behind Canada out of three countries in the North America region. Its overall score remains well above the world and regional averages.
Although the foundations of economic freedom remain strong, in the United States, recent government interventions have eroded limits on government, and public spending by all levels of government now exceeds one-third of total domestic output. The regulatory burden on business continues to increase rapidly, and heightened uncertainty further increases regulations’ negative impact. Fading confidence in the government’s determination to promote or even sustain open markets has discouraged entrepreneurship and dynamic investment within the private sector.
Among other things, restoring the U.S to the status of a Free economy will require policy changes to reduce the size of government,reforming the tax system, and restructure entitlement programs.
For more on this topic, see
http://www.heritage.org/Index/ and WSJ
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Not everyone is enamored with this method of scoring:
“Critics such as Jeffrey Sachs have contested the Index's assumption that economic openness necessarily leads to better growth. In his book The End of Poverty, Sachs graphed countries' ratings on the index against GDP per capita growth between 1995 and 2003, claiming to demonstrate no correlation between a country's rating and its rate of economic growth. Sachs pointed out, as examples, that countries with good ratings such as Switzerland and Uruguay had sluggish economic performances, others, like China, with poorer rating had very strong economic growth.
“The UAE questioned the rating of their country's economic freedom in 2008, comparing its middling rating with the high rating they had received from other indicators such as Transparency International and Moody's. They also argued that the report is 'unreliable', because its methodology had changed twice in the last two years.
“Stefan Karlsson of the Ludwig von Mises Institute, challenged the usefulness of the index due to the fuzziness of many of the categories used to determine freedom. John Miller, writing in Dollars & Sense, criticizes the Index for inappropriately weighted indicators for economic freedom and not taking into account the actions of governments to nurture business. According to him this leads to wealthy and/or conservative countries with barriers to trade placing high on the list, while poor and/or socialist countries with fewer restrictions on trade place low. According to Left Business Observer, the Index has only a 33% statistical correlation with a standard measure of economic growth, GDP per capita.”