Economic Freedom: China Up, U.S. Down

Since 1995 the Heritage Foundation, a conservative think tank in Washington, D.C., has put together the Index of Economic Freedom to “track the march of economic freedom around the world.” In January, Editor in Chief Matt Welch sat down with economist Jim Roberts, who co-authored the 2012 edition of the survey. They discussed reasons for optimism about China, reasons to worry about the United States, and the general state of economic liberty around the world. For video of the interview, go to reason.tv.

Q: Why did Heritage start putting out the Index of Economic Freedom?

A: Conservatives felt the American public and the world at large didn’t have a good grasp on the fundamentals that underlie the great prosperity we’ve enjoyed in the United States. So to remind people and to advocate for those policies—limited government, low taxes, strong rule of law, light regulation, and open markets—Heritage started the Index.

Q: Have the last few years been bad for economic freedom?

A: They haven’t been great, although we had a little bit of an uptick last year. This year again it’s gone down for the world. There are some bright spots in sub-Saharan Africa and Asia. But the bad news for America is that for the third year in a row, there’s been a precipitous drop in economic freedom in the United States. Economic freedom peaked about seven or eight years ago in the U.S. and has been dropping since then.

Q: What are you measuring in the United States that is dropping?

A: Government spending’s score has just gone through the roof. The Keynesian stimulus has failed but has left us heavily indebted, and this administration ([like] the prior one) [is] spending too much money and not getting enough as a result, taking money out of the economy that could be better used for private-sector investment. And too much regulation. It’s strangling business. It’s making business overly cautious. People don’t know what to do, especially with ObamaCare coming on the horizon. These have been the main things, but also property rights, where you had the abuse of the rule of law in the United States with the takeover of General Motors and Chrysler, for example, [and] the too-big-to-fail bank bailouts. These all counted against the United States’ score.

Q: How is China doing in terms of economic freedom?

A: They’re sure not doing nearly as well as Hong Kong, which has been No. 1 for the last 18 years. Meanwhile, the mainland is stuck below the middle of the stack. Think about how well [China] could be doing if they opened up their political sector as they have their economy. If they had stronger property rights, strong rule of law, and genuine open markets, and didn’t play games with currency, how much better could they be doing? Quite a bit. 

Q: Your background is in property rights, and you worked for the State Department for a quarter century. Tell us a little about China and property rights. Do they have any?

A: They do in practice, but not in law, and that’s the problem. If you have major investors, they’re going to want to see not only property rights enshrined in law but actually a track record of the government responsibly handling that, where you don’t have to buy off judges protecting those property rights. China’s going to take time to do that, but they’ve got to start, and they haven’t yet. 

At least they opened it up to have leases for property, but they need to go and finish that and have real property rights with real ownership. Share the power. Diffuse the money, and you diffuse the political power along with it, and you have more participation, more democracy.

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  • BakedPenguin||

    What, no love for Cato's index?

  • Tman||

    For every story I read about "economic" freedom in China I can read another ten other stories about Chinese human right suppression from forced abortions to North Korean-style "arrest the whole family for the crimes committed by an individual" that belie any progress.

    If China ever finally gets a 1st amendment type of freedom we are going to find out some absolutely awful shit.

  • k2000k||

    I find it odd the China has improved its economic freedom ranking considering I am reading more and more business articles talking about how China is putting a squeeze on foreign owned businesses.

  • Soc Indv Sparky||

    You know what this tells me? Economics is boring. I mean mind-numbingly sleep-inducing weapons grade boring.

  • hk||

    It isn't boring once you realize our entire fate lies in proving certain people wrong. Debt and Keynesian budgets are scary, that makes economics interesting to me.

  • Soc Indv Sparky||

    Economics is psychology for math geeks.

  • Mr. FIFY||

    Plus, the Nobel committee will give out prizes to fuckstains like Paulie Krugnuts, so there's another strike against economics.

  • ||

    In all fairness, Krugman's Nobel was for work utterly unrelated to the liberal pop-economics bullshit he peddles today.

    I don't know how anyone could possibly think economics is boring. Macroeconomic policy debates can be exceedingly boring, but economics in general is basically the study of how productivity takes place in social groups from 10 to 10 billion. It's astonishing, really, how such order can come from such seeming chaos, and how spontaneously and organically it is hard-wired into our human nature.

  • ||

    Economics is boring. I mean mind-numbingly sleep-inducing weapons grade boring.

    Even when it's about pirates?

  • ||

    And yet it will be economics, rather than terror or some weird epidemic, that will likely bring down the republic.

  • Soc Indv Sparky||

    It won't be economics, it will be people that are incapable of letting others make their own decisions.

  • R C Dean||

    Seeing as letting people make their own decisions is pretty much what market economics is all about, I think you're actually agreeing sage, there, Soc.

  • Soc Indv Sparky||

    This is essentially the "guns don't kill people, people kill people" argument. In my opinion, semantics are used far to often to cover up truth. It may be people that are following what they believe to be correct market economics based solutions, but ultimately it is people who will be responsible for the collapse.

  • ||

    Why can't it be both?

  • NotSure||

    China may have property rights in practice but not in law, but then there are other places where there property rights in law but not in practice. I don't know which of the two are preferable, but both will not work of there is no culture of property rights in the society. Speaking of Hong Kong, it will predictably move down in that list of economic freedom as the CCP gets its corrupt paws ever more entrench in the city.

  • hk||

    I don't know about that, considering Hong Kong has been very economically free since the 1980's.

  • Almanian...still||

    "has been" being key - "going forward", quite possibly = "not so much".

    We shall see...

  • sloopyinca||

  • Almanian...still||

    No, I think that fits right in with this

  • Enjoy Every Sandwich||

    "Damn, Timmy, we still have that much freedom? What can we do to make that smaller?"

  • Almanian...still||

    "So she was all, 'you hold the cymbals THIS way', and I was all, 'um, NO, you hold them VERTICALLY.' So we asked the band director - yeah, I was right, AGAIN..."

  • Registration At Last!||

    SHORTER HERITAGE: "Well, they will put a bullet through your skull and sell your organs to a Saudi prince if you speak up for democracy, but ObamaCare is TEH SUX! I say we give the edge to the PRC."

  • ||

    Right, that's totally why China ranks about 100 places behind the US in the index. Because a relatively non-free country moving toward more freedom while a relatively free country moves toward less freedom is a qualitative statement that the relatively non-free country is superior to the relatively free country.

    Shorter RAL: Team Blue is still better than a totalitarian dictatorship, so I r teh free!

  • Stephdumas||

    A bit off-topic, but United Liberty posted a recent rent about Heritage Foundation http://www.unitedliberty.org/a.....foundation

  • joy||

    protecting those property rights. http://www.riemeninnl.com/riem.....-c-19.html China’s going to and they haven’t yet.

  • jason||

    Both countries blame on the each others for their epolitical systems,

  • tipuasher||

    great reviews, express gratitude you
    http://www.antoniogiacca.com/video

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