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Free Minds & Free Markets

The U.S. Economy Is More Free Than It’s Been in Years

Economic freedom is good—whether in itself or because of the longevity, prosperity, and associated liberty it brings.

Jo Kirchherr Westend61/NewscomJo Kirchherr Westend61/NewscomIn a country that seems determined to reenact the 1850s, or the Weimar years, or maybe Italy's years of lead, good news about politics and the economy can seem exceedingly rare. But brace yourself for a shock, because this country around you that looks poised to tear itself apart has quietly broken a decades-long retreat from economic freedom, becoming a place more supportive of private business and the ability of individuals to make a living.

This good news comes courtesy of the latest report on the "Economic Freedom of the World," published last week by Canada's Fraser Institute and the Cato Institute and using data up through 2016. "The foundations of economic freedom are personal choice, voluntary exchange, and open markets," write authors James Gwartney, Robert Lawson, Joshua Hall, and Ryan Murphy—though there's rather a lot more behind the numbers, as you might expect.

Readers of Reason will take it as a given that freedom—the ability to order your own affairs and make consensual arrangements with willing people—is a good thing in itself. But the report notes that "countries with greater economic freedom have substantially higher per-capita incomes." In fact, those in the least-free quartile of countries have the lowest per-capita income at $5,649, rising to $11,465 in the third quartile, $18,510 in the second quartile, and $40,376 in the quartile containing the most economically free countries.

Life expectancy also rises and "is about 20 years longer in countries with the most economic freedom than in countries with the least."

And freedom appears to be indivisible, with the rights to run your business and use your property closely linked to the rights to criticize leaders and change the government. "Greater economic freedom is associated with more political rights and civil liberties," the report notes.

So economic freedom is good—whether in itself or because of the longevity, prosperity, and associated liberty it brings.

All of this should be important to Americans because the U.S. has been sliding in the rankings for many, many years. The 2012 report mourned that "[f]rom 1980 to 2000, the United States was generally rated the third freest economy in the world, ranking behind only Hong Kong and Singapore," but that it "has experienced a substantial decline in economic freedom during the past decade."

That year, the U.S. came in at number 18. If you're American and concerned about longevity, prosperity, and associated liberty, that wasn't a good sign.

But now, "the United States returned to the top 10 in 2016 after an absence of several years." While not back to its high-water mark, the U.S. is now ranked in sixth place. And if you're wondering, the U.S. ranking didn't improve because everybody else is going down the drain more quickly than us; our score actually rose, meaning the country became more free in economic terms.

If we can avoid tanking the world's economy in a trade war, we have some friends who might want to join the celebration.

"Worldwide, economic freedom has increased during the past three decades," the report points out. "Moreover, the increase in economic freedom of developing economies since 1990 has been more rapid than the increase of high-income industrial countries. The institutions and policies of developing countries today are substantially more consistent with economic freedom than was the case in the 1980s."

Remember that link between economic freedom and per capita income mentioned above? Now take that and apply that to the entire planet. Then wrap your mind around a report recently published by the World Bank finding that "the number of extremely poor people—those who live on $1.90 a day or less—has fallen from 1.9 billion in 1990 to about 736 million in 2015."

It's worth noting that the other major measure of economic freedom, the Heritage Foundation's Index of Economic Freedom, still has the United States at an unimpressive eighteenth place—but that's despite real improvements in the country's performance. Heritage found an all-time high in global economic freedom; the U.S.'s improvements got swamped in that overall rising tide.

"The increase in its overall score would seem to indicate that the decade-long decline in America's economic freedom may have been arrested. There are signs of renewed labor market dynamism and increased growth, and major regulatory and tax reforms are spurring business confidence and investment," the Index's editors wrote.

That's not to say you should stop worrying; we're humans and we're perfectly capable of flushing away the good times. President Trump's protectionist instincts—his view of trade as a zero-sum game in which the U.S. is necessarily pitted against its partners—is brewing up a nasty conflict.

In May, more than 1,100 economists signed a letter deliberately echoing the one sent to Congress in 1930 urging rejection of the Smoot-Hawley Tariff Act, which subsequently contributed to the devastation wrought by the Great Depression. "Congress did not take economists' advice in 1930," the modern letter warns, "and Americans across the country paid the price. The undersigned economists and teachers of economics strongly urge you not to repeat that mistake."

Also disturbing, is that "global support for free markets seems to have been falling continuously since the 1990s," as described by Pál Czeglédi and Carlos Newland for the Economic Freedom of the World report. They examine several possible reasons before citing Nobel Prize winning economist James Buchanan to the effect that people seem to favor some sort of "parentalistic" protection. This role has been played in the past by religion, but in increasingly secular societies the state has stepped in with all of its coercive power.

It's an interesting theory that's worth exploring elsewhere. But, for whatever reason, surveys find increasingly wealthy populations voicing decreasing support for the economic freedom that made them prosperous. It's quite possible that anti-market fervor has slowed or even halted progress toward economic freedom in much of the world, Czeglédi and Newland add. They speculate that as governments substitute the preferences of politicians for the outcomes of voluntary exchange with inevitably unpleasant results, sentiment will shift again.

For the moment, though, the United States is an economically freer place in an economically freer world. That means improved prospects for long, free, and prosperous lives for all of us—if we don't mess it up.

Photo Credit: Jo Kirchherr Westend61/Newscom

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  • loveconstitution1789||

    Cons: California bans more and regulation around the USA went up.

    Pros: Trump gets some regulations lowered and states legalize marijuana to some degree.

  • JesseAz||

    Please keep your ignorance to yourself.

    There was literally news just yesterday at California's attempt to regulate the internet. There's the constant agricultural regulations imposed across state lines due yo illegal interstate regulations, where California pushes requirements on out of state farms. The California increases to CAFE standards which impose extra costs on other state consumers as well.

    My god man, try to educate yourself.

  • Last of the Shitlords||

    Yeah......voting for The Hag was so. I hope better......

    Are you for real?

  • Darth Soros||

    Headline: "US Economy Freer than it has been in years!"

    In related news, US "liberals" (and by that I mean "tax-happy, coercion-addicted, power-tripping government humpers and State fellators") commit mass suicide in protest. "We just can't live," a suicide note from one writing as "SQRSY One, "in a world of too much liberty! Without Big Brother's Mailed Fist up my rectum, what is the point of living!"

  • Nuwanda||

    "...so voting for Der TrumfenFuhrer in the general election can easily be forgiven.

    Voting for Der TrumfenFuhrer at the PRIMARIES will NEVER be forgiven!"

    Well, isn't that a novel twist. Of course it fails to take into account that Trump's milquetoast competition in the primaries was, within the context of the primaries, just as woeful as Clinton would be in the general.

    But no, we're asked to assume Trump was worse than Jeb, Christie, et al. Further, we all knew Clinton was a shoe-in for the Democrats. Even she couldn't have fucked it up against Cruz, Rubio or Paul. Or would they have carried the college as Trump did? Right.

  • loveconstitution1789||

    Sqrlsy Ome gets upset that propangda not taken seriously.

  • BigT||

    "published last week by Canada's Fraser Institute and the Cato Institute and using data up through 2016"

    This pre-dates Trump. Expect the index to rise significantly at the next report.

  • David Nolan||

    Huh? With record-breaking debt ALREADY greater than Obama's, and MUCH more threatened? (8-year vs 8-year)

    And the only increase n annual deficits more than 50% EVER ... in a booming economy.
    What will happen in the next recession -- virtually inevitable in a Trade War ...with annual deficits already well over a trillion dollars?

  • XM||

    What auto pilot spending program (like Obamacare) has Trump proposed that would saddle us with long term debt? Military and discretionary spending can be adjusted. Entitlement spending, not as much.

    The deficit will increase because of the tax cuts, but the problem was never revenue.

    Obama was in office for 8 years. His first year economic policy was non starters like cash for clunkers. The companies he bailed out expanded overseas, which planted the seeds of economic populism that helped elect Trump. The economy recovered the recession somewhere in the 6th year of his presidency in spite of his missteps.

    Obama was a demagogue with a penchant for eloquence, nothing more. His healthcare imposition on the economy almost certainly gave birth to the Uber era. Trump's tax policy has brought back investments from overseas. His trade war will cost jobs, but new deals (same as the old ones) will address some of that.

    I'm not giving Obama much credit on anything. He was a big spender AND a closet socialist. He was a one time exception for voters who were growing disillusioned with George Bush and the prolonged military conflict. He's a mistake that should not be repeated.

  • David Nolan||

    What auto pilot spending program (like Obamacare) has Trump proposed that would saddle us with long term debt?

    That's not the only way to create debt. And Trump has created more 8-year debt already. than Obama did after 8 years. (Obama actual vs CBO 2024 forecast)

    The deficit will increase because of the tax cuts,

    Mostly

    On debt, Trump has done MUCH worse. Obama inherited the 2nd worst recession since the Depression. Trump inherited the longest recovery ever for an incoming President - from Obama.

    NO prior administration has EVER increased the deficit ... over 50% in a single year -- with a booming economy

    Trump said he'd pay off the debt in 8 years Cut taxes AND increase spending. Not touch Social Security and Medicare. AND provide universal health care. So far, he's off on the debt by $31 Trillion,

    I'm not giving Obama credit, just doing an accurate comparison. Libertartans are neither left nor right.
    Democrats borrow trillions to pay for free stuff.
    Republicans borrow trillions to pay for free tax cuts.

    Oh yeah, Trump gave himself a HUGE tax cut -- not the 40% cut he campaigned on, but still huge.

  • David Nolan||

    Will Trumptrolls notice that the reported advances in dreesom were achoeved under Obama?

  • David Nolan||

    AAAK .... TYPO ....

    Will Trumptrolls notice that the reported advances in freedom ere achieved under Obama?

  • jay||

    It usually happens under a democratic president...with republicans controlling the other houses, because that is the only time the gop acts like actual republicans. Gridlock works with a dem president. That isn't a credit to obama, or clinton for that matter. Sometimes I think the republicans WANT to give the dems credit for everything.

  • David Nolan||

    Do you realize that this administration has already increased the 8-year debt, in less than two years, more than Obama did after his 8 years -- and threatens even ore? (CBO 2014 forecast vs Obama actual)

    No other administration has ever increased the deficit by ... over 50% in a single year ... in a booming economy.

    What scares me is they gridlock Obama , but go ape-shit under Trump. This is why libertarians have always favored a divided government (in any mix). It was the GOP Senate, under Reagan, which buried his "Grace Commission" spending cuts that would have saved (Cato estimate) over $10 trillion by 2010.

    Republicans seem compelled to balloon debt. Under Dubya, they "paid for" Medicare Prescriptions by looting the income tax. Up to 45% of ALL Medicare can come from income taxes, NOT the Trust Fund, which would have gone bankrupt years ago. So it was Republicans who insulated the Trust Fund,, to get Dem vores. Over $300 billion last year, 20%+ of the entire federal income tax -- and increasing forever.

  • Kirk Solo||

    The CBO also said the ACA would pay for itself too...

  • 2VNews||

    We still have too much political correctness, virtue signaling, government debt, regulation, taxation, punishment, government brainwashing in public schools and too much devaluation of our money.

  • David Nolan||

    By BOTH parties. We're in DEEP doo-doo.

  • loveconstitution1789||

    Lefties mostlt though.

  • Conchfritters||

    It's too bad that we are spending ourselves into oblivion. Our economic freedom will be serverely curtailed once the government decides to tax the shit out of us again, because they sure as hell aren't going to decrease spending.

  • sarcasmic||

    The government won't tax the debt away. They'll inflate it away.

  • Don't look at me!||

    It still hurts, but in a different way.

  • John||

    The government's ability to collect taxes peaks at around 19% of GNP for the feds. They can try to take more but tax avoidance makes doing so subject to the law of dimnishing returns. My entire life people have been convinced that the debt is going to destroy the economy some day soon. It has never happened. Maybe some day it will, but there seems to be no stopping Congress and at this point no real point in worrying about it.

  • sarcasmic||

    Someday bonds will cease to be viewed as a sound investment, and when that happens the whole system will collapse overnight.

  • John||

    Except that that never happens in other countries absent a lot of other craziness that destroys the economy on its own. Things like that happen in places like Venezuala or Turkey where the government does other things besides borrowing that destroy people's faith in the economy. That could happen here no doubt. But if it ever does, the amount of debt we have will really be incidental. If the real Socialists ever get in charge, we could be debt free and still be screwed.

  • sarcasmic||

    The amount of debt won't matter because the currency will be inflated into worthlessness.

  • David Nolan||

    Except that that never happens in other countries absent a lot of other craziness that destroys the economy on its own

    Crazy like Trump's worst-ever deficits ... in a booming economy?

  • RPGuy16||

    In the long run we are all dead anyway.

  • DRM||

    When does that happen? Japan's debt-to-GDP ratio is twice ours (technically, more than twice by IMF gross debt, just short of twice ours by IMF net debt), and yet there hasn't been any related collapse.

  • vek||

    That's because of "faith" in Japan remaining productive as a nation. People have the same general idea about the USA. In theory even if we completely blow it, which we are really, we will still end up being one of the wealthiest nations on earth.

    The infrastructure, capital assets, labor force, etc that we have here dwarf those found almost anywhere else on earth by basically all metrics. So even with massive monetary issues, we cannot become as poor as Somalia overnight. That would require amounts of stupid that even our politicians aren't likely capable of, over a period of decades. But we could potentially become as poor as Germany or the UK in shortish order, which would be a considerable drop from where we're at now.

  • JunkScienceIsJunk||

    Complete collapse isn't the only thing worth worrying about. It's not a binary thing. The fact of the matter is that debt is a drain. Only about 90 cents of every dollar collected goes to the government. The remaining 10-12 cents is for servicing debt. That's a significant drain which leads to less efficient outcomes.

  • JesseAz||

    As a small scale example of the issue look at certain democratic cities where a quarter of their spending is debt and returned people. They e had time reduce services to fund those costs.

  • RPGuy16||

    Cities don't get to print the currency that the debt is issued in.

  • JunkScienceIsJunk||

    To put it in perspective, the approx 10% of waste would be equivalent to injecting 10% of total revenues back into the economy. It has been estimated that Trump's

  • JunkScienceIsJunk||

    It has been estimated that Trump's tax plan will inject

  • JunkScienceIsJunk||

    Oh forget it. (it appears this site doesn't like the less than sign)

  • David Nolan||

    Both those, less and greater than, are code for custom html -- like italics, or a web link

  • JunkScienceIsJunk||

    Yeah, I figured it would ignore it without a closing sign.

    Anyway, pointing out that Trump's cuts were less than 1% and it is argued that it will result in growth of $250B per year. Imagine what that 10% could do.

  • David Nolan||

    Or more. Like when Hell freezes over. :-)

  • Here for the outrage||

    literally hitler

  • BestUsedCarSales||

    If that's a Trump comment, this data predates him. That being said, I expect it to improve as Regulation seems to be one of his best areas.

  • JunkScienceIsJunk||

    Glad to see an improvement! But let's keep things in perspective: being ranked 6th in a world that openly has disdain for free market economics is still no great achievement. If we handed the reins to economists instead of the political elite, we would be safely in 1st place.

  • sarcasmic||

    Piketty and Krugman?

  • JunkScienceIsJunk||

    No, the economics community by and large.

  • The Last American Hero||

    Like the brilliant minds that failed to foresee the collapse of Lehman and Bear Stearns? Or the ones that devised quantitative easing? Maybe you mean those Randians that didn't see the Euro soverign debt crisis coming.

  • JunkScienceIsJunk||

    The brilliant minds who, as an aggregate, are far more in favor of a free market than American politicians or the lemmings that vote for them (and who are content with not having qualified economic advisors on staff).

  • Kivlor||

    If only we allowed the elites to control everything, then true utopia could be reached.

  • David Nolan||

    Will Trumptrolls notice that the reported advances in freedom were achieved under Obama?

    Or that the current administration has already added more 8-year debt, in less than 2 years, than Obama added AFTER 8 years ... and threatened much greater debt? (CBO 2024 forecast vs Obama actual)

    What other President and/or party has EVER increased the annual deficit .. over 50% in a single year ... in a booming economy Even a minor recession -- .virtually inevitable in a Trace War -- would start with annual deficits already well over a trillion, thus likely a major financial disaster.

    Left - Right = Zero
    But still note that freedom increased under that communist from Kenya ... while Republicans have not launched their own New Deal (greatly expanding even Dubya's irresponsibility)

  • The Last American Hero||

    Do you even read the comments? It's been posted about 3x already that in 2016 the previous administration was still in charge.

  • JunkScienceIsJunk||

    In fairness, it was David who was the one who posted those.

  • David Nolan||

    (deep bow)

  • Last of the Shitlords||

    There is no 'David'. It's 'Hihn' or whoever it was sjitpostijg as Hihn.

  • David Nolan||

    Clever diversion.
    Cool conspiracy..

  • JunkScienceIsJunk||

    To echo your sentiment, it's not just Trump's administration that has presided over the country's major increases in spending. Bush Jr's (though, notably, not his father's) administration was guilty of this as well, and Reagan before him. The notion that republicans are more likely to decrease spending than democrats is a myth. They just TALK about decreasing spending. Their actions confirm that they do the opposite.

  • David Nolan||

    Reagan's debt was caused by Republicans to. His "Grace Commission" spending cuts would have saved over $10 trillion by 2010 (Cato estimate).

    Reagan then began asking for a line item veto ...over his own party! (Cuts buried in the GOP Senate)
    Later, as Russia was collapsing, savings in Defense spending were supposed to reduce the debt accumulated under Reagan. That failed too.

    Overall
    Democrats borrow trillions to pay for free stuff.
    Republicans borrow trillions to pay for free tax cust.
    Both loot the federal treasury to buy votes..

  • loveconstitution1789||

    Democrats controlled congress through much of the Reagan years.

  • Ellis Wyatt||

    He said "the GOP Senate" --- and had NOTHING to do with an event that lasted more than a single year.
    So your compulsion for being a tribal partisan hack has burned you again.

    You also may have missed that Reagan worked wit the Democrats, not a bullying authoritarian like Trump.
    Reagan also worked to expand his support beyond his base, instead of cutting himself off from most Americans.

    Trump has excuse for his shameful record on the debt -=- already worse than Obama (on Trump's own 8-year comparison)

  • Ellis Wyatt||

    Correction:
    "Trump has no excuse for his shameful record on the debt -..."

  • jay||

    It increased because he couldnt do anything. How was it in his first 2 years. Follow who controls the govt, what direction it goes. Under Obama? Obama what? He was a lame duck since 2010

  • David Nolan||

    Trump is the worst EVER on debt, because he couldn't do anything?

    If you mean Obama's first two, that fails also. Obama inherited the second worst recession since the Depression, and handed Trump the longest recovery EVER, for an incoming President (7 years). But Trump is so much worse on debt than Obama -- who borrowed for the "stimulus" spending plus all the negatives of a major recession.

    Under Obama? Obama what? He was a lame duck since 2010

    I described what. 2010 was into the recovery. And the GOP totally screwed up Obamacare -- by refusing the original bipartisan deal that would have killed single-payer forever -- brilliant stonewalling?

    Under Kennedy, a non-stupid GOP worked with Kennedy's tax cuts, which launched the first of only two postwar booms. Reagan;s was the other, with tax cuts essentially the same as Kenend's. So when they worked with Dems, Kennedy did not need his left wing at all -- which strongly opposed the tax cuts. Gary Johnson's GREAT ad in 2012, showed how Obama had campaigned as a moderate on health care, KILLING Hillary and Edwards for the nomination, by opposing a mandate as stupid (with the best argument against one) It was Republicans who forced Obama to the left (but less debt than Trump)

  • Oli||

  • aajax||

    Made it back to #6 with Obama as president. Well, there's a thing. I'll be curious to see if Trump can keep us there. The corporate tax may be a plus, while these insane executive "national security" tariffs are a definite minus, as is are the huge deficits.

  • RedC||

    It seems pretty clear to me that Obama didn't want a strong US economy. He said that the greatest threat to the world is man-made climate change. He and many progressives and establishment politicians say that human activity is cause global warming. Well what sort of human activity? Well economic activity or course. What is the greatest source of economic activity? The American middle class. Progressive fear a prosperous American middle class because they think it is destroying the Earth.

  • loveconstitution1789||

    +1

  • Ellis Wyatt||

    How can our economy be a threat to the world?

    He did hand Trump the longer recovery EVER for an incoming President -- starting from the 2nd worst recovery since the Depression. He added more jobs than Trump, annually, for his final three years, had 3 quarters of greater GDP growth than Trump'\;s best .. and despite all that, added LESS new debt than Trump (on Trump's own 8-year standard)

    You're dead wrong on climate change, to an almost embarrassing degree.
    But squeezed in many GOP slagans and talking points.

  • vek||

    Are you so retarded that you don't understand that coming immediately out of a recession you're OBVIOUSLY going to have high job growth?

    Likewise, being handed an economy that hasn't had a recession in awhile is a recipe for a recession happening any old time. We're overdue for one, and I've been very surprised we haven't kicked into one yet. If Trump gets through this 1st term without one I'll be surprised, let alone both his possible terms. If we do manage to not have one soon, it will be purely on the back of his deregulation and tax cuts, and just general optimism.

    Whatever the case, anybody with sense knows that presidents don't magically direct the economy from day one when they enter. Depending on what policies are being pursued it can take years before anything they do has much effect, other than the optimism or pessimism they inspire.

  • vek||

    Well, this is essentially the gridlock from Rs taking over congress. It will be interesting to see how these guys score the Trump years. There will be pros and cons from a free market perspective, but most businessmen clearly seem to see it as an overall improvement. I do.

    Now if only our silly government could ever cut spending...

  • sudon't||

    "Readers of Reason will take it as a given that freedom—the ability to order your own affairs and make consensual arrangements with willing people—is a good thing in itself".

    Unfortunately, if you work for wages, the freedom to bargain for better working conditions has all but been legislated away. But, you have the freedom to fuck off, so it's all good! Tired of low, stagnant wages? Just be an entrepreneur!

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