The United States is losing ground to its major competitors in the global marketplace, according to the 2010 Index of Economic Freedom released today by the Heritage Foundation and The Wall Street Journal. This year, of the world's 20 largest economies, the U.S. suffered the largest drop in overall economic freedom. Its score declined to 78 from 80.7 on the 0 to 100 Index scale.
In the world-wide rankings of economic freedom, the U.S. fell to eighth from sixth place. Canada now ranks higher and boasts North America's freest economy. More worrisome, for the first time in the Index's 16-year history, the U.S. has fallen out of the elite group of countries identified as "economically free" by the objective measures of the Index. Four Asia-Pacific economies now sit atop the global rankings. Hong Kong stands in first place for the 16th consecutive year, followed by Singapore, Australia and New Zealand. Every region of the world maintains at least one country among those deemed "free" or "mostly free" by the Index.
These trends are important because study after study shows a strong correlation between economic freedom and prosperity. Citizens of economically freer countries enjoy much higher per-capita incomes on average than those who live in less free economies. Economic freedom also has positive impacts on overall quality of life, political and social conditions, and even on protection of the environment. Perhaps of most significance in these hard times, Index data indicate that freer economies do a much better job of reducing poverty than more highly regulated economies.
It is common these days to dismiss as simpletons or ideologues those who speak in favor of the free market or capitalism. An honest assessment shows otherwise. Economic freedom, as represented in the Index of Economic Freedom, is a philosophy that rejects economic dogma, championing instead the diversity that follows when entrepreneurs are free to choose their own paths to prosperity.
The abiding lesson of the last few years is that the battle for liberty requires perpetual vigilance. President Obama professes desire to foster prosperity, environmental protection, poverty reduction and better health care. How ironic, then, that his economic proposals so consistently ignore or even undermine the one system -- free enterprise capitalism -- that has proven best able to achieve those goals.
Now America's once high-flying economy is barely crawling forward. Americans deserve better, and they can do better -- as soon as they reverse course and start regaining the economic freedom that made America the most prosperous country in the world.
Mr. Miller is director of the Center for International Trade and Economics at the Heritage Foundation. He is co-editor, with Kim R. Holmes, of the "2010 Index of Economic Freedom" (471 pages, $24.95), available at heritage.org/index.
First appeared in the Wall Street Journal