January 6, 2005
By Edwin J. Feulner, Ph.D.
All too often, bad news accompanies good news. And people
usually want the good news first, so here it is: Economic freedom
is expanding around the globe.
Now, the bad news: It's not expanding here in the United
This isn't mere conjecture. For the last 11 years, The Heritage
Foundation and The Wall Street Journal have joined to
publish our annual "Index of Economic Freedom." We
look at 10 key ingredients of free economies, from reasonable
levels of taxation, tariffs and regulation to government spending,
property rights and monetary stability.
In our 2005 edition, we again found that improving economic freedom
is the only reliable way to generate economic growth and expand
prosperity in an era of increasing globalization. And freedom is on
the march, with more people than ever enjoying the benefits of that
This year, the scores of 86 countries improved, while 57 declined.
Seventeen countries are categorized as having "free" economies, and
56 more are rated "mostly free." In fact, over the last decade the
number of people living in "free" economies has shot up by 32
percent, to 478 million. Meanwhile, the number of people in
"repressed" economies is down 38 percent, to 242 million.
Again, that's the good news.
Unfortunately, the 2005 Index also marks a watershed for the United
States. For the first time, our nation doesn't make the list of the
top 10 freest economies. This isn't exactly unexpected, though. The
U.S. has been treading water for a decade, as our competitors
around the world improved steadily. Our government is conceding
leadership on the very thing that has been the foundation of
American strength: economic freedom.
In recent years, the U.S. has allowed higher government spending
and protectionist measures to drag our economy into a trap. We're
now choosing to do what is easy and shortsighted, rather than doing
the hard work needed to expand economic freedom. But, as the Index
shows year after year, without persistent commitment, economic
Luckily, it hasn't come to that here. Yet.
Our economic freedom isn't fading, it's merely holding steady as
other nations improve. That's why we've been sliding down the list
of economically free countries. This year, Iceland, Australia and
Chile all forged past us.
High tax rates -- especially high corporate-tax levels -- are a
major drag on the U.S. economy. Increasing government spending, now
at 35.9 percent of GDP, is also a problem.
Another factor is the abuse of "antidumping" measures.
Such measures are supposed to be used to prevent other countries
from selling their goods here at below-market prices, and that
makes sense. But as Index co-editor Mary Anastasia O'Grady points
out, America now overuses this tool. In fact, since 1995, the
United States has trailed only India in the number of antidumping
cases it has filed.
Many of those came as a result of the Byrd Amendment, named for
Sen. Robert Byrd of West Virginia. This amendment encourages
producers to file complaints with the government, because if any
"dumping" is found, they get to share in the penalties
The World Trade Organization ruled two years ago that the Byrd
Amendment violates international trade policies, and the U.S. has
promised to comply with the WTO. But we haven't done so yet, which
means that eight American trading partners soon could retaliate
against our unfair trade practices -- a move that could start a
There's no need for that. After all, trade wars are expensive and
end up hurting everybody, while, as the Index proves year in and
year out, free trade builds economies and ends up helping
If more of our politicians will recognize the benefits of economic
freedom and go back to promoting it, next year we can return to the
top 10 worldwide. And that would be good news -- for
Ed Feulner, president of the Heritage Foundation
(heritage.org), a conservative think tank based in
All too often, bad news accompanies good news. And people usually want the good news first, so here it is: Economic freedom is expanding around the globe.
Edwin J. Feulner, Ph.D.
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