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From Site Selection magazine, November 2014

Congratulations – We Came in 12th!

Illustration by Bob Gravlee


lobal economic freedom is once again on the march!  Not so much in the United States.

This is according to the 20th anniversary edition of the Index of Economic Freedom, released in early 2014 by the Heritage Foundation and the Wall Street Journal. The Index scores countries in 10 categories: property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom and financial freedom.

The US fell out of the top 10 for this first time this year, declining to 12th overall. That puts the US solidly in the “Mostly Free” category, admittedly better than the “Moderately Free,” “Mostly Unfree,” or “Repressed” categories. Back when the Index was introduced, in 1995, the US was “Free” as one would expect.

The 2014 Index finds notable declines for America in fiscal freedom, business freedom and property rights, placing it again behind its neighbor to the north, Canada. Sub-Saharan Mauritius even made the Top 10, placing 8th — four slots ahead of the US.

Another global freedom index, the Economic Freedom of the World 2014 from The Fraser Institute, ranks 152 countries and territories according to various economic freedom measures. This ranking, first introduced in 1996, also places the US 12th. And there are more similarities: Both Indexes rank Hong Kong and Singapore first and second, respectively, this year. And the Economic Freedom of the World Index also has Mauritius in its top 10 — in fifth place, no less. (Note to self: Figure out what they’re doing in Mauritius!)

What’s happened to us?

Most worrying is this excerpt from the Fraser Institute’s index concerning US economic freedom: “The United States, once considered a bastion of economic freedom, now ranks 12th in the world … Due to a weakening rule of law, increasing regulation, and the ramifications of wars of terrorism and drugs, the United States has seen its economic freedom score plummet in recent years, compared to 2000 when it ranked second globally.”

Benjamin Franklin once proclaimed that “Those Who Sacrifice Liberty For Security Deserve Neither.” Have we sacrificed an essential part of our strength as a people in the name of security?

Whatever the case, investors don’t seem worried. The US remains the global market in which companies most want to have operations (many of them need to be in markets like China, which is different than wanting to be there). Indeed, FDI in America is on the increase, as content in this issue explains. Why? Perhaps because states like Georgia, Site Selection’s top US Business Climate for 2014, have found ways to compensate for national forces that impede capital investment, like those cited in the Indexes, and find ways to help make companies — foreign and domestic — successful.

I’m confident the US will rise again in economic freedom rankings like the ones mentioned here. As Winston Churchill said, “You can always count on Americans to do the right thing — after they’ve tried everything else.”

Stay positive.

Till next time,

Mark Arend
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