The news is out: the U.S. is falling behind on economic freedom. In the 2010 edition of the Index of Economic Freedom, the United States, for the first time, dropped out of the ranks of the free, and into those of the ‘mostly free,’ ranking eighth in the world and behind Canada in North America.
The U.S. retreat was broad-based: it fell backward in seven of the ten areas measured. And while much of the U.S.’s decline stemmed from its response, under both President George W. Bush and President Obama, to the financial crisis, some of the burden it carries is older, and even heavier. Its corporate tax rate, at 35 percent, is high compared to most of its major competitors. Its government spending, though lower than some, has risen steadily since 2000. And though it ranks relatively highly on freedom from corruption, it is only 18th out of the 179 nations surveyed, which is far from flattering to our sense that Americans are an honest people.
The costs of economic unfreedom should be obvious. In the U.S., it means fewer jobs and lower growth. And what is true here is true abroad as well. As the Adam Smith Institute in Britain points out, the way to minimize poverty is to promote the creation of wealth. And as the economic and political walls came down across the world over the past decades, the people of the world enjoyed both the material and moral fruits of freedom. As the Institute puts it:
over that 36 years . . . our living standards [in Britain] have around about doubled, even while they’ve taken a 5% or so hit in these last couple of years, and global poverty has fallen by 80%. That’s the largest drop in poverty in the entire history of our species
To its credit, the United States has led this march of freedom. It led, of course, by resisting Communism, which sought to advance political tyranny in the name of ending economic freedom. But it led even before that. After the Second World War, the U.S. rejected protectionism and sought to promote freer trade and economic liberalization among its friends and allies in Europe and Asia. Its reasoning was clear: not only is economic growth a good thing in itself, it also – as the Great Depression and the rise of Hitler showed – helps to stabilize liberal democracy. And if the U.S. was going to speak the virtues of economic freedom to others, it had to practice those virtues at home.
Economic freedom is not, just, in the self-interest of the United States. It is in our interest as the world’s leading democratic power. The American grand strategy since 1945 has been to advance economic freedom and political freedom, and to recognize that both freedoms are closely linked. The Obama administration’s retreat on economic freedom is not just bad at home: it signals a wider disinterest in the cause of promoting freedom abroad. In short, one of the bipartisan pillars of our foreign policy – it was conceived, after all, by the Rooseveltian liberals who were in charge in the mid-1940s – has disappeared, and no one has noticed. That is a retreat from prosperity, from true liberal values, and from international leadership all in one.