Economic Freedom: Where We Rank

Everybody: "We’re number 9! We’re number 9!"

The Heritage Foundation released a list of the best and worst countries on the economic freedom scale. For more on the actual criteria, see the full post. But here are the top 10 lists:

Most Free

  1. Hong Kong (1st)
  2. Singapore (2nd)
  3. Australia (3rd)
  4. New Zealand (4th)
  5. Switzerland (5th)
  6. Canada (6th)
  7. Ireland (7th)
  8. Denmark (8th)
  9. United States (9th)
  10. Bahrain (10th)

Least Free

  1. Timor-Leste (170th)
  2. Iran (171st)
  3. D.R. of Congo (172nd)
  4. Libya (173rd)
  5. Burma (174th)
  6. Venezuela (175th)
  7. Eritrea (176th)
  8. Cuba (177th)
  9. Zimbabwe (178th)
  10. North Korea (179th)

Freedom Takes a Hit

The good news is that the United States ranks eighth out of 179 countries in the 2010 Index of Economic Freedom. The bad news, according to John Stossel (via Reason Magazine), is that the U.S. ranks behind Canada and that policies (both past and current) are threatening that freedom even more.

For the past 16 years, the index has ranked the world’s countries on the basis of their economic freedom—or lack thereof. Ten criteria are used: freedoms related to business, trade, fiscal matters, monetary matters, investment, finance, labor, government spending, property rights, and freedom from corruption.

The top 10 countries are: Hong Kong, Singapore, Australia, New Zealand, Ireland, Switzerland, Canada, the United States, Denmark, and Chile.

The bottom 10: Republic of Congo, Solomon Islands, Turkmenistan, Democratic Republic of Congo, Libya, Venezuela, Burma, Eritrea, Cuba, Zimbabwe, and North Korea.

The index demonstrates what we libertarians have long said: Economic freedom leads to prosperity. Also, the best places to live and fastest-growing economies are among the freest, and vice versa. A society will be materially well off to the extent its people have the liberty to acquire property, start businesses, and trade in a secure legal and political environment.

Bill Beach, director of the Heritage Foundation’s Center for Data Analysis, which compiles the index with The Wall Street Journal, says the index defines "economic freedom" to mean: "You can follow your dreams, express yourself, create a business, do whatever job you want. Government doesn’t run labor markets, or plan what business you can open, or over-regulate you."

We asked Beech about the U.S. ranking. "For first time in 16 years, the United States fell from the ‘totally free’ to ‘mostly free’ group. That’s a terrible development," he said. He fears that if this continues, productive people will leave the United States for freer pastures.

"The United States has been this magnet for three centuries. But today money and people can move quickly, and in less than a lifetime a great country can go by the wayside."

Why is the United States falling behind? "Our spending has been excessive. … We have the highest corporate tax rate in the world. (Government) takeovers of industries, subsidizing industries … these are the kinds of moves that happen in Third World countries. …"

Beach adds that the rule of law declined when the Obama administration declared some contracts to be null and void. For example, bondholders in the auto industry were forced to the back of the creditor line during bankruptcy. And there’s more regulation of business, such as the Dodd-Frank law for the financial industry and the new credit-card law. But how could the United States place behind Canada? Isn’t Canada practically a socialist country?

"Canada might do health care the wrong way," Beach said, "but by and large they do things the right way." Lately, Canada has lowered tax rates and reduced spending.

Tennessee Battles for Top Billing in Internet Speeds

Hearing a dial-up computer tone today is a little like listening to the crackling sound of a phonograph from the early 20th century. It’s out of place and just a little creepy.

In Indiana, we’ve come a long way from the days of waiting for our computers to connect to the Internet. Some of the most rural areas now have access to broadband capabilities and advanced mobile services.

Much of that is due to the Telecom and Video Reform Act (HEA 1279) that the Indiana General Assembly passed and Gov. Mitch Daniels signed in 2006. The act deregulated the telecommunications industry and put Indiana on the map as a leader in expanding broadband services. The capabilities have also attracted investments from a number of entities.

Now, it looks like another quasi-Midwestern state is gaining attention in the world of broadband. Chattanooga’s city-owned electrical utility has started offering an Internet service that is among the fastest in the world.

The Chattanooga Electric Power Board’s new Fiber Optics network will provide a 1 gigabit-per-second Internet service. The utility said the service is more than 200 times faster than the average national download speed today.

At a cost of $350 a month, it’s also much more expensive than the typical residential plan. Harold DePriest, the Chattanooga Electric Power Board’s president and CEO, said residential customers don’t really need that fast a service, but businesses might.

He said the high-speed service won’t be costly for EPB to operate, yet it should put the Chattanooga community at the forefront of attracting businesses – possibly Internet providers – that can benefit from having it.

“Chattanooga represents the next frontier in communications technology, with limitless potential for new applications for education, entertainment, health care, industrial development, and more,” DePriest said in a statement.

The article goes on to quote Chattanooga Mayor Ron Littlefield saying the announcement has put the city “on the short list of progressive communities in the world.” A New York Times article says that only Hong Kong and a few other cities in the world offer such fast services and that Chattanooga will be the first in the United States to do so.

Fast, but not cheap. Would you pay $350 a month for this kind of capability?

Time to Lower Federal Corporate Income Rate

If tax rates can in fact be said to influence where companies locate and invest, the U.S. has a problem. As our economy becomes increasingly global our combined (federal and provincial/state) income tax rate is higher than every other country in the world, except Japan. Both presidential candidates have recognized the need to do something. Sen. John McCain proposes a significant reduction of the current 35% federal rate to 25%. Although coupled with other proposals and not nearly as definite or assertive, Sen. Barack Obama also indicated he is open to lowering the rates.

The U.S. can’t afford to ignore what most other industrialized countries have already figured out: the corporate income tax rates affect investment. This year China dropped its rate from 33% to 25%; and Taiwan, Hong Kong and Korea, which already had much lower rates than the U.S., dropped theirs even more. And it is not just in Asia. The adjustments swept Europe with Germany, Italy, the U.K. and Spain all making rate reductions. It is truly a global thing. Other countries that are part of the wave of cuts: Turkey, Bulgaria, Israel, South Africa and Colombia.

So with so much talk of change in other contexts, it is important to point out that it is also time for a change to our corporate tax rate. A full listing of the corporate rates in nations belonging to the Organization for Economic Cooperation and Development, along with other revealing information on this subject is available from the Tax Foundation.