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The United States is in imminent danger of dropping out of the Index of Economic Freedom’s “mostly free.” The Index, which has been published by the Heritage Foundation every year since 1995, ranks a total of 176 countries based on how economically free or unfree they are. The comprehensive rating is based on assessments of twelve categories of freedoms.

In the Index, countries are divided into five groups, the best of which is “free” (and includes Singapore, Switzerland, Ireland and Taiwan); the worst is “repressed” (with countries like Venezuela, Cuba, and North Korea). The index can also be regarded as a “capitalism ranking.”

In the latest ranking, the U.S. only just scrapes into the second-best of the five categories (“mostly free”). If the United States were to lose just one more point in next year’s ranking, it would find itself in the “moderately free” category, along with the likes of Barbados, Portugal, and Bulgaria.

The U.S. has progressively dropped down the rankings in recent years. There are now a total of 16 European countries that are economically freer, i.e. more capitalist, than the United States, such as Switzerland, Ireland, Estonia, Luxembourg, Denmark and Sweden. Even Germany and Austria are considered economically freer than the U.S. Could it almost be time for Arnold Schwarzenegger, who once swapped Austria for the United States because Austria was too socialist and he admired the style of capitalism in the U.S., to start thinking about going back to Austria unless the U.S. changes course?

The Heritage Foundation, which compiles the Index, explains the United States’ poor rating: “The U.S. economy faces enormous challenges. Big-government policies have eroded limits on government, public spending continues to rise, and the regulatory burden on business has increased.”

The U.S. does receive positive ratings for “Rule of Law,” “Business Freedom” and “Investment Freedom,” while for “Fiscal Health” the hopelessly over-indebted United States only scores 0 points, and for “Government Spending” it gets a very low rating of 49.3 points.

Nevertheless, while their country steadily slips down the capitalism ranking, a majority of Americans are still pro-capitalist, as confirmed by a survey conducted by Ipsos MORI for the book In Defense of Capitalism, which is published today in the U.S. (and 29 other countries). A total of 34 countries have now been surveyed and respondents in each country were presented with more than 30 statements on the market economy and capitalism. The only country out of the 34 where people are even more positive about capitalism is Poland. The U.S. is followed by South Korea and Japan (see chart below).

Despite the overall result, there are far greater differences between younger and older respondents in the U.S. than in any other country: Americans over the age of 60 are firmly in favor of a market economy and capitalism, while Americans under the age of 30 tend to have a slightly negative attitude toward capitalism.

This trend among young Americans, in combination with the United States’ increasingly poor ranking in the Index of Economic Freedom, shows that capitalism in the U.S. is now under threat, as it is in Europe, where Great Britain has already slipped out of the “mostly free” category and into the “moderately free” group of countries. With its score of 69.9 points, Great Britain has the worst rating since the Index was first calculated way back in 1995. In 2006, Great Britain was still on a respectable 80.4 points! Another country that has lost a lot of ground in the Index over the past few years is China, which now only ranks 154th out of 176.

The story is very different in Vietnam: although the country calls itself “socialist,” it has registered more economic freedom gains since 1995 than almost any other country in the world. Despite ranking just 72nd, its score of 61.8 is 20 points higher than in 1995. Poland, on the other hand, which along with Vietnam is among the countries that have gained the most economic freedom since 1995, has lost some of its earlier advances in more recent years. 

It is time to defend capitalism – not only, but perhaps especially in the United States!


Rainer Zitelmann is a German historian and sociologist and author of the book IN DEFENSE OF CAPITALISM

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