NCPA - National Center for Policy Analysis


January 27, 2010

The 2010 edition of the "Index of Economic Freedom" poses a frightening paradox.  Around the world, the economically freest countries are, by and large, those with a British legacy, says Theodore R. Bromund, the Margaret Thatcher Senior Research Fellow with the Heritage Foundation. 

Indeed, the top five -- Hong Kong, Singapore, Australia, New Zealand, and Ireland -- were either founded or influenced by the British.  Of the top ten states, only Denmark, Switzerland, and Chile were not, at one point, governed from London.  The lesson should be clear: economic freedom, born of the thought of Adam Smith and David Ricardo, spread round the world with the English-speaking people, to the immense benefit of both their children and those who learned from them. 

And yet the two most important English-speaking countries today are sliding backwards, says Bromund: 

  • In 2009, the United States, for the first time, dropped out of the ranks of the free, and into those of the "mostly free."
  • The United Kingdom dropped only slightly less than the United States, and it fell out of the top ten for the first time.  

The reasons for the U.K.'s comparative decline are clear, says Bromund: 

  • While some countries did not respond to the 2008-9 financial crisis by limiting economic freedom, others, including Britain, did.
  • The United Kingdom already had to carry the burden of the National Health Service and the European Union's Common Agricultural Policy, which distort its domestic prices and impose higher costs on consumers, as well as a high and increasing level of government spending.
  • Add to that the nationalization of Northern Rock Bank and the majority and minority stakes, respectively, the government has taken in the Royal Bank of Scotland and Lloyds Banking Group, and you have a nation that is moving increasingly rapidly away from economic freedom. 

There is little likelihood that the United Kingdom will reverse this retreat in the next edition of the Index, says Bromund: 

  • The 2010 Index reports that government spending as a share of national income in the most recent year was 44 percent.
  • But the Organization for Economic Co-operation and Development (OECD) reports that public spending will reach 53 percent of national income in 2010. 

Source: Theodore Bromund, "The Mostly Free Anglo-American Alliance," Heritage Foundation, January 26, 2010. 

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