Among the many costs of COVID-related panic has been the diminution of global economic freedom. According to the Heritage Foundation’s illuminating 2022 Index of Economic Freedom, the response of governments to COVID “wreaked havoc on the world economy.” The study finds that almost “every economy included in this Index experienced negative growth in 2020.”
The study defines economic freedom according to “four broad categories: rule of law (property rights, judicial effectiveness, and government integrity), government size (tax burden, government spending, and fiscal health), regulatory efficiency (business freedom, labor freedom, and monetary freedom), and market openness (trade freedom, investment freedom, and financial freedom.”
The most economically free country in the world is Singapore. The least economically free country is North Korea. The United States, groaning under increasing debt and a ballooning federal government, stands at an embarrassing 25th on the list, well behind Scandinavian countries.
American politicians could learn much from the success of Singapore, where businesses flourish not in spite of government but because of it. Singapore, according to the study, has a “business-friendly regulatory environment,” low taxes, unassailable property rights, and a government intolerant of corruption and excessive spending.
Singapore’s “top individual income tax rate is 22 percent, and the top corporate tax rate is 17 percent,” says the study. “Government spending has amounted to 18.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 0.5 percent of GDP.” In the United States, by contrast, the “top individual income tax rate is 37 percent, and the top corporate tax rate is 21 percent,” according to the study. “Government spending has amounted to 38.9 percent of total output (GDP) over the past three years, and budget deficits have averaged 9.0 percent of GDP.”
Economic progress is tied to economic freedom, emphasizes the study: “As economic freedom rises, the global economy expands and poverty falls.” Since 1993, the “percentage of the global population living in abject poverty” has gone from 34.3 percent to 9.3 percent. The poorest countries in the world are the least economically free. This runs counter to the complacent assumptions of liberals, who propose bigger and bigger government as an answer to poverty. Their “great reset,” undertaken in the name of the poor, will consequently not help them.
The study’s authors argue that the world economy can only rebound from COVID if governments resist the temptation to spend, tax, and regulate themselves out of the crisis. What pulls the poor out of poverty is not an expanding government but an expanding economy. The worst places in the world for the poor to live are socialist countries, such as Cuba and Venezuela, which fall near the bottom of Heritage’s index.
The study is full of useful information that debunks liberal assumptions. Liberals, for example, often bray that countries with robust free markets pose the greatest threat to the environment. But the opposite is true. According to the study, the most economically free countries are the cleanest ones: “In countries around the world, economic freedom has been shown to increase the capacity for environmentally friendly innovation. The positive link between economic freedom and higher levels of innovation ensures greater capacity to cope with environmental challenges, and the most remarkable improvements in clean energy use and energy efficiency over the past decades have occurred not as a result of government regulation, but rather because of advances in economic freedom and freer trade.” (READ MORE: Freedom Is the Essence of American Exceptionalism)
Countries that prize the free market also score better than socialist countries according to non-material standards. “The societal benefits of economic freedom extend far beyond higher incomes or lower rates of poverty,” says the study. “Countries with higher levels of economic freedom enjoy higher levels of overall human development as measured by the United Nations Human Development Index (HDI), which measures life expectancy, literacy, education, and standards of living in countries worldwide.”
President Joe Biden is peddling the myth that to “build back better” requires hampering free markets. But this study shows convincingly the folly of that approach. A more socialist post-pandemic world will not be a prosperous or safe one. It is no surprise that the most troubled countries in the world — China and Iran, among others — fall low on the index. Russia also fares poorly, “ranked at 43rd among 45 countries in the Europe region,” says the study.
Political freedom and economic freedom are more often than not entwined. It is no coincidence that the pols most demagogic about COVID are opposed to both. A receding world economy is the byproduct of their hubristic and hysterical politics. America’s already weak ranking on Heritage’s index will get worse, not better, as Biden’s combination of punishing productivity and spending wildly drives inflation ever higher. Would that the Democrats took studies like Heritage’s seriously. Instead, they return to the failed policies of the past, guaranteeing that Biden’s America will not lead the world out of its post-COVID morass but cause a deeper plunge into it.