When writing yesterday’s column about new competitiveness rankings from the IMD business school in Switzerland, I noticed that I have not yet written about this year’s edition of the Index of Economic Freedom.
Time to rectify that oversight.
We’ll start with a look at the nations with the most economic freedom. Interestingly, Singapore has now displaced Hong Kong as the world’s most market-friendly jurisdiction (because Hong Kong’s score declined, not because Singapore’s score increased), with New Zealand, Australia, and Switzerland rounding out the top 5.
The United States, meanwhile, isn’t even in the top 10. Instead, America dropped from #12 last year to #17 this year.
The decline is partly due to a lower score (with Trump’s protectionist policies deserving the biggest share of the blame), but mostly caused by better scores from nations such as Chile, Georgia, Estonia, and Lithuania.
What may shock people, though, is that even supposedly socialist Denmark (score of 78.3) ranks above the United States (score of 76.6). Here’s a look at U.S. and Danish scores from 1995-present.
Regular readers already know that Denmark is not a socialist nation. Indeed, it’s never been socialist. By world standards, there’s basically no history of government ownership, central planning, or price controls.
The most accurate way of describing Denmark is that it combines laissez-faire economics with tax-and-spend redistributionism.
Since this is a common approach among nations in that part of the world, some people even refer to this set of economic policies as the Nordic model.
So how does this approach compare to policy in the United States? The short answer, as illustrated by this table, is that America generally does better on fiscal policy, but gets lower scores when looking at almost every other type of policy.
The great irony of all this is that Bernie Sanders wants the U.S. to be more like Denmark, but he only says that because he doesn’t realize it would mean reducing the negative impact of government.
P.S. While Denmark has some awful fiscal policies (the tax burden is terrible), there are some bright spots. It has done a good job in recent years of restraining the growth of government, and it also has a partially private retirement system.
P.P.S. Not that any of these will be a surprise, but the three lowest-ranked nations in the Index of Economic Freedom are Cuba (26.9), Venezuela (25.2), and North Korea (4.2).
