Previously when it came to competition between the United States and Canada, we’ve traditionally only had to worry if the fight took place on an ice rink. But over economic freedom? Unfortunately the Fraser Institute’s Economic Freedom of the World index reveals the United States has not just fallen to 16th from second in 15 years, but our Canadian cousins have stolen our playbook and surged into ninth. Rather than teaching the world about the importance of economic freedom it sounds like we could do with a lesson.
So what has gone wrong in the United States? According to the Fraser Institute there are several concerns around the independence of America’s legal system, ranging from the manner in which the auto bail outs occurred to the abuse of eminent domain by powerful interests. In addition, there are particular problems with how power appears to have shifted away from the independent judiciary and become more centralized in the executive, creating a regulatory and legal environment more conducive to meeting political objectives than creating jobs and investment. Luckily the solutions are actually fairly straightforward and are already gaining some traction.
First of all while America’s excessive regulatory regime has undoubtedly hampered growth and investment, the growing politicization of oversight also applies to taxpayer assistance to business in the form of credits, loans, direct payments, and other forms of incentives. This corporate welfare, or ‘cronyism’ as it’s often called, sends a signal from Washington that if you’re politically connected you don’t have to innovate and compete in the open market. Instead you can simply achieve your economic ends through using regulation and other favors to squeeze out your peers. If the United States wants to improve its economic standing, individuals from both parties should launch a full-on assault on public assistance to business.
Another problem cited in Fraser’s report is that the United States has moved away “from rule of law and toward a highly regulated, politicized, and heavily policed state,” primarily as a responsive to the wars on drugs and terror. Thus police officers now “sport armored cars, assault rifles, and body armor and look more like soldiers at war than cops keeping the peace.” If citizens are not confident in the impartiality of the law they are therefore less likely to enjoy the security of their property rights. One solution to this is to remove the perverse incentives promulgated by the federal government such as the 1033 program where state and local law enforcement receive military-grade equipment even if there is limited or no demand for its use.
Finally law enforcement’s seemingly cavalier use of civil asset forfeiture, a process in which property is seized without due process simply based on the preponderance of the evidence. Proponents claim that civil asset forfeiture acts as a “useful tool” to combat the illicit drug trade. Unfortunately this has had traumatic collateral consequences for innocent Americans. As Leonard W. Levy pointed out, law enforcement is now “subordinated to making money for one’s department” which has unfortunately seen thousands of innocent Americans lose their property because it’s been suspected as being a party to a crime. Leaders in Washington and across the country should look to states like Montana and New Mexico, where a conviction is now required before law enforcement can seize – and keep – someone’s property. Such a move would not only help protect the innocent, but ensure incentives are focused on public safety and not infringing upon property rights.
While the United States has certainly seen its global economic standing decline, this isn’t irreversible. Through reining in politically-driven regulations, curbing taxpayer assistance to corporations, and reforming incentives to law enforcement that have undermined property rights, Washington can create an environment conducive to economic freedom, investment, and job creation. As the author of the Fraser Institute’s index notes, “economic freedom breeds prosperity.” It’s time for America to revisit the approach that made its economy prosper and an example to the world. With our friends in the north leading the way, who’s up for a little healthy competition?