Heritage Foundation: Canada's Economy Freer Than U.S.

A year of bailouts and stimulus spending has taken a toll on global economic freedom, according to the 2010 Index of Economic Freedom. For the 16th year in a row Hong Kong is #1, followed by Singapore, Australia, New Zealand and Ireland.

The report from the conservative Heritage Foundation bumped the United States from #6 to #8. It's not often you hear praise of Canada (#7) from a right-leaning think tank, but our neighbors to the north have been deemed to have the freest economy in North America:

Canada's economic freedom trails the world average only in government spending. Elaborate social and welfare state programs swell overall government expenditures. Government spending has also increased slightly due to implementation of a significant stimulus package. However, good fiscal management and federal budget surpluses have enabled the economy to undertake stimulus measures without undermining fiscal soundness and long-term economic competitiveness.

Not surprisingly, the report's authors are not fans of Pres. Obama's economic policy.

Seeing Hong Kong in the #1 spot, where it has presided since the index was created in 1995, may be jarring for those who have followed the Google - China saga. And to be certain the Heritage Foundation doesn't look kindly on mainland China, ranking it at #140, sandwiched between Djibouti and Haiti.

So why does the Index favor Hong Kong when it is ultimately answerable to the same rulers who demand censorship from Internet companies? The short answer: Low taxes, tariffs, and government spending.

Critics of the Index have long complained that it rewards and punishes countries on the basis of conservative economic doctrine, without providing any helpful predictions about when more freedom -- as defined by the Heritage Foundation -- will result in higher economic growth. (One obvious example: #140 China's GDP growth puts 139 "freer" countries to shame.)

As Wheaton College economics Prof. John Miller wrote on the 2009 Index:

So it seems that the Index of Economic Freedom in practice tells us little about the cost of abandoning free market policies and offers little proof that government intervention into the economy would either retard economic growth or contract political freedom. In actuality, this rather objective-looking index is a slip-shod measure that would seem to have no other purpose than to sell the neoliberal policies that brought on the current crisis.

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Adam Pasick is the senior Asia correspondent for Quartz.

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