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Why America is in Decline – Failing Legal Structure and Insecure Property Rights
Having high levels of economic freedom makes countries more prosperous and brings a host of other benefits, but economic freedom in America has been rapidly decreasing in the past decade.
We are running a series of posts looking into the specifics of the five categories in the Fraser Institute’s Economic Freedom of the World Report to find out exactly why this decline is occurring. One category we’ve looked at is the size of government, which showed that the increasing size of government has led to reduced economic freedom. Today we are going to look at the next category.
Legal Structure and Security of Property Rights
This category is extremely important to the security of economic freedom. The Fraser Institute’s report explains why:
Security of property rights, protected by the rule of law, provides the foundation for both economic freedom and the efficient operation of markets. Freedom to exchange, for example, is meaningless if individuals do not have secure rights to property, including the fruits of their labor. When individuals and businesses lack confidence that contracts will be enforced and the fruits of their productive efforts protected, their incentive to engage in productive activity is eroded. Perhaps more than any other area, this area is essential for the efficient allocation of resources. Countries with major deficiencies in this area are unlikely to prosper regardless of their policies in the other four areas.
As the quote says, countries that have a low score in this area are in trouble, even if they are strong in the others. Here are the main takeaways from this category of the Fraser report.
- America’s economic freedom score for legal structure and security of property rights has dropped nearly two full points on a ten point scale. That is huge. For comparison consider the fact that the United States’ overall economic freedom score dropped just under one full point from 2000 to 2009, yet is went from the 3rd most free country to the 10th because of that change. Even small differences in the economic freedom score matter, and two points is certainly not small.
- The United States has seen a decrease in every single one of the five sub-categories in property rights from 2000-2009.*
- The Judicial Independence score has dropped more than one point.
- The Impartial Courts score slid more than three full points.
- The Protection of Property Rights score went down more than two points.
- The Military Interference in Rule of Law and Politics score has gone down three points.
- The Integrity of the Legal System score also dropped nearly two points.
Seeing so many large decreases in such a short time frame should make Americans concerned. We’ve dropped from 3rd to the 10th most economically free country in the world, and it looks as though we are continuing the slide. Our legal structure needs to be geared toward promoting economic freedom and protecting private property; otherwise our country will forego the many benefits that come along with them.
*For more details on how these scores are calculated and defined, please see the report.