The world economy is in trouble, and governments are making things worse. Here’s the story, right out of the pages of the 2012 Index of Economic Freedom, published Thursday by the Heritage Foundation and The Wall Street Journal:
“Rapid expansion of government, more than any market factor, appears to be responsible for flagging economic dynamism. Government spending has not only failed to arrest the economic crisis, but also—in many countries—seems to be prolonging it. The big-government approach has led to bloated public debt, turning an economic slowdown into a fiscal crisis with economic stagnation fueling long-term unemployment.”
The new index documents a world in which economic freedom is contracting, hammered by excessive government regulations and stimulus spending that seems only to line the pockets of the politically well-connected. Government spending rose on average to 35.2% of gross domestic product (GDP) from 33.5% last year as measured by the 2012 index.
Most of the decline in economic freedom was in countries in North America and Europe. Canada, the United States and Mexico all lost ground in the index, and 31 of the 43 countries in Europe suffered contractions. They ought to know better. These are the very countries that have led the world-wide revolution in political and economic freedom since the end of World War II. But now, weighed down by huge welfare programs and social spending that is out of control, many governments are expanding their reach in ways more reminiscent of the 1930s than the 1980s.