Index of Economic Freedom Released; U.S. slips

The annual Index of Economic Freedom, published as a joint effort by the Heritage Foundation and the Wall Street Journal, has recently been released for 2010.

The Index is a valuable tool and one which investors should pay close attention to. We have previously explained our longstanding framework for measuring the climate for investing in any given country or region using the "four pillars" of tax rates, interest rates, level of monetary stability or inflation, and level of freedom. The Index is one of the best resources for evaluating the varying levels of freedom on a global basis.

It is also valuable for evaluating the changing levels of freedom in different countries, and the direction they are heading (either towards becoming more free or less free).

In that previous blog post on the "four pillars," as well as in other previous posts such as "Return of the 1970s, part 2," we noted that there have been some disturbing trends towards lower scores in the U.S. in all four of those important categories, and the latest Index of Economic Freedom bears that out. The United States is one of the most declined countries in the Index this year, declining in seven out of ten categories measured in the study, and falling to eighth in the world from sixth a year ago.

As you can see from the map pictured above, America now ranks behind neighbor Canada, which ranked seventh last year.

How should investors react to this information? We have written on this topic in the past. We would recommend reviewing the thoughts found in the following previous posts:
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