U.S. Much Less Competitive: Bad for 'Recovery'

Any investor still wondering whether this "recovery" has legs, what's holding the U.S. economy back or where to find some of the best prospects abroad going forward will find a great resource in today's release of the annual Index of Economic Freedom, put together by the Heritage Foundation and Wall Street Journal.

It's bad news for the U.S., which dropped to eighth from sixth place, leaving Canada, rather than the U.S., North America's best business climate. In a shocker, for the first time the U.S. is no longer ranked among the world's most "economically free" countries.



There was deterioration in 10 subcategories ranging from financial freedom to property rights thanks to greater regulation, more protectionist trade policies, massive stimulus spending and bailouts of corporations deemed "too big to fail," dragging the U.S. index score to 78 from 80.7 on a 0-to-100 scale.

The report's editor says:

"Policies have resulted in job losses, discouraged entrepreneurship, and saddled America with unprecedented government deficits... These trends are important because study after study shows a strong correlation between economic freedom and prosperity."

Unable to count anymore on a rising tide of inflating credit to artificially lift all boats, the U. S. economy will need to generate economic growth the old fashioned way -- earn it -- as more of the world's growth is enjoyed by countries with good or improving policy and business climates.

Hong Kong, Singapore, Australia, New Zealand and Ireland are now ranked as the world's most attractive places to do business, according to the Index ratings. Turkey, Montenegro, Poland, Croatia and Qatar show some of the most rapid improvement in their attractiveness. That's where more of your focus on growth needs to be.

The U.S. meanwhile joins the U.K., Iceland, Bulgaria and Yemen, among countries suffering the steepest erosion in economic freedom over the past year.

Peter Boockvar of Miller Tabak put it best, when he recently told Bloomberg News that the recovery story "is all about the business climate."

"We need to make it more attractive to do business here [in the U.S.]," he said. "It's the only way we're going to be able to get real, solid economic growth over the next five years."