The concept of freedom is woven into the fabric of the United States. Wars were fought in its name, and politicians frequently toss the term around without much thought about its meaning.

It’s perhaps ironic that the country this year plummeted to 16th on a list ranking countries by economic freedom. For context, the U.S. ranked No. 2 back in 2000 but has since lost ground to countries such as Canada, Switzerland, and the United Kingdom.

While the U.S. has dropped in the rankings, “economic freedom” is a bit of a nebulous term. It attempts to calculate the degree to which residents of various countries are free to live and conduct business transactions without government interference. The index is based on data from five areas: government size, property rights, sound-money access, international trade regulations, and rules governing business and labor.

Losing Our Freedom

Market issues are the biggest contributors to the United States’ descent down the charts — most notably our government’s failure to protect property rights. This change is driven by government overreach and changing policies related to government takings, eminent domain, and so on.

Private property once protected by the law is now there for the taking if the government sees value in it. This isn’t solely for so-called “public benefit” projects such as new roads or railways; government organizations often take private property only to turn around and give it to private businesses. This was the case in the highly publicized Kelo v. City of New London case.
Other times, governments seize and give it to themselves. Some police departments, for example, systematically use civil asset forfeiture laws to increase their own budgets.

This pattern is deeply disturbing. We’ve become a nation where governments and politicians choose winners — certain businesses — in the market and provide them with favors. The scales have been tipped at the expense of citizens and consumers.

Diverging Approaches

Proactive avoidance can be helpful in dealing with government overreach, but there are no contracts or investments capable of nullifying sweeping political decisions. Entrepreneurs are left with three options: abide, evade, or alter.

  1. Abide: This is more of a “no choice” option. Abiding entrepreneurs take whatever comes their way and react accordingly and as is expected of them. It’s not exactly a way of dealing with the problem, though some entrepreneurs might decide to simply disregard the issue if they feel change is impossible.
  2. Evade: Evade is an interesting option because it involves numerous potential strategies. Entrepreneurs attempt to be nimble and keep their options open by renting office space rather than buying it or leasing vehicles rather than purchasing them. This approach might include moving to a different state or country that offers more beneficial institutional frameworks.Herein lies the true danger of diminished economic freedom: Companies could be tempted to leave because of government interference. Why should a CEO invest in a U.S. factory and deal with perpetually shifting regulations when she can instead open a facility in Mexico or Canada?
  3. Alter: When political institutions and policies get out of hand, entrepreneurs sometimes choose to become involved in politics. Entrepreneurs generally aren’t well-equipped for political dealings. Instead, they should consider partnering with lobbyists and other political minds to spur change.If all else fails, entrepreneurs can always attempt to buy political favor via campaign contributions. This behavior can rapidly spark a political arms race, as competitors must follow suit or risk being left behind.

Freedom might be one of the core tenets of the U.S., but the country appears to be losing its economic liberty. Research by the Montreal Economic Institute indicates economic freedom facilitates entrepreneurship more than government programs, though many politicians meddle with the market through regulations and incentives. Entrepreneurs are left to accept changes as they come, minimize risk through evasive action, or fight back by altering regulations. As a result, resources that could have benefitted consumers are put to other, lesser uses.