The US is slipping in its rankings across the board, no longer able to claim “best” or “number one” status in anything other two categories.

January 17, 2022

By: Bobby Casey, Managing Director GWP

slipping US rankingA while back, I wrote up a piece, “World’s Largest Tax Haven“, on how the United States was the best tax haven in the world. The fine print reads: “for everyone except Americans“.

When the US wants to be exceptional, it can! And it really does an incredible job keeping the incentives going on foreign direct investment. You’d never think it, but your privacy is about as airtight as you could hope for.

It sounds crazy because Americans do not enjoy that level of freedom at all. So typically when you read about the US, you are seeing it from an American person perspective, not as a non-American. When Americans make as much as $600 on a payment app, they get dinged by their government.

If Americans have money abroad, FATCA requires banks to report on those Americans’ accounts. The same isn’t necessarily true of American banks reporting on foreign investors. The US is very guarded with the information it has on foreign investors.

It’s expensive and time-consuming to become an American citizen, but it’s actually not nearly as difficult to shelter your assets in the US. In fact, this offsets its lack of competitiveness domestically.

On the other hand, the US can be terrible at all sorts of things. And it can fail at breakneck speeds!

It’s not that the US is dead last (yet!) but it’s not really doing much toward being “the best” or “the greatest”. The US didn’t have the worst response to COVID-19, for example. Some cities and states did worse than others. But they didn’t do the best either.

There is no tied for first in matter of freedom. You’re either free or you’re not, and it shows in the numbers.

The US dollar is a global reserve currency. One of the major factors propping that up is the petrodollar.

The US dollar, however, used to be the clear front runner. Now it’s getting very tight with the Euro. In terms of GDP, the predictions are split:

Goldman Sachs this week predicted that the Eurozone would grow at a faster pace than the U.S. in 2022, projecting a growth rate of 4.4 percent for EU and only 3.5 percent for U.S. GDP. The latest World Bank forecast, also from January, still sees the U.S. ahead, if only by a paper-thin margin of 0.1 percent, while the new IMF outlook is yet to be released.

Other indicators, however, seem to corroborate this trend:

The value of global payment transactions in Euro has been inching up to that of the U.S. dollar, data from the Swift international payment network shows, hinting at increased activity around the currency. In October 2020, Euro transaction value even slid ahead of the U.S. dollar, and while that didn’t last long, the gap between the two currencies on the world stage has become considerably smaller since the start of the coronavirus pandemic.

The United States certainly is suffering a loss in economic trust. The term “Bidenzuela” is trending on Twitter as, country wide, grocery stores are seeing persistently empty shelves. Likewise, inflation is taking its toll on everyone as that limited supply is even more expensive.

Labor force participation went from 63.4% February 2020 to 60.2% March 2020 to 61.9% December 2021. The Bureau of Labor Statistics defines it as:

The labor force participation rate is the percentage of the civilian non institutional population 16 years and older that is working or actively looking for work. It is an important labor market measure because it represents the relative amount of labor resources available for the production of goods and services.

The percentages seem small, but it represents millions of people. People are slow to return to the work force, and policy-makers are slow to return to normal. GDP can’t go up if people aren’t working. GDP can’t go up if products can’t get to shelves.

The US dollar’s standing in the ranks of reserve currencies isn’t the only thing slipping.

The US passport’s standing is likewise not “Number One”. It’s not even Number Two. It’s tied for sixth among twenty-one countries… and it appears as the twenty-first in the list. It’s not the worst. That title goes to Afghanistan with access to only twenty-six countries without a visa. Japan and Singapore’s passports provide access to one hundred ninety-two countries. The US can get you into one hundred eighty-six.

It’s not in terrible company yet. Other countries with the same distinction are the United Kingdom, Switzerland, Norway, New Zealand, and Belgium. The United States is equidistant from Japan and Singapore and Malaysia. Between Malaysia and the US are many Eastern European countries such as Lithuania, Estonia, Slovakia, Czech Republic, Poland, and Hungary.

Again, the US isn’t poorly, but it’s not the clear winner of greatness its brand suggests.

In terms of economic freedom, the Heritage Foundation ranks the US twentieth. If we were to do the ten-year challenge, the United States has dropped eleven spots: from 9th in 2011 to 20th in 2021. But here’s the real shocker. The following countries are ranked higher on the freedom index than the United States:

  • Estonia – 8th

  • Georgia – 12th

  • Mauritius – 13th

  • United Arab Emirates – 14th

  • Lithuania – 15th

  • Chile – 19th

The top five are: Singapore, New Zealand, Australia, Switzerland, and Ireland.

Cato Institute’s most recent civil liberties’ assessment has the United States tied for 15th with Germany and Japan. Estonia again beats the United States coming in at 4th.

Size of military and tax haven are the two things the US can claim to be the “best” at. Otherwise, there are options a-plenty for countries with things to offer.

As for me, freedom rankings are fine, but they aren’t everything. While countries like the US are slipping, there are other countries that are climbing. That’s where opportunities could be waiting.

Sometimes countries that are coming up have more to offer those who are also trying to come up in the world. The symbiosis between countries that want more advanced businesses and those trying to keep start-up costs low is there for the taking. In fact, many countries offer programs which incentivize entrepreneurs to come in with their innovations.

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