US Slipping in Innovation, Education, and Economic Freedom

The US is slipping in more ways than one: innovation, education, and economic freedom.

January 29, 2018

By: Bobby Casey, Managing Director GWP

US Slipping Innovation Education Economic FreedomThe US has been steadily slipping in key areas that made it a once great place: innovation, education, and economic freedom.

When I see the slogan “MAGA” I basically associate it with a Republican version of “Hope and Change”. It’s whatever you want it to be. It’s nothing and everything all at once. There’s some talk about the economy and jobs, and while those things are indicators, they don’t even begin to scratch the surface of the health of the nation. That’s hardly the full blood panel of the United States. That’s weight and body temperature at best.

Much like those discussions on “wage gap”, people think there’s a silver bullet answer: sexism. But in truth there are multiple factors that go into that, least of which is gender. And there are several factors which determine the success and trajectory of a country.

I often wonder why countries don’t operate like businesses. In as much as they position themselves above market forces, they really aren’t. Immigration, emigration, corporate inversion, and divestment patterns show that individuals and businesses alike will vote with their feet and wallets no different than any consumer will with a store.

Every country has a brand and reputation, as well. And that is precisely where the US is slipping: in key performance areas that contribute to success like Innovation, Education, and Economic Freedom.

Innovation

Bloomberg has been releasing an analysis of most innovative countries for the past 6 years. From 2017 to 2018 the US dropped two slots, falling out of the top ten for the first time since the inception of the study.

  • Within this are 7 subcategories:
  • R&D Intensity
  • Manufacturing Value-Added
  • Productivity
  • High-Tech Density
  • Tertiary Efficiency
  • Researcher Concentration
  • Patent Activity

According to Bloomberg:

The U.S. fell to 11th place from ninth mainly because of an eight-spot slump in the post-secondary, or tertiary, education-efficiency category, which includes the share of new science and engineering graduates in the labor force. Value-added manufacturing also declined. Improvement in the productivity score couldn’t make up for the lost ground.”

Turns out the snowflakes getting their PhDs in “Gender Studies & Interpretive Dance” don’t count. Didn’t see that coming did you?

One of our greatest imports is graduate students in STEM fields, but not so much anymore.

Education

According to the OECD (Organization for Economic Cooperation) the US ranks 25th in Science, 24th in Reading, and 39th in Math. Out of 50 countries, the US placed 17th in a study carried out by the EIU (Economist Intelligence Unit). The top 5 slots went to South Korea, Finland, Hong Kong, Japan, and Singapore.

The US spends close to $12,000 on average per student per year, one of the highest in the world; yet despite the investment, the product is rather sad. Asian countries that spend far less out-perform the US on many fronts. And nowhere does this become more apparent than in the innovation index.

It’s not even about teacher compensation. The US is competitive in teacher compensation with only Luxemburg leading on that front.

Even on the university front, the US lost the #1 and #2 spots to Oxford and Cambridge in the UK. While that might change post-Brexit as a good amount of funding once came from the EU, what is undeniable is the Asian universities that are climbing up the ranks. According to Times Higher Education World University Rankings 2018:

The National University of Singapore is now the top-ranked institution outside of Europe and the U.S., at joint 22nd, and China’s two leading institutions, Peking and Tsinghua universities, are now both higher than the highest-placed universities in Australia and Germany, Melbourne University and LMU Munich respectively.”

The one place where the US is still competitive is largely dominated by the PRIVATE universities. There are some state universities sprinkled in there, but it is a rather interesting observation.

Regardless of who the POTUS is, where is the greatness? Of all the areas I’m addressing here, higher education has the MOST latitude and freedom to control its level of production. Innovation and Economic Freedom both heavily reflect how much the government is involved. Even elementary and high school education relies quite a bit on public funding. But higher education is one of the MORE privatized areas and the US still slips?

Have the universities become complacent? They aren’t lacking in funding, that’s for sure. Their costs and tuitions have skyrocketed with little improvement (if any) in the quality of education or the employability those degrees uniquely offer.

Economic Freedom

The United States took a serious blow in economic freedom as well. Heritage Foundation does its annual evaluation on “Economic Freedom” and 2017 didn’t go well for the US. Not only is it not in the top 10 it’s struggling to remain in the top 20! Coming in at a sad 17th, the country that swoons over symbols of freedom is lagging behind such countries as Estonia (6), United Arab Emirates (8), Chila (10), Georgia (13), and Lithuania (16).

Even where I’m living now in Latvia, they are 20th, and climbing! They saw more gains overall than any of the top 38 countries.

These rankings are derived from 4 facets with 3 subcategories each:

  • Rule of law
    • Property Rights
    • Government Integrity
    • Judicial Effectiveness
  • Government Size
    • Government Spending
    • Tax burden
    • Fiscal Health
  • Regulatory Efficiency
    • Business Freedom
    • Labor Freedom
    • Monetary Freedom
  • Open Markets
    • Trade Freedom
    • Investment Freedom
    • Financial Freedom

Granted this was done prior to the passing of the tax bill, and there is a likelihood that Trump will cut some regulations. But with his new tariffs on imports ranging from 20% to 50%, his crack down on immigration, FATCA, and the stalker-like regulations congress is passing on cryptocurrencies, I doubt corporate tax cuts will be enough to offset all the other detrimental policies.

Cato Institute does another similar study called “Human Freedom Index”. This hasn’t been around as long as the Economic Freedom Index from Heritage, however, it’s important to note the corollary Cato makes with individual freedom and economic freedom. Here are few choice topline observations:

  • Countries with high levels of personal freedom also have high levels of economic freedom
    Clearly the fact that the US ranked 24th in Personal Freedom and 17th in Human and Economic Freedom speaks volumes.
  • The freedom to associate and assemble with peaceful individuals or organizations of one’s choice is an essential part of individual freedom and a basis of civil society.”
    When we look at cases like the Christian bakers who simply wouldn’t bake a cake for a homosexual wedding, while we might disagree, the fact that the bakers were punished in US courts for exercising their right to freely associate or disassociate doesn’t bode well.
  • Governments that restrict people’s movement greatly limit the scope of overall liberty.”
    Again free movement of goods is not any different than the free movement of labor. If the US insists upon tariffs and strict immigration laws, it will pay the price economically and that will take a toll on all freedom metrics.

Cato used 79 indicators for their Human Freedom Index which all fell into one of these 12 categories:

  • Rule of Law
  • Security and Safety
  • Movement
  • Religion
  • Association, Assembly, and Civil Society
  • Expression and Information
  • Identity and Relationships
  • Size of Government
  • Legal System and Property Rights
  • Access to Sound Money
  • Freedom to Trade Internationally
  • Regulation of Credit, Labor, and Business

Indices are merely directional indicators. Nothing more. But if you look at once large successful corporations like FAO Schwartz and Macy’s you see brands that neglected to stay ahead of the relevancy curves. The US is likewise riding on the coattails of its overromanticized history. The US can tell you what it has done in the past, and can feel adequate about its present, but it’s future is dismal is this trend continues.

People who really want to MAGA, should not be putting all their eggs in the POTUS basket. It’s not Trump’s job to improve the American ethic. It’s his job to get out of his constituency’s way.

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Comments

  1. It’s not the strictness of US immigration laws which is the problem.. It’s the mix of illegal immigrants with their billions of tax dollars of net cost to the taxpayer as well as their crime rates, plus the welcoming of so-called refugees who make no effort to assimilate. The US version of diversity is a huge negative.

    Self-sufficient immigrants who will assimilate and who can contribute to wealth creation are quite welcome.

    • Kelly Diamond says:

      If you had universal healthcare that was run as the immigration policies are currently run, I think you’d be singing a different tune about the difficulties of the current laws.

      I have a grandmother who is here on a green card from Japan. She’s been here for about 40 years. Can barely make an English sentence. She had a job: selling cosmetics to Japanese customers. Her refusal to assimilate doesn’t really affect anyone else. She hates American food. She hates American rural areas. After 40 years, immigration made a mistake on her birthdate. She was technically here illegally until they straightened it out. She’s not on any more welfare than a veteran of the military. She collects her late husband’s pension or something.

      There are a few things that people lose sight of in matters such as these: 1. Why people emigrate from their native lands and/or expatriate; 2. welfare is a mutually exclusive issue to immigration, not an interchangeable one.

      1. Look at the expatriation and divestment patterns of Americans. American corporations inverted out of the US why? Tax and regulation avoidance mainly. They can run their businesses so much cheaper elsewhere. Why to you see a net exodus out of states like California and Illinois to states like Texas? Uprooting your family and relocating just from one state to another is no small task and is certainly NOT something you observe of a lazy welfare class of people. You see this of the working and middle class. They, like deer, are simply migrating to where the resources are more abundant and the threats are lower. This is not unique to Americans. This is primal, and only unique to those willing to do the work of improving their lot in life.

      2. Welfare is absolutely an issue. One with which I take great umbrage. I resent anyone who collects a government check. This doesn’t just include the single moms scamming the system in the projects, but also government employees. Neither are net tax payers. If you are a career government employee, you’ve never contributed a dime in taxes. You might’ve had deductions taken, but you never created wealth. There’s an article on this site that talks about how manufacturing jobs (i.e. the productive jobs that actually CREATE wealth) are outnumbered by government employees in the US (i.e. the non productive jobs that suck wealth out of the US economy).

      No matter how noble you think the job might be… a government job is not a productive job. Between everyone that draws a paycheck or just a welfare benefit, many Americans do not qualify as net tax contributors. In fact, since 90% of federal revenues come from the top 10% of earners, I dare say 90% of Americans aren’t NET contributors. If they were would the US be looking down the barrel of $20 Trillion in debt?

      If welfare is the main concern, then address the welfare state as its own problem. But putting the trash out where we know bears will come and rummage through it and complaining that they do so is a little self-defeating. And to presume that the same government who is responsible for the total malfeasance of the US budget will miraculously demonstrate ruthless efficiency when it comes to border control is likewise a little unrealistic.

      I don’t think assimilation is really necessary. I think peaceful pluralism is all anyone should expect. By that I mean simply that no one imposes on the others. Immigrants don’t make you eat their food, and you don’t make them eat yours. They don’t make you pray to their god, you don’t make them pray to yours. But that’s true of everyone already here in the US. Americans can’t agree on much so rather than impose, we freely associate and disassociate accordingly. Thus far, those terms have been agreeable to nearly everyone. The only ones taking exception are Americans, which is odd. It’s not enough that Gustavo comes to the US and leaves you alone… he has to have his Stasi papers in order and ready to present to the SS agents.

      What immigrants do now, is what they have been doing for centuries: defacto segregating themselves. Look at San Francisco: red light district adjacent to little Italy adjacent to Chinatown adjacent to the financial district. I mean you don’t have cultural brawls breaking out over this. Even in Los Angeles, where you have heavily concentrated Asians, Hispanics, and blacks… you don’t see one group going into the others and stirring things up. But they have businesses that facilitate keeping thing their respective cultures going. In predominantly Asian areas, for example, you will see more herbalists, acupuncturists, and ducks hanging in windows of restaurants. The proprietor speaks some English, but mainly caters to a base that doesn’t require him to speak it.

      The US version of diversity is really a non issue. Forced exclusion is as problematic as forced inclusion. So the issue isn’t that people from different countries are here practicing their cultures. That’s what America was founded on: a bunch of Separatists who just wanted to live their lives their own way without their respective governments interfering. The real issue isn’t diversity, but how it’s being handled. Americans have lost sight of how to mind their own business and leave others alone. Policy makers feel the need to force integration and acceptance and that only creates more hostility and resentment.

      If the welfare system was abolished and there was no policy one way or another regarding language and culture, you’d never know the difference that an immigrant was here or not. Legally or otherwise. While I realize there are plenty of articles itemizing the costs of the undocumented immigrant, what I don’t see is their contributions juxtaposed with that list. They do pay taxes: sales tax, fuel tax, even contribute to property taxes via their landlords. Their GDP contributions are considerable in states like California that are dense in construction, hospitality, and agriculture. Have you tried to find information pertaining to their contributions? I’ve found both, and it appears, that proportionately they contribute more than they take. It’s not to say there aren’t the moochers, but it certainly makes no sense to spend tens of billions to fix a problem that costs considerably less than that to have.

      I take issue with welfare because I take issue with taxation. I don’t feel any better that my tax dollars are being spent on border agents than I am that it’s going to bail out GM or that it’s going to a congressman’s pension or some trailer trash in Appalachia. I want to spend less and be taxed less. How do we get there from here? By legalizing migration and pocketing that money would be my first guess.

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