It's been bothering me all week. The day on which the US markets were closed (for MLK day), the major bourses around the rest of the world tanked. I thought the US was the sick man here, the euro was doing fine, BRIC was the emerging global force etc. Why is the rest of the world so affected when they have been trying to de-couple from the US economy for a few years now?
I found my answer when I read this Heritage Foundation and WSJ Index of Economic Freedom courtesy of Jason Busch. It factors ten freedoms - Business Freedom, Trade Freedom, Fiscal Freedom, Government Size, Monetary Freedom, Investment Freedom, Financial Freedom, Property rights, Freedom from Corruption, Labor Freedom.
The US is rated 5th. The ones ahead are islands or city states - by definition very open to trade and economic policy.
But what is scary is where other global economic "engines" rank. Japan (17th), Germany (23rd), France (48th), Brazil (101st), India (115th), China (126th), Russia (134th). The first three fighting hard to stay closed and pandering to domestic businesses and unions. The other four, proud to be called the next "global forces", but still economic adolescents.
No wonder the markets are spooked. A leader in decline, and none others prepared to step forward in a meaningful way.
So call the US sick, spoiled, greedy, whatever you want. But if you are German or Japanese or Indian, quit sniping and pick up our slack in imports, immigration and ideas.
Time to rev up your engines.
