Among U.S. states, New Mexico is the only one to end the last four decades less economically free than it began, finds a recent report. Even worse, binding its residents in red tape and smothering them in government leaves its residents poorer. Sadly, even as a laggard that’s moving in the wrong direction on economic freedom, New Mexico still allows its residents more leeway when it comes to business, money, and property than all but two Canadian provinces. And its people, while poor relative to many Americans, are more prosperous than the residents of most Canadian provinces.
There’s a great deal of ruin in a nation, as Adam Smith once
. But if New Mexicans are testing the limits of that ruin, the state is also a testament to the importance of economic freedom.
Economic freedom means “personal choice, voluntary exchange, freedom to compete in markets, and protection of person and property,” as
by Professor Robert Lawson of the Southern Methodist University Cox School of Business. Such freedom requires a minimum of government interference from regulations, taxes, trade barriers, and money manipulation.
Almost all U.S. states have improved their standing with regard to respecting people’s liberty to start businesses, use their property, keep their income, and otherwise make their own economic decisions. New Mexico, by contrast, “is the
only
state to have reduced the economic freedom of its citizens over the four decades for which we have data,” according to a
by Matthew D. Mitchell, of the Fraser Institute, and Paul Gessing, of Albuquerque’s Rio Grande Foundation.
That places New Mexico in an unimpressive 43
rd
place among American and Mexican states and Canadian provinces in the Fraser Institute’s separate
Economic Freedom of North America 2024
report. For context, the Washington, D.C.-based Cato Institute’s
index puts
in a nearly identical 41
st
place for economic freedom, and losing ground on regulatory issues.
“New Mexico lags its neighbors in every area, but especially in government spending and labor regulation,” add Mitchell and Gessing.
“
New Mexico spends a larger share of its residents’ income than almost any other state in the union.” And the state set its minimum wage so high it discourages businesses from creating jobs and hiring workers.
Disrespect for economic freedom has real consequences in terms of human wellbeing, point out the Fraser and Rio Grande authors. New Mexico trails when it comes to growth in employment and real GDP. “It has the third-highest poverty rate in the union, a larger share of children on federal food assistance than any other state, and a larger share of citizens on Medicaid (tax-supported welfare medicine) than any other state.” While most of the Southwest booms, with neighbouring populations growing by an average of 12 per cent, New Mexico’s population has risen by only one per cent. The state’s restrictive red tape, taxes, and excessive government are causing it to miss out on a regional bonanza.
That’s unfortunate for the Land of Enchantment. But as laggard as New Mexico is among U.S. states, it has more economic freedom than any Mexican state, and all but two Canadian provinces.
“Alberta (8.01) is the highest-ranking Canadian province, tied for 12th place with Tennessee, South Dakota, Colorado, and Texas,” according to Fraser’s
Economic Freedom of North America 2024
report. “The next-highest Canadian province is British Columbia (7.84) which is tied with Massachusetts, Minnesota, and New Mexico for 43rd place.” Mexico’s states all bring up the rear as the least economically free jurisdictions on the continent.
That mismatch in economic freedom has real-world consequences when it comes to prosperity. Mexico, while it has made progress, trails far behind the U.S. and Canada in terms of per capita GDP, according to the
. But Canada, after largely parallelling its southern neighbor for decades, has fallen badly behind. As of 2023, per capita GDP in current U.S. dollars was $82,769 for Americans, $53,431 for Canadians, and $13,790 for Mexicans.
Writing for
The Hub
in 2023, Trevor Tombe, a professor of economics at the University of Calgary,
that most Canadian provinces lag in productivity and income far behind almost all U.S. states. “Ontario, for example, has a per-person level of economic output that is similar to Alabama (both equivalent to $55,000 USD worth of final goods and services produced annually per person),” he wrote. “Only Alberta exceeds the U.S. average of $76,000, but even Canada’s strongest economy ranks 14th overall.”
The only other provinces ranked ahead of 46
th
-place New Mexico were Saskatchewan and Newfoundland and Labrador.
Last October, working from their own calculations contrasting the U.S. and Canada, the Fraser Institute’s Alex Whalen, Lawrence Schembri and Joel Emes
that Canadians are getting comparatively poorer. “By 2022, all ten Canadian provinces ranked in the bottom ten positions for earnings per person.” Alberta remained the most prosperous Canadian province, “but as of 2022 was surpassed by all US states—in 2010, only 12 US states reported earnings higher than Alberta.”
Making the case even more compelling is the
that economic freedom tends to go
with
. Limiting one type of liberty erodes the others.
There are lessons to be learned for everybody involved. While, as Adam Smith had it, there’s a great deal of ruin in a nation, the U.S. at the national level has been flirting with ruin under first the
big-spending and interventionist policies
of the Biden-Harris administration and then the
of President Trump. With both of America’s major political parties unfriendly to economic freedom, there’s little constituency in the nation’s capital for leaving people alone to manage their own affairs.
Canada has already demonstrated that a country much like the U.S. can lose ground on economic freedom and the prosperity it creates. There’s nothing to prevent Americans from following suit. The U.S. currently has further to fall, but once the plunge begins wealth can be quickly lost. New Mexico needs more economic freedom, of course. So do both Canada and the United States.
As we look at a world of trade war, confiscatory taxes, and politicians who won’t leave people alone, let’s take New Mexico as an example of what not to do.
National Post
