Four Canadian resource-rich provinces are among the top five most economically free places to live in North America, according to a new ranking released by the Fraser Institute on Tuesday.
In its 10th edition of Economic Freedom of North America, oil-dependent Alberta ranked first place with a score of 8.2 out of 10.
Saskatchewan was second, scoring 8 out of 10, while both Newfoundland Labrador and B.C. tied with Texas for third place, with 7.7.
The highest-ranked Mexican state was Coahuila de Zaragoza, which was tied with 21 other jurisdictions in 30th place. Meantime, tiny Prince Edward Island ranked at the bottom of the list among Canadian provinces in 65th spot.
The report, which uses 2012 economic data across 50 states in the U.S., 32 in Mexico and Canada’s 10 provinces, defines economic freedom as an ability to live and work with minimal government interference. It includes 10 variables such as taxes, size of government, the labour market and openness to international trade.
“The link between economic freedom and prosperity is clear — provinces that support low taxation, limited government and flexible labour markets enjoy greater economic growth while provinces with lower levels of economic freedom see lower living standards and fewer economic opportunities,” stated report co-author Fred McMahon, the Fraser Institute’s Dr. Michael A. Walker Research Chair in Economic Freedom.
While Canada fares well in the rankings overall, (Ontario tied with a group of states for 6th spot and Manitoba and Quebec tied for 18th) the report says overall economic freedom has declined across all three countries since the turn of the century.
The average score for Canadian provinces has fallen to 7.6 from 7.8 since 2000. The U.S. saw a much bigger drop, to 7.5 from 8.2, over the same period.
In Mexico, the average score has fallen to 6.9 from 7.1 since 2003, when the Fraser Institute started compiling data for that country.
While Canadian provinces have a slightly higher level of economic freedom than the U.S., the report says it’s not something to celebrate.
“Unfortunately, this does not mean that Canadian provinces are gaining in economic freedom, but rather that their economic freedom is declining more slowly than that of the U.S. states,” the report states.
McMahon said the big decline in economic freedom in the U.S., coupled with small declines in Mexico and Canada, has helped to improve Canada’s rankings and caused the gap with Mexico to close.
“For both Canada and the United States, the response to the financial crisis was to increase government intervention in the economy, reducing the space for free exchange,” he said in an email to Yahoo Canada Finance.
He said both nations also saw some deterioration in the rule of law and an increase in government red tape.
The loses were far more serious in the U.S., he said, and appear to flow from increasing complexity in regulations, which has had several impacts.
“For Mexico, the key problem seems to be related to the rule of law, probably arising out of the battle against drugs,” McMahon said.
The report comes amid debates about the growing divide between rich and poor across North America, and as lower oil prices threaten to put pressure on government spending in provinces such as Alberta, and the federal government.
If oil prices remain at current low levels for a prolonged period, Canada’s rankings could be much different in the years to come.