This week I am writing to you from Dallas and the Economic Freedom of North America (EFNA) conference.
Every year I join with leaders of policy think tanks from other U.S. states, plus from Canada and Mexico, to meet with economists who measure and study ways to advance economic freedom in North America.
As you can imagine, it’s an exciting event, one that gives us at the Grassroot Institute of Hawaii a lot to think about in formulating policy recommendations for our own state.
As I’ve reported previously, Hawaii does not perform well on the annual EFNA Index, ranking 45th out of the 50 states in terms of economic freedom. This is a reflection of our high levels of taxes and government spending, as well as our labor regulations, which are among the most extensive in the nation.
In short, there is a relationship between economic freedom and a community’s prosperity, and Hawaii’s poor rating helps explain many of the socio-economic ills we experience — from the high cost of living to our housing shortage, rampant homelessness and the “brain drain” of talented young people leaving Hawaii for better opportunities elsewhere.
In the past, we’ve looked at states with better rankings, like Texas, and asked what could we do to emulate their successes. But it’s also worth looking at lower-ranked states to see what we should avoid. And when it comes to learning opportunities by that measure, it’s hard to beat California.
California is second from the bottom in economic freedom among U.S. states — worse than Hawaii. And it is reaping serious economic consequences.
Hawaii may be experiencing a “drain” on its talent, but from California the talented are fleeing. In the past seven years, more than 10,000 businesses have reduced operations in California, expanded elsewhere or left altogether. As businesses have fled, so have its citizens. According to the U.S. Census, more than 3.5 million people left California between 2010 and 2015.
I’m not suggesting we cheer California’s economic woes or applaud the fact that Hawaii manages to edge out the Golden State in terms of economic freedom. But California does serve as a warning.
In the past, Hawaii lawmakers have often looked to California for policy ideas. We’ve seen many regulatory proposals in Hawaii that were patterned after laws adopted or proposed there. But given how a lack of economic freedom has hurt California businesses, Hawaii legislators should start looking elsewhere for policy ideas.
Instead of getting inspiration from the bottom of the EFNA index, let’s look at the top, where states such as New Hampshire, Florida, Utah, Texas and Nevada provide more positive examples of how Hawaii could achieve a better economy, better government and a better society.