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03/06/2005

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spiritofcapital

Professor Becker:

Right On! Economic liberaliazation and subsequent political liberalization have strong correlations.

One question: what about in African countries where private property is not protected--if not even existing more many--and acquring the legal documents takes years (per de Soto's research). It would seem that some sort of political reform would be needed for economic liberalization?

David Thomson

To be absolutely clear, I am not claiming that people value economic freedoms more than political freedoms

You may not be---but I am definitely doing so. A certain degree of affluence usually precedes any genuine interest in democracy. The vast majority of people value a comfortable lifestyle far more than political freedom. The latter is something of an acquired taste that many perceive as an added responsibility and headache. Instinctively, it is deemed preferable to let others worry about such extraneous stuff.

my labor makes you free

Second Mr. Thomson above that economic freedom, specifically, improvement in personal wealth are more valuable than political freedom. One need look no further than East/Southeast Asian developing countries for multiple case studies on tension/competition between political and economic freedom.

It would be good to be more specific about what data are used to demonstrate varying degrees of economic freedom. I have a feeling that the studies would run into difficulties. For example, the incidences of property rights and enforcement/legal structures must be tempered with different attitudes towards government, elites, and wealth in a given society.

That said, the general correlation between economic and political freedom might also be distinguished from the general correlation between, say, per capita wealth and political freedom.

All in all though, such thoughts are good starting point for further analysis, but as a basis for a particular domestic policy, such comparisons of aggregate macroeconomic data have limited utility. The simple example is comparison of GDP figures across vastly different economies, without looking at how GDP is distributed within a population and across sectors of the economy.

It has been an ongoing disservice for elite western governments to prescribe specific policies to "less developed" economies. Fortunately, national technocrats and publics around the world are getting wiser and correctly viewing such advice through a domestic lens and, among other things, (a) considering the decision frameworks of individuals and of particular populations in their given society, and (b) avoiding backing into familiar policies and frameworks that have yielded desired outcomes in the west.

Unfortunately, there are still armfuls of irresponsible governments/leaders/officials who appear to have little interest in genuinely addressing the welfare of their country's populations. But that's another topic.

Zathras

Economic freedom can be easier for governments to grant that political freedom.

Economic freedom resides mostly in governments laying down rules for what may not be done. Other things being equal, fewer rules equal more freedom; a command economy is not only an inefficient vehichle for creating wealth, but a tremendous amount of work to run.

Political freedom is more difficult. It demands of the public engagement, and of public institutions mechanisms to mediate conflicts between interests. A highly sophisticated structure for ensuring political freedom, like the American Constitution, is beyond the capacity of many less developed cultures to implement.

Wes

...economic freedoms. These include the ability to own property and have it protected by law and contracts,...

So what about the freedom to walk along a beach without encountering "Private Property - No Tresspassing signs"? Or the freedom to modify a computer program to suit one's needs (that is, violate the derivative works clause of the program's copyright)? Or the freedom to walk into a grocery store and take an item off the shelf and walk out (without paying)?

Property law is fundamentally about the government taking freedom away from its citizens (or at least providing a mechanism by which some citizens can restrict the freedom of other citizens). Now, it can be argued that by "freedom" we only mean those freedoms that people should have (or that freedom is the ability to take away other people's freedom) - but then every country in the world can claim that it's citizens have complete freedom because its citizens are granted exactly the freedoms that (the country in question has concluded that) they should have.

Along those lines, Bush keeps going on about spreading democracy in the Middle East but, in fact, everyone wants democracy - they just want it on their own terms. Specifically, Bush wants a democracy in Iraq in which the USA has permanent military bases there from which it can launch attacks on neighboring countries and in which American companies are pumping Iraq's oil and selling it to people in the USA at low prices. The various insurgent groups all want different things (some would want a democracy in which Saddam Hussein was back in power and some would not) but the one thing they have in common is that they want a democracy in which the USA is completed excluded from any dealings with Iraq. So the battle is really over whether a democracy is shaped in Iraq that includes or excludes the USA.

Similarly, both the Israelis and the Palestinians want peace. It's just that a number of Israelis want a peace in which Palestine doesn't exist and a number of Palestinian's want a peace in which Israel doesn't exist. So both sides then claim "Oh, the other side doesn't want peace: they just want to destroy us!"

So, yeah, everyone wants freedom, democracy, and peace - they just want them on their own terms and it is the terms that are in dispute around the world. The real question, then, is whether having the economic freedom on the terms the the USA wants will lead to political freedom on the terms that the USA wants (and vice versa).

RWS

Bush is on record stating that if the Iraqi government asks the US military to leave, it will do so. Also, they are bending over backwards to get an Iraqi assembly to set up its own style of representative government. There's not much more we can do.

Thug regimes like Hussein start out promising economic growth as a trade-off for political freedoms. They end, as have many of the east Asian ones, in total collapse as the totalitarian state and the one-party rule slowly expand and create corruption and graft of enormous proportions at all levels of government.

The "trade-off" of economic and political liberties is, in my assessment, a chimera in the long run. I did an econometrics project on this in a seminar once; the best data and methodology I could put together showed that in the short run, dictatorships grow faster than democracies... but in the long run, democracies grow faster (this is the 10-year and greater horizon). I think that is absolutely right. In the short run, the dictator can suppress the Marxists and strong-arm the economy into action. However, the corruption and inefficient style of growth eventually create macroeconomic pressures on either the currency or the banking system or the businesses that are under the policies, and growth will slow or even reverse.

Corruption is just too much fun. In the long run, it's inevitable without political freedoms to air out the dirty laundry.

Jay Cline

I'd be curious in hearing some response to Wes' obvious confusion between anarchy and freedom. The fur on the back of my neck is standing as I read this illogical retort.

SS

I think Becker makes an important point here, suggesting that advancing economic status may correlate with an increased demand for political freedom.
I think it is related to a pointthat Fukuyama made well in The End of History. His suggestion being that as a technocratic class in China rises, they begin being educated in places that have adopted the free market system (places with better schools). They come back to their country as the sons and daughters of the wealthy (read: party members) class of that society, and find that while rich and enjoying a good economic position, are dissatisfied with their status. I think the argument certainly carries some weight.

Milton Friedman also puts forth an interesting suggestion: "Freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself ... Economic freedom is also an indispensable means toward the achievement of political freedom." (In my understanding) after noting instances in South America, he retracted his longstanding statement that economic freedom directly lead to political freedom, realizing instead that there was a mere correlation.
I think this weakening of this point went too far, and that Professor Becker's argument is well made. It is difficult for either economic freedom to progress without the political, or vice versa.

However, I would put forth the additional suggestion that countries that restrict economic freedom rarely respect the political. Thoughts?

Wes

...obvious confusion between anarchy and freedom.

Presumably the discussion is about freedom from government control so, in that sense, anarchy is complete freedom. Where's the confusion?

In particular, no one wants complete freedom and so the disagreement arises from what limits to place on freedom. For example, capitalists would like to limit collective ownership while socialists would like to limit individual ownership.

In this particular discussion, there seems to be a sort of convolution of economic freedom with economic success. If economic freedom is defined to be equivalent to economic success then when the US national debt (from the Bush administration's massive military spending and tax cuts) becomes
unsustainable and the US economy goes through the floor then it can be said that the USA did not have economic freedom under the Bush administration.

It is an interesting question of whether economic success correlates with a desire for political freedom. If economic success is defined as minimizing the fraction of the population that is uneducated and desperately poor then there should be a strong correlation because people who are too poor and uneducated to have an understanding of the political choices available to them are unlikely to make good choices.

Wes

A bit off topic here but it relates to the definition of freedom.

Bush is on record stating that if the Iraqi government asks the US military to leave, it will do so.

Bush is also on record saying that Iraq had weapons of mass destruction (at the time of invasion) so he doesn't exactly have a lot of credability.

Also, they are bending over backwards to get an Iraqi assembly to set up its own style of representative government.

Actually, they are bending over backwards to get the Iraqi's to set up a style of government acceptable to the USA. I doubt very much that anyone in the Bush administration cares whether it's a style that the Iraqi's want except to the extent that the Bush administration wants a government that won't face immediately face a popular revolt.

There's not much more we can do.

I agree that there's not much more that we will do. As far as what we could do - we could withdraw all our troops immediately and pass a law that no US company may be involved in any aspect of Iraq's oil production. The most relevant question is what we should do. If Bush were truly enlightened he would go before congress with a bill barring US companies from any involvement in Iraq's oil production and reconstruction (to make it perfectly clear that there is no conflict of interest) and requiring all US troops to be withdrawn within two years unless either 1.) in a vote certified by the United Nations 90% of all Iraqi's vote for the USA to stay or 2.) the United Nations certifies that Iraq is not stable enough for such a vote to take place.

More to the question at hand. Saddam Hussein decided that the right amount of freedom for Iraq involved brutal suppression of rebellions involving the Shia and the Kurds and now the Bush administration has decided that the right amount of freedom for Iraq involves a brutal military occupation suppressing a rebellion involving the Sunnis, among others.

Of course, the Bush administration claims that it is making progress toward democracy and that at some time in the future the Iraqis will be able to vote for for their constitution - but, like, how much choice is that? I mean what are they going to do? Vote to not have a constitution? That's like back when they could either vote for Saddam Hussein or not. Wow! What a choice.

Real political freedom isn't about whether people are allowed to vote or whether people are allowed to express their opinions. Real political freedom is about people being able to determine the political decisions that their country makes. When half the USA didn't want to go to war with Iraq and the Bush administration completely ignored them the Bush administration was stomping all over the essence of what political freedom really is.

David Thomson

"When half the USA didn't want to go to war with Iraq and the Bush administration completely ignored them the Bush administration was stomping all over the essence of what political freedom really is."

Huh? The last time I checked the Republican administration did not pull off a coup. President Bush has been chosen by the voters to lead this country. The majority of our elected representatives also back the president in Iraq.

There is nothing stopping you from advocating your (I think) most peculiar views. It appears, however, that you bewilderingly think that democracy does not exist in the United States if most of us disagree with you!

Daniel Chapman

This fight was hashed out 2-3 years ago, and it's really not relevant to the topic. Can we just agree that reasonable minds can differ on the war?

Zathras

What makes this blog valuable, apart from the unusual intellectual firepower of its proprietors, is the number of thoughtful posters who stay on topic and do not encumber threads with lengthy polemics. There are plenty of options elsewhere on the Internet for repeating talking points about the Iraq war or whatever Bush administration policy was in the newspaper this morning.

Wes

President Bush has been chosen by the voters to lead this country.

The fundamental idea that the USA was founded on is that, for each decision that is made, a person should have a say in the decision to the extent that they are affected by the decision. For example, under ordinary circumstances, the decision of what a person should eat for lunch should be made by the person eating the lunch.

The essence of political freedom, as it was intended in the founding of the USA, is that people should have a say in the decisions of a government to the extent that they are affected by those decisions. Now, things like fair elections, separation of power between different branches of government, separation of power between the federal and state levels of government and the bill of rights are all mechanisms designed to achieve political freedom but they are the means rather than the end.

Political freedom is a matter of degree and it is measured by the extent to which the government's decisions reflect the preferences of those affected by those decisions. In particular, it is not measured by whether a country holds elections or allows public criticism of government policies (although such things usually promote political freedom). Interestly, with this fundamental definition of political freedom, the USA actually has less political freedom than many other countries.

Now, Gary Becker (incorrectly, in my opinion) defines political freedom as holding elections and he defines economic freedom (again, incorrectly, in my opinion) as private ownership. The question at hand is whether economic freedom results in political freedom so, using his definitions, a concrete question would be whether selling off a national park to a luxury condominium developer would result in more frequent elections.

The more interesting question, would be whether economic success (defined as minimizing the fraction of the population that is poor and uneducated) leads to political freedom (defined as goverment decisions reflecting the preferences of those who are affected by the decisions).

This is an interesting question because the problem with letting people make decisions for themselves is that it results in people no longer being able to control other people. For example, does a decent income and education correlate with willingness to let gay couples decide for themselves whether or not to get married? Or, for that matter, most people in the USA have had reasonable levels of education and income for most of the history of the USA but it took a civil war to decide that slavery was a bad idea.

David Thomson

Economic freedom can be easier for governments to grant that political freedom.

An authoritarian government may not be thrilled about economic freedom, but it does enjoy the resulting added wealth. The entrepreneurs can be permitted a great deal of leeway---as long as they dont try to wrestle power away from the political bosses. Please note what happened to jailed Yukos CEO Mikhail Khodorkovsky. Everything was apparently fine before he dared defy Putin. Will increased economic freedom inevitably lead to political freedom? Yes, I think this is most likely. Unfortunately, it may not occur anytime in the near future.

Vulgar Moralist

First, thanks for the excellent post and discussion. I am not an economist. I'm a student of history and of the moral requirements for freedom (there are such). From that perspective, allow me a couple of observations.

Political freedom as we understand it entails some level of individual prosperity. This isn't a Marxist or a materialist notion, it's Jeffersonian. The point is that an economically dependent person can't behave as an independent citizen. It is unrealistic to expect the servant to look his master in the eye and claim equality of any sort.

Historically, the political aspect of equality was among the last to emerge. In England, then in the US and Western Europe, classes that matched the elites in social and economic achievement eventually broke through to political equality because they had the power and the wherewithal to do so.

The reverse is also true: politically democratic countries that are economically backward, like India, are in fact "command cultures," in which the poor have no choice but attach themselves to some headman in the hope of material benefits. Anyone who has lived in such countries knows that political parties become milk cows for the rich and employment agencies for the poor. Anything as abstract as "opening up the economy" simply never intrudes on the agenda.

The interesting question is how that cyle is ever broken - as it has been, again and again. That is the question that the President's people should be asking, if they wish his "freedom policy" to succeed. The Arab world, diverse at it is, remains largely a culture of command. What are the commanding heights that must be stormed - not only in the economy and in politics, but in the moral sphere, in a way of life - that result in the transformation of a society from obedience to economic risk-taking, from tribal chieftain to Bill Gates? Welcome anyone's thoughts on the matter.

Forgive the plug, but I have a post in my blog - at http://vulgarmorality.com - on the the prospects for the President's policy: Freedom Policy, Command Cultures.

Paul Gowder

Define "economic liberty." What does this mean? Does it mean absolute freedom of contract? Does it mean limited liability for corporate shareholders? (Limited liability would seem to me to be a manifestation of economic non-freedom, insofar as it impairs the freedom of non-shareholders to undertake their economic affairs without overpowering interference from limited liability entities.)

Could it be that some kinds of economic freedom -- such as weak intellectual property laws or enforcement (cf. China) and unsrestricted flow of both capital AND labor (cf. the merchantile era in Europe, and contrast to our current free-moving capital, but restricted-by-immigration-laws-moving labor system) are helpful to political freedom, while other kinds of economic freedom (freedom to hold slaves, limited shareholder liability) do not necessarily do so?

Moreover, if political freedom leads to economic non-freedom, or at least has the potential to do so (because of the interest groups you mention making inefficient distributions), and economic freedom leads to political freedom, does this mean that there's a perfectly ordinary and natural progression? Economic freedom leads to political freedom, and then the political freedom constrains economic freedom through the political process? Gee, that almost sounds like historical materialism! Why, Dr. Becker, you're a Marxist! Good to have you on board. :-)

Paul Gowder

Finally, does "economic liberty" mean strong protection for private property interests or strong protection for free trade?

The two are often in conflict. Cf. again the intellectual propery issue, and also limitations on tort liability, both of which have the liberalization of trade on one side (free copying! no tort liability!) and strong property protections (compensation for copied works! compensation for damaged property!) on the other.

Which one is "economic liberty?"

Are nusiance laws, which restrain my neighbor's land use to protect the uses of my land, a form of economic liberty or not? How about nusiance laws on a broader scale, i.e. environmental protection laws?

Or is "economic liberty" incapable of making that decision, and thus a completely content-free concept?

Michael Martin

I have no quarrel with anything that Mr. Becker has said on the subject. But I think that it's important to see that his arguments do not scale down to the development of economic and political liberty in circumstances of extreme poverty. I'm pretty sure he would agree that are still some basic political liberties (such as the freedom from the threat of violence in civil war) that are preconditions to economic liberty. In this (admittedly more particular) sense, political liberties are very much a precondition to economic liberties.

But when I admit that it is a more limited sense, I mean more limited theoretically. Practically speaking, about 1/6 of the world population still has to deal with obstacles to the preconditions for economic liberties to exist at all.

Michael Martin

Actually, I should add that I think the Bush administration has taken an approach that Mr. Becker might favor in addressing the (lack of) "political liberties" that I mention -- by encouraging private interests in the United States to get involved, for example, by tax breaks for Tsumani aid.

Javier Aparicio

While I mostly agree with the post, the following claim is wrong:

"Mexico has had a free press and considerable political freedom for a century or so, but economic freedoms did not begin to evolve until the latter part of the 1980s."

Mexico is an example of a long-lasting authoritarian regime that evolved from a closed to an open economy shortly before major political liberalisation occured. So, Mexico is a good example of the main argument, but for different reasons. Mexico's case follows Posner's logic pretty good, though.

Zathras

Per VM's comment, American history abounds with examples of people whose political rights, or at least political opportunities, could be said to have been abridged, but who prospered mightily in most other respects. Even at the height of Jim Crow some blacks could acquire both education and wealth. Anti-immigrant sentiment in the early decades of the last century did not prevent multitudes of immigrants from acquiring a measure of wealth, and some succeeded in amassing vast fortunes. In later years both groups saw legal and other barriers to their political expression and opportunities removed.

What changed? Did changes in economic status lead to changes in political status? This is not an easy question to answer. It is unlikely that the greater relative wealth of blacks in 1964 compared to 1884 made no difference in the civil rights movement's great victories. It is even less likely that the children of impoverished immigrants would not face fewer obstacles to political expression and advancment, being not impoverished themselves. Having said that, it is I think clear that economic freedom and opportunity alone were not the only factors at work with respect to either group. It may be doubted that they were of themselves sufficient cause to produce an increase in political freedom and opportunity for either group, and especially for the descendants of slaves.

Only with caution should we assign the lessons of the American experience to other countries. It may be the case that the American political tradition accomodates itself to the expansion of political freedom better than others. What I'm suggesting is that economic freedom and opportunity may lead to political freedom and opportunity, but shouldn't be expected to do this without help.

Vulgar Moralist

Interesting points by Zathras. I wonder what kind of help would be most useful - whether the precedents of occupied Germany and Japan, countries which became democratic and prosperous, have any lessons for the Administration today.

In any case, I agree that material prosperity is not enough to lead, directly and inevitably, to democracy. Other factors, such as education and independence of spirit are needed as well - and some luck, I suspect.

Peter Konefal

While reading Milton Friedman's "Capitalism and Freedom", I encountered a similar, although much worse formulation of the relationship between economic freedom and political freedom. Freidman made the absurd statement that there can be no political freedoms without economic freedoms (patently untrue).

Although Becker is clearly a proponent of free-markets, he makes his analysis of the relation between economic liberalization and political freedoms in a more balanced way - clearly aknowledging cases where economic and political 'freedom' have not at all coincided.

Nonetheless, one gets the feeling that political freedom (democracy) and capitalism (euphemistically called economic freedom - which sounds better?) are not opposition logics.

Lets examine the logics...

Democracy, in the most fundamental sense, implies free elections and the assignment of equal political value to each participating citizen - one person, one vote; and the majority rules. That's the essential principle of most democracies.

Capitalism, or "economic freedom" implies, as Becker surmises, protection of private property, the right to change jobs, etc, a commodity market in labour power, opportunities for startup companies etc.

But what is the fundamental principle of capitalism?

This has been vigorously debated, but some of the fundamental principles is that it entails a market in labour power (labour power is commodified) and the existence of privately held capital which is distributed according to the self-interested will of investors/capitalists. It is held that this flow of capital (investment) provides jobs, benefits, etc, to society.

Nevertheless, a momentary analysis of investors in the US reveals that there is a tremendous stratification of financial holdings; Wealth is not at all held equally. The top 5% of investors in America own more capital than the bottom 50% of all Americans. Fine. Its the workings of the free market.

But what about democracy.

Does the already realized potentiality for free markets to result in enormous wealth/investment power disparities affect the quality of the democracy in such 'economically free' societies?

In other words, do the wealthy enjoy more political power than do other citizens?

Can they use their economic assets, (media holdings particularly) to promote particular agendas, pressure political elites, influence key demographics etc?

Few would dispute this possibility (or argue that it doesn't currently occur on a massive scale).

Thus, the democratic principle of equal political value per person is clearly violated.

The tendency for free markets to create vast wealth stratifications results in a similarly disfigured stratification of political power.

In this light, capitalism can be viewed as antagonistic to democracy, rather than a prerequisite.

I'm not arguing that some kind of free market is not a good idea; far from it - I only wish to examine some inherent tendencies of the logic of capitalism/democracy and recognize that they do not at all corrospond.

Palooka

"Freidman made the absurd statement that there can be no political freedoms without economic freedoms (patently untrue)."

Is it really? Every democracy on this planet has a capitalist economy--but every capitalist economy isn't a democracy. This suggests it is a necessary, though insufficient, precondition for the formation of democracy. If by "political freedom" you mean democracy, then it is your statement which is patently untrue.

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