Democracy and Free Markets--Posner's Comment

I agree with Becker that a high standard of living is likely to lead toward democracy. The intermediate stage is political liberty. As John F. O. Bilson explains in his article “Civil Liberty—An Econometric Investigation,” 35 Kyklos 94, 103 (1982), “Almost any reasonable theory of freedom would predict a positive correlation between freedom and real income. On the demand side, freedom must be considered a lux¬ury good so that the re¬sources devoted to the attainment of in¬di¬vidual freedom are likely to be greater when per capita in¬come is high. On the supply side, it is undoubt¬edly more costly to repress a wealthy person than a poor person and the need to do so is probably less acute.” Although we tend to associate political liberty with rights against government coercion, for example the rights conferred by the U.S. Constitution, rather than with democracy as such, it would be difficult to be secure in those rights without electoral competition; rulers who are not required to stand for election at frequent intervals are too powerful to be constrained by courts. Becker gives good examples of how authoritarian governments evolve toward democracy as the standard of living rises. I agree that under modern economic conditions rapid economic growth requires a commitment to free markets. The puzzle is why, knowing that such growth will undermine authoritarian government, a dictator or ruling clique would want to allow economic liberty. To safeguard his power, one might think, a dictator would keep his country poor. That has been, in fact, an effective strategy for many, probably most, dictators. It may be that dictators adopt a policy of economic liberalization only when their political power is already in decline, so that the optimal strategy is to slow the rate of decline by buying off the population (temporarily) with greater economic opportunities, siphoning the people’s energy from political to economic activity. I also agree with Becker that there is no necessary tendency for democracy to promote economic liberty. This is implicit in the fact that every modern democracy grants rights against the democratic majority, notably property rights, as in the requirement in the Fifth Amendment that the government pay just compensation for property that it takes for a public use. This is recognition that democracy can endanger economic liberty. When we speak of the desirability of “democratic” government, what we should mean by democracy is not popular rule in some literal sense (the sense the word “democracy” bore in ancient Greece), but a system in which the principal officials are subject to electoral checks and in which the entire government has only limited powers over the citizenry. In a wealthy society, the democratic structure as I have sketched it will usually suffice to preserve considerable economic freedom; but in a poor society, the preconditions for such a structure may not exist and as a result democracy may undermine economic liberty seriously. There may be elections, even honest elections, but there may not be judges competent and independent enough to protect property rights securely and enforce contracts reliably. A democratic government may be populist in the sense of adopting policies that produce equality at the expense of growth (“killing the goose that lays the golden egg”). That is why there is no necessary correlation between democracy and prosperity. But I think President Bush had something else in mind when he called for greater democracy in the Middle East and other areas of the world where authoritarian government predominates. I don't think his principal objective was to promote economic liberty in those countries. I think the point rather is that democratic societies tend to be less aggressive militarily than authoritarian societies. The reason is that most people in any society have no taste for the risks and violence of war. Democracies may find themselves involved in defensive wars, of course, but there are very few examples of democratic societies warring with each other; that is, democracies are rarely aggressors (rarely, not never). It is therefore in the U.S. national interest to promote democracy throughout the world, because if all nations were democratic the military threat to the United States would be greatly reduced. It is true that democracy in the Middle East might bring to power in some nations radical Islamist movements. Nevertheless if they were genuinely democrat they would probably find it difficult to rally their people to support a militaristic foreign policy, or to support terrorist movements that might provoke a violent response from the United States.

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